September 2012 ~ Managing a Car Loan

Saturday, September 29, 2012

Should You Buy an Extended Warranty From a Used Car Dealership?

4:09 AM 2 comments

Buying a used car is tricky enough, but by the time you have the car inspected, negotiate the best price and secure your financing, you'll have a decision to make: Should you buy an extended warranty or not? There are pros and cons to buying extended warranties. In some cases, having a warranty can be a lifesaver; in others, it can be a waste of money. There are a number of factors to consider when determining if an extended warranty is right for you.

Buying an extended warranty on a used car can give you peace of mind. Buying a used car is generally considered a smart move because you don't have to absorb the initial depreciation of a new car; however, buying a used car comes with risk. Many used cars have no remaining factory warranty, and you may be stuck paying for any repairs out of pocket if you don't have an extended warranty. An extended warranty will generally cover at least the major components of the car, such as the engine and transmission.

The average consumer, according to Consumer Reports, pays roughly $1,000 for an extended warranty, yet receives an average of $700 in benefits. On average, extended warranties do not pay off. In a situation where you don't have to use the warranty at all, the entire cost of the warranty goes down the drain. If the cost of out-of-pocket repairs does not exceed the cost of the warranty, then buying the warranty was not a wise financial move.

Extended warranties are not created equal. Some warranties cover most factory-installed equipment, similar to a new car warranty; others cover only the major vehicle components. Some extended warranties come with a zero or low deductible, while others come with a higher deductible. The more items the warranty covers, and the lower the deductible, the higher the price for the extended warranty tends to be.

New car dealers often sell extended warranties backed by the manufacturer. Because used car dealers do not have the backing of a large automaker, they generally sell warranties issued by aftermarket financial companies. Consider the reputation of the company prior to purchasing an extended warranty, rather than relying on the good reputation of the used car dealer. It's not the car dealer, after all, that makes the decision to approve or deny extended warranty claims. Research the warranty issuer by checking out its Better Business Bureau profile. Reliable companies will have a low rate of complaints, and high rate of resolution of the complaints they do have. Shy away from companies with high rates of unresolved complaints.

Can I Borrow My Car's Value for Cash I Need?

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When you borrow money based on the worth of your car, you are taking out a title loan. You go to a car title loan company, and a lender evaluates your car and gives you a loan based on the car's worth. You hand over the car's title until you pay back the loan. Title loans are available only in certain states, and there is a reason for this.

Generally, you need to own the car and possess the title to get a car title loan. As of 2011, 19 states allow title loans: Alabama, Arizona, California, Delaware, Georgia, Idaho, Illinois, Kansas, Mississippi, Missouri, Minnesota, Nevada, New Mexico, South Carolina, South Dakota, Tennessee, Texas, Utah and Virginia. The states that refuse to allow title loans put title loans under the predatory lending category because of the high interest rates title loan companies charge -- sometimes in the triple digits.

If you need a loan to get you through a difficult time and you have bad credit, a title loan can be a good option for you, but you have to be careful and understand the ramifications. The loan you get is typically due in 30 days. If you are still having financial difficulties and are late with your loan payment, the title company can take your car. Each state varies regarding the particulars of the loan. In Georgia and Alabama, for example, a title loan is a particularly risky venture because those states treat your loan as a pawn, meaning that if you are late with your payment and the title company repossesses your car, the company can sell your car for more than what you borrowed and keep the difference.

Car title loan companies realize that most people cannot pay back the loan in 30 days, so generally, the loan company allows the borrower to pay just the interest at the end of the 30 days and make the loan plus the new interest due the next 30 days. For example, say you borrow $1,000 at a 24 percent monthly interest rate. At the end of 30 days, you would owe $1,240. If you can't pay that, the title loan company typically allows you to pay the interest of $240 with the balance of $1,240 due in 30 days. Title loan companies generally let borrowers roll the loan over this way eight times, at which time the borrower either repays the loan or the company repossesses the car, Leslie Parrish of the Center for Responsible Lending told Edmunds. If you do pay the loan off on the eighth month, on the $1,000 you originally borrowed, you would have paid back $2,920.

A great divide exists on whether title loans ought to exist or not. People in the predatory loan camp want these loans abolished, calling the practice "legalized car theft," as Jean Ann Fox, of the Consumer Federation of America, referred to them on Bankrate.com. But Eli Lehrer, of the libertarian Center on Finance, Insurance and Real Estate, believes that car title loans are a good way for people with little assets and poor credit to get money. The alternatives to car title loans are usually worse, such as payday loans, pawn shops or loan sharks.

Six Steps to Selling Your Own Car

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Selling your car is a financially beneficial alternative to trading in, as you'll usually be able to fetch a higher price. When you trade a car in, the dealer generally offers you the wholesale value with plans of selling the car at retail value. Selling the car on your own gives you an opportunity to sell the car at, or closer to, the car's retail value.

Before selling your own car, you'll want to determine an approximate value for the vehicle, so you can set an asking price. Good resources for determining a car's value are Kelley Blue Book, Edmunds.com and the National Auto Dealer's Association guidebooks or website. Consider the car's condition and mileage. You might also want to search for similar vehicles on local dealers' lots and on the Internet to get an idea of what the car typically brings.

Consider having the car professionally detailed and serviced prior to selling it. A dirty car that needs maintenance or work may be a hard sell, and it will generally fetch less money. Don't go overboard; most people understand that used cars are not perfect and will have minor imperfections and defects.

Advertise the car to list it for sale. Consider listing it on websites like Cars.com or Autotrader.com. You might also want to run an advertisement in the local newspaper's classifieds section. The purpose of this is to let potential buyers know the car is for sale. You might also want to place a small sign on the car that indicates it's for sale.

Answer any inquiries on the vehicle in a professional manner, and then try to set up an appointment for the shopper to look at and drive the vehicle. Don't let anyone drive your car on a solo test drive. This could open the door for theft. Make sure the person has auto insurance and a valid license prior to letting them test drive the vehicle.

The typical car buyer will usually try to negotiate the sale price, although you may encounter a buyer willing to pay full price. Be firm but fair when negotiating. Expect a savvy car buyer to low-ball you with a price much lower than your asking price. Don't get offended or upset. Instead, counter-negotiate with a price somewhere in the middle of your asking price and his offer, providing it's close to the vehicle's value.

You'll need the title and the assistance of a notary to complete the sale. In general, you shouldn't take checks for a car you are selling. If you take a money order, contact the issuer to ensure it's valid prior to transferring the car. In most states, you'll need to fill out a bill of sale -- a document detailing the sale of the vehicle. You can obtain one from any motor vehicle office in your state.

The Best Auto Loans

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The best auto loan rates go to the customers who are best prepared and have the best credit. The major auto loan lenders' top-tier packages are relatively standard. So if one lender is willing to give you a low rate, chances the others will match it. The trick is being prepared and in a position to demand the best interest rate available.

Check your credit report and make sure the information on the report is accurate. Errors, no matter the size, can make a difference in your credit score, and thus in your interest rate. Once you learn your credit score, research what local banks are offering customers with your credit history. And don't forget credit unions, which generally offer some of the best deals. If you have a high credit rating you can expect to get more favorable interest rates.

Having a budget planned in advance and determining the down payment you can afford will go a long way in helping you get the best rate. Knowing what you can afford means you have the knowledge to determine if you can go with the lower rate and shorter payback term or if you need a longer term loan. Auto lenders offer payment terms as long as 80 months. The longer payback term means more interest over the term of the loan and may mean higher fees, as well.

Compare lenders and loans offered through dealers, who may have various loan incentives in place when you shop for a new car.

You know your credit score. You have an idea of the rates that you qualify for from different sources. You have planned out the down payment amount and the pay back term you can afford. Now you have several offers presented to you to consider from lenders and dealers. Make sure you get an offer in writing and list any contingencies that could affect the terms.

Ohio Repossession Laws

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When borrowing money to purchase a vehicle, you get what is called a secured loan. Borrowers can finance their vehicles through the dealership's lending institution or through a third-party private banking institution. As a promise to repay their loan obligations, borrowers pledge the vehicle as collateral, providing lenders with the right to reclaim their property, or collateral, upon default. Ohio's repossession laws mandate notification to buyers from banks reclaiming their property.

Under Ohio law, banks and lenders do not have to provide car purchasers with notice prior to repossessing vehicles, if the purchasers defaulted on their loan agreements. Creditors can simply tow away vehicles used as collateral with no advance notice. However, lenders must comply with the state's laws allowing repossession only if there is no breach of peace. A breach of peace would be if the lender used physical violence, verbal threats of violence or damaged property during the repossession.

Under Section 1309.623 of the Ohio Revised Code, borrowers who default on their loan agreements have a right to reclaim their collateral by offering a full tender. This full tender allowance provides debtors with rights of redemption if they pay the full delinquency plus any reasonable attorney's fees and repossession costs before the lender disposes of the property through a sale.

Once a creditor repossesses a vehicle, it must provide the borrower with notice of repossession. Creditors who provide financing through "Buy Here/Pay Here" dealerships and creditors who provide the initial loans but subsequently assign them to third parties, must provide written notification of the repossession and loan default within five days of repossession. The written notice must provide each defaulting purchaser with the total amount in arrears, the steps necessary to reclaim ownership of the vehicle and any pending sale notices. Under Ohio's statutory code, borrowers who purchase vehicles and finance their purchases through vehicle loans are responsible for paying the entire loan obligations, even when lenders sell their vehicles. Buyers are responsible for any remaining loan obligations after the vehicle sale.

The notice of sale must contain the date, location, time and minimum sale or bid price for the vehicle. Lenders must also provide written notification to the purchaser of subsequent responsibility for any deficiency remaining after the sale. Lenders who provide independent financing are only required to comply with the notice of sale information.

Since consumer protection laws can frequently change, you should not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your jurisdiction.

How to Find Out the Blue Book Value on a Vehicle

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If you are interested in selling or buying a used car, you will need to obtain the current value of the vehicle. One of the most used resources when trying to determine the value of a car is the Kelley Blue Book. This is a resource that can tell you the current market value of nearly any car in the market place. You will need some basic information about the car to get the value you want.

Instructions

If you are trying to find out the value of a car that you own, you will need to obtain the odometer reading on your car. If, however, you are simply trying to figure out an approximate value for a particular type of used car, you can avoid this step. You also need to get any other important information about the make and model of the car that you want to obtain the value of, such as the year of the car.

There are two ways to access the Kelly Blue Book, either online or by going to your local library.

The library will provide access to a current version in the reference section. Once you have a copy of the book look up the value of your car, or the car you intend to purchase. The book is divided into categories such as sedan, SUV or hybrid and then further broken down into make and model and finally the specific year. Locate this information to find the current value.

The second alternative is to access the Kelley Blue Book from your computer. Enter the Kelley Blue Book's website and input the necessary information about your car. You can enter information about the make and model as well as specific features that your car may have such as a DVD system or navigation. Next enter the odometer reading as well as choose the condition of your car. You can choose between three different levels of quality when assessing the value of your car. Try to be as realistic as possible so that you can get an accurate value. Once you are finished inputting the information about your car, you can submit it and the Kelley Blue Book website will provide you with an approximate value. You can select between the third party value, the trade-in value, the suggested retail price or the certified pre-owned price.

What to Do When You Have an Upside Down Auto Loan

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When you have an upside down auto loan, this means that the resale value of your car is less than what you owe on your loan. Although some dealerships offer to roll this debt over into your new car loan, this move can worsen your financial situation because you will be starting your next loan upside down as well.

Unless you absolutely need to sell your car now, hold onto it and keep making payments until you are no longer upside down. Eventually, your monthly payment will reduce the principal by more money than the car drops in value during the month. If you hold onto the car until you finish paying off the loan, then you will be able to sell the car and keep the proceeds or use them as a down payment on your next vehicle.

If you can afford it, make extra payments on your auto loan to reduce the amount you owe and get yourself out from being underwater. For example, make an extra payment of $200 each month for a year to reduce the loan balance by $2,400 more than what you would have if you just made your regular payments.

If you do have to sell your car when you are upside down on your auto loan, then sell your car to a private party. Your car can fetch more in a sale to a private party than what you can realize in a sale to a dealer. If you have time to place ads and meet with potential buyers, a private party sale could make up the difference if you are only slightly upside down in your payments. For example, if a dealership offers you $6,000 for your car and you owe $7,000 on it, try selling it to a private party for $7,000 instead.

When you finally get rid of your upside down auto loan, be smarter next time you buy a car. Make a large down payment of at least 20 percent of the purchase price to give yourself a cushion so you start with a loan amount well below the value of the car. Buy a used car instead of a new car so the car depreciates less quickly. Most importantly, choose a short loan term so your payments keep up with the rate of depreciation.

What Do I Need When Buying a Used Car?

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When it's time to buy a new car, purchasing used may save you a ton of money. However, it is important to be an even more savvy consumer when you purchase a used car, because you can't be sure of any pre-existing issues that car may have had with the previous owner. While the purchasing process is generally the same, there are a few things to you need to bring -- and request -- when you buy a used car.

When you buy a used car -- or a car of any kind, actually -- you need to provide basic information, such as your state-issued photo ID and Social Security number for the paperwork. You need to provide a method of payment, be it in the form of cash, cashier's check, personal check, money order or credit card. If you obtain financing, you may also need to provide financial statements, a recent pay stub, proof of residency (in addition to your driver's license) and proof of insurance on the vehicle, which needs to be lined up simultaneously while purchasing the car. Generally, you can obtain a quote and start the policy over the phone and then drive to the insurance company directly from the dealership if you don't have insurance, or simply transfer existing coverage via the phone or Internet if you do already have a policy.

This is different from a general vehicle history. This gives a very specific accounting of the maintenance and repair work done on the car, from the last oil change and tire rotation to any major repair jobs. According to the Federal Trade Commission (FTC), if the owner of the car or the dealership does not have this information, request it from the shop where the work was done. Chances are, it has more extensive records and may be willing to share them with you before you purchase the vehicle.

You also need a vehicle history report. This tells you about any accidents the car has been in or whether or not it has been exposed to a natural disaster, such as a flood. You can use a commercial company, such as Carfax, or go through a government agency, like the National Motor Vehicle Title Information System or the National Insurance Crime Bureau (see Resources).

The FTC requires that dealerships offering used cars for sale must post an accompanying buyer's guide. This guide gives consumers insight into the vehicle they are purchasing. Information in it includes whether or not there is a warranty on the vehicle, what costs the dealer will pay for repair as per the warranty, a warning about spoken promises, major car systems including any potential problems of which you should be aware, a warning to get promises in writing, a warning to keep the buyer's guide and a reminder to have the car checked by a reputable auto professional before purchase.

It is important to understand your rights when purchasing a used car, particularly regarding your right to return a vehicle. According to the FTC, the right to cancel a purchase and receive a refund only exists if the dealer grants you the policy. If this is the case with your used car dealer, ask for it in writing so you have proof of the policy and can take advantage of it as it relates to your purchase.

How to Clear a Car Title After the Loan Is Paid

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Car loans make it easier to purchase an automobile. Financial institutions offer a wide variety of loan terms, depending upon your circumstances. When you get a car loan, the automobile is used as security against the loan. The bank places a lien on the car title to secure its interest in the property. You can't sell the vehicle while the lien is on the title. When you pay off the loan, you need to get a clear title for your car.

Instructions

Pay off your car loan. Look at your last loan statement or contact the lending institution to determine the final payoff amount. Make sure your loan is paid in full.

Contact the financial institution that granted you the car loan and request a written lien release proving that you paid the loan in full. The lender will send you a letter stating that you have satisfied your financial obligations and that it is releasing the lien on your car title.

Take your car title and the lien release form to a local office of the Motor Vehicle Department, or MVD. Submit your title and the lien release form, and request a new title. Pay the fee. The MVD will issue you a new car title that is free and clear of the lien.

The Disadvantages of Returning a Lease

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Although it isn't a wise move, it is possible to end a car lease early. Reasons range from a change in income to no longer needing the car because you want to move to a major city. Regardless of the reason, however, returning your leased car to the dealership early comes with a number of disadvantages.

When you return a lease early it constitutes a breach of the lease agreement. It is similar to changing your mind about an apartment after you've signed the papers and moved into the space. The lessor (the dealership financing company in this case) is inconvenienced because the property is now used and the company must find a new lessee. It is common for a car financing company to take action to discourage a breach of the lease agreement.

One action that car leasing companies take to discourage returning a lease before its time is charging early termination penalty fees. These fees are commonly very expensive for the person leasing the car. In some cases, the lease agreement may require the lessee to pay a fee equivalent to the remaining payments due on the agreement.

Another disadvantage to the lessee if he returns the car early is that the financing company may report the breach to credit bureaus. The leasing company calls this situation a "voluntary repossession," which means that the lessee willingly gave the car back. If the leasing company lists a repossession on the lessee's credit report, that has a seriously negative affect on his credit rating and remains for seven years. Experian representative Rod Griffin confirms, "If there's a repossession on your credit report, it would do serious damage to your credit."

An alternative to returning a car lease, which allows the lessee to avoid penalties, is to attempt a lease transfer. In this type of arrangement, the lessee finds another willing and qualified person to take over his payments. It is sometimes difficult to arrange, which is why many online lease transfer websites assist with this process. They publish information about the car up for transfer online and pre-qualify interested parties. The lease transfer service then facilitates the transaction between the new lessee, old lessee and the financing company to ensure a seamless transfer.

What Is the Average Depreciation of a Motorcycle?

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Depreciation is the rate at which an asset loses value over time. Depreciation standards are set by the IRS and range from simple to complex methods. Straight-line depreciation is the method most commonly used because it is simple to calculate.

The IRS lists the useful life of vehicles at five years. The price of the vehicle divided by 5 will generate the annual depreciation rate. According to "The Wall Street Journal," the average cost of a motorcycle in 2007 was $12,304. Based on this figure, the average depreciation expense for motorcycles in 2007 was $2,460.80.

Depreciation represents the amount of value lost each year on an asset. As vehicles age, the value decreases. Depreciation rates matter most when an owner is pricing his motorcycle for resale. The actual value of the motorcycle may vary from the IRS rules when other items are taken into consideration, such as mileage.

When financing a motorcycle, it is important to ask if it is financed using Rule of 78 interest or simple interest. Rule of 78 interest collects more interest in the first 24 months, which means that there is less principal being paid. Selling a motorcycle that still has a financed balance under Rule of 78 will mean the seller is upside down on the loan.

Can a Car Dealer Charge Late Charges After You Have Paid It Off?

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If you're paying a car dealership for your car loan, you purchased from a buy-here, pay-here lot. Otherwise, you would pay a bank or credit union for monthly payments and late charges. If the dealer says that you still owe money for late charges, either you haven't finished paying for your vehicle or the charges are incorrect and you need to dispute them.

Read your purchase contract thoroughly. The terms of your vehicle loan are stated in your contract, including your monthly payment amount, grace period for late payments and the cost of late charges. The amount the vehicle originally cost is likely different from the amount you'll pay back over the term of your loan because of your loan's interest rate. When you signed your original contract, you agreed to any late charges stated in the contract. You must pay the late fees to complete your loan payment.

If you don't believe that you owe late charges to the dealership, dispute the charges with the dealer manager. Talk to the dealer to find out which dates it believes you paid your payments late. Go through your records to prove the dealer wrong. Gather your receipts or a bank statement that documents the dates of payments. Provide the dealer with copies of your records to prove your payments were paid on time. Many banks store copies of deposited checks, so talk to your bank to obtain proof of payment.

If you determine that the late charges are incorrect but the dealer still demands payment, let the dealer know you plan to complain to the proper state agency. Call your state motor vehicle department to determine where to file your complaint. Once you file the complaint, the state agency will initiate an investigation to determine whether the dealer is overcharging you for the vehicle or if you must pay the amount due. Dealers usually keep detailed records for each buyer, so make sure you have your own payment receipts as well.

If you plan to trade your vehicle to another dealer toward a purchase or sell the car privately, you can't do so until you have the vehicle's title. If you trade to a dealer, the dealer must contact the dealer to where you owe payment to obtain your balance and then pay the dealer directly. If your late charges aren't significant, you may want to pay your late fees to obtain the vehicle's title. You can still initiate an investigation with the proper state department. If the dealer overcharged you, your payment will be returned.

How to Buy a Repossessed Vehicle From the Bank

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Banks across the U.S. repossess vehicles when borrowers default on loan payments. Banks sell the vehicles to get reimbursement for the outstanding loan. Many lenders quickly offload repossessed vehicles because of the maintenance expenses. People who buy these cars from banks often pay below market prices.

Most major banks have two separate financing divisions that handle car loans: consumer lending and dealership services. The consumer bank handles loans for individuals making in-person loan applications in branches, while the dealership services division deals directly with car retailers. The local branch employees may have no knowledge of cars repossessed by dealer services and vice versa. Small banks and credit unions fund loans locally and also handle repossessions through local branches.

People looking for repossessed cars should contact their local banks or look for listings on their websites. Cars repossessed by the dealership services divisions of major banks typically go to car dealerships for resale. Car dealers either buy the cars cheaply from the lender or sell the vehicles on the lender's behalf. Some car dealers organize auctions involving cars repossessed by several lenders. Dealers usually advertise these auctions online or in local newspapers.

Anyone thinking of buying a car from a bank should go online to the Kelley Blue Book and find the value of comparable vehicles. KBB takes local market conditions into account when pricing cars because prices vary from state to state and even within states. Kelley also bases values on the additional features of a car and its overall condition. Prospective buyers should offer less than the market value when entering negotiations. Banks have to maintain repossessed cars, and lenders often will accept bids well below the KBB value if the buyer offers cash.

Many people believe if that they buy a car from the same bank that finances their loan, they will get a better deal than if they borrow elsewhere. In reality, banks prefer to accept cash bids for cars, and the departments that handle repossessed vehicles typically have little or no involvement in loan underwriting. Credit unions usually offer lower rates for car loans than banks because credit unions are non-profit entities. Someone can take out a loan at a credit union and use the funds to pay for a bank-repossessed car with cash.

Do I Need to Wait a Year to Refinance My Car?

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You don't have to wait a year to refinance your car if you don't want to; although, you might benefit from waiting depending on the terms of your current loan. If your bank charges early payoff fees, you might save money by waiting. Or, if you currently have a high interest rate because of poor credit, you might have to improve your credit rating before applying for a better rate or term. If you just financed a new car, you might not have enough equity in the vehicle to refinance the loan without a down payment. Discuss early payoff fees with your current lender and the benefits of refinancing with a new loan provider to determine if you should wait to refinance your auto loan.

Instructions

Shop auto loan interests rates by visiting lender websites or by calling loan providers. Advertised rates are usually for new cars, not used. Shop interest rates until you find a lender you want to use for your refinance.

Call your current lender to obtain your loan's payoff amount, including the loan's per-diem amount, or interest added daily, for at least 10 days. Confirm your lender doesn't charge a penalty fee for early payoff.

Organize your vehicle information so you can provide it when applying for your refinance. Expect to provide your vehicle payoff amount, identification number, year, make, model and mileage. Check your vehicle over for features that increase the lending value of your car, such as alloy wheels, leather or a sunroof.

Contact the lender you want to use for refinancing and explain to a representative what you're hoping to accomplish by refinancing your loan. This way, the representative can explain any savings from interest rate or term adjustment. Submit your vehicle and credit information to start the application process.

Wait for your approval, which can take several days. Once approved, discuss the terms of your loan to ensure the interest rate, down payment requirement (if any) and term result in an affordable payment. If so, arrange to sign your loan contract.

Submit any required information to your new lender if required, such as a copy of your pay stub or proof of residency. Review your contract and sign where appropriate. Your new lender will pay off your old auto loan and become the car's new lien holder.

How to Calculate EMIs

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If you own a house or car, chances are you're paying EMI. Equated monthly installment (EMI) is the total amount to be repaid on a loan (including interest) divided by the number of periods you're paying the loan. The components are not static--that is, the interest component of EMI is higher in the beginning of the loan and then declines over the life of the loan. For this reason, it is important to be able to verify the loan documents and schedule of payments issued by your lender.

Instructions

Open a new of Excel file in Microsoft Word.

Go to "Functions." This can be found in the drop-down menu or as a button. If you don't see it, do a search in the "Help" menu.

Go to "Financials." Select the PMT function.

Input the data in the fields provided. If your interest rate is 10 percent, then enter .10 for the interest rate. If you need to make it a monthly interest rate, then divide by 12. Nper refers to the number of periods, which is usually anywhere from 2 to 48 months on a car loan or up to 30 years for a mortgage. For FV, use 0 or the future value of your loan once paid off. For PV, enter the loan amount. For Type, use 1 if your loan starts immediately (not usual), or 0 if it starts after one month.

Hit enter to calculate the payment (PMT). This is your EMI or your installment payment. If there's a significant variance from the payment schedule sent by your lender, check to make sure the interest is input correctly. Also, check to see if your interest coincides with the number of periods. That is, for 36 periods at 5 percent interest, the interest would be equal to (5/100)/36 and the number of periods would be 36.

Verify your results with an EMI calculator. See Resources for an example.

How to Use Principal Reduction on Car Loan

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If you're struggling to make your monthly car payments because of a recent financial hardship, and you're worried that you'll default on your auto loan, it's time to call your auto lender to ask for a reduction in your loan's principal. By reducing the amount you owe on your auto loan, your lender will also be lowering your monthly payment, saving you from defaulting.

Instructions

Gather the financial papers that you'll use to convince your auto lender that you have suffered a financial hardship that has made your car payments a burden. Copy the documents that prove your monthly debt obligations, such as your credit-card statements and statements from any other loans you may have, such as student or home loans. Also make copies of your two most recent paychecks and your most recent federal income tax return. You'll use these to prove your gross monthly income.

Call your auto lender at the number provided on your most recent loan statement. Explain that you've suffered a financial hardship--a job loss, lengthy sickness or drop in annual income--that is making it impossible for you to continue making your car payments. Ask your lender to reduce the principal you owe as a way to provide relief.

Send in the paperwork that you collected in Step 1. Your auto lender will review these documents to determine that you really have suffered a serious financial setback that has made it difficult to pay your car payments.

Agree to a principal reduction on your car loan if your lender approves your request. Your lender will then send you a new set of coupon books with the new amount of money you owe each month. Make sure, before agreeing, that you can afford this new amount each month.

In the majority of cases, a bank won't reduce the principal balance of your car loan amount, even if you can prove financial hardship. But even if your lender does not agree to reduce the principal of your car loan, you might still qualify for financial relief. Your auto lender might lengthen the term of your loan to lower your payments, or reduce your interest rate. Both might provide the financial relief you need and keep you out of worse situations, such as repossession.

How to Figure Car Loan Payments

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The sticker price you see on a car window usually is not the amount that you will actually end up paying for the vehicle. In fact, due to interest on a car loan, you can end up paying significantly more over time than the sticker price shows. Car loans are calculated with amortization factored in, meaning the interest charged changes as you pay off more of the balance.

Instructions

What amount of the car purchase is being financed? Include, taxes, licenses and fees if they are being rolled into the loan.

What is the term of the loan? Some are three years, while others run for five years. You also need the interest rate to compute the monthly payments; the interest rate will then be converted into decimal form. For example, if the rate is 5 percent, the decimal form will be .05. If your loan is five years, you will make 60 payments. Web Math says that due to amortization, the interest rate will be figured per payment. For example, if the rate is 5 percent, you divide the decimal form, or .05, by 12 to get .0042, or the interest rate at the time of payment.

Set up the formula to figure out your payments. According to Web Math, your payment will equal I x Loan Amount / 1 - (1+I) ^-n. Web Math notes that I represents the interest rate at the time of payment and n represents the number of periods. So if the loan amount is $20,000 and your interest rate is 5 percent on a five-year loan, by plugging the numbers into the formula you would pay $377.42 each payment. Web Math notes that in this example you will pay $2645.48 in interest. To finish the equation by hand you must do the parentheses first by adding 1 to the interest rate at payment in decimal form, which is .0042, to get 1.0042. Then multiply that to the -60 power to get .078, and subtract that from 1 to get 0.222 as your final answer on the bottom of the equation. On the top, multiplying the loan amount of 20,000 by the interest rate at payment of .0042 gives you 84. To finish, 84 divided by the bottom figure of .222 gives you $377.42 as the monthly payment.

California New Car Sales Laws

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California consumers who purchase a new car within the state may seek protection for defective purchases through the state's lemon law or the Song-Beverly Consumer Warranty Act. First passed on July 1, 2006, this consumer protection law provides car buyers with a limited time period to return defective vehicles to dealers for a return of their money or replacement car.

The consumer protection law covers vehicles used for personal purposes. The law also covers commercial consumers if their purchases do not exceed 10,000 lbs., and the purchaser's business owns less than five vehicles. The law typically does not cover motorcycles, mobile homes and off-road vehicles. However, parts of the act may cover buyers purchasing motorcycles or mobile homes. In certain cases, the law also extends to buyers who purchase used cars covered by original warranties.

Dealers must give each buyer an itemization of charges if the buyer obtains financing to purchase their vehicles. Dealers do not have to provide this itemization to buyers who do not obtain car loans to pay for their purchases. Dealers are limited to how much they can charge for extending loans on a bank's behalf. Banks and dealers must provide notice of how their credit applications are used and provide them with their credit scores. Dealers must provide new car buyers with a "Notice to Vehicle Credit Applicant" disclosure providing the name of reporting agencies verifying credit scores, the credit agencies' determination criterion and phone numbers to contact them.

The Song-Beverly Consumer Warranty Act requires dealers to provide replacement vehicles or refund a buyer's money when buyers request repairs under their written warranties. The buyer, and not the dealer, has the option of selecting her remedy and may choose either a replacement vehicle or full refund minus some incidental fees. Buyers must provide dealers with a reasonable number of attempts to repair the defective vehicle. If buyers request a refund, manufacturers or dealers must pay the use taxes, license and registration fees, towing fees and any other incidental charges paid by the buyer.

Under California law, "reasonable" depends upon the facts and circumstances. Generally, for serious issues, consumers can provide a fewer number of repair opportunities than a less serious defect. A provision in the act provides consumers with a bright-line determination of reasonable when they experience car problems within the first 18 months of delivery or within the first 18,000 miles, whichever happens first. Within the first 18 months or 18,000 miles, California law presumes the buyer provided the dealer with a reasonable opportunity and reasonable number of attempts to fix the car in certain circumstances. When the problem could lead to serious injury or death, and the buyer provides the dealer with written notice of the defect and provides the dealer with at least two repair attempts without success, then the buyer may use the presumptive rule. Additionally, buyers who provide dealers with at least four attempts to repair their cars within this timeframe and provide written notice may take advantage of this rule. The rule also applies to buyers who have had their cars in repair shops for at least 30 days, total, after purchase.

What Happens If Your Car Loan Gets Charged Off?

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Many consumers finance a car using a car loan. If you fail to make payments on the loan, the lender may seize the car and charge off the debt as a loss. This is called a repossession. It's important to know how a repossession affects you and your finances.

According to FICO, 35 percent of your FICO score measures how well you pay your bills. A repossession shows that you defaulted on an auto loan. This is a major derogatory item to have on your credit. It will appear on your credit report for seven years and will have a negative impact on your credit score. How much your score drops depends on the other aspects of your credit report.

A repossession on your report may prevent traditional lenders from approving you for another car loan. You may receive approval from a subprime lender, which is a lender that specializes in loans to consumer with credit problems. These loans usually come with a higher interest rate, however. Such lenders may also require you to pay a larger down payment in order to qualify.

Repossession of a car does not relieve you of the legal obligation to pay the debt. Once the lender has the car, it will sell it at auction to try and recoup some of the money owed on it. The difference between what the car sells for and the outstanding amount of the loan is called a deficiency. The lender will then come after you for payment of that amount. The lender may sell the debt to a collection agency or they may sue you in court to obtain a judgment against you.

If a lender turns the debt over to a collection agency, that agency will place a collection account on your credit report for that debt. This will further lower your score since collection accounts are considered a negative entry on your report. If the lender obtains a judgment against you, that is considered a public record and it will appear on your report as well. FICO considers judgments negative and this can lower your score as well.

If the lender obtains a judgment against you for the unpaid balance of the auto loan, it can haunt you for many years. A judgment gives the holder of the judgment the right to garnish your wages, seize funds in your bank account or place a lien on any property you own, such as your home. Depending upon the state, the owner of the judgment may continue to try and collect on the debt for many years, even once it no longer appears on your credit report. In Florida, judgments have a statue of limitations of 20 years from the date the judgment was entered.

What Affects Car Insurance Pricing

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Being familiar with the factors that affect car insurance pricing can help you get the best auto insurance premiums. Car insurance companies charge monthly premiums, and this costs covers damage. Paying a high premium may impact your personal finances. Understand the factors that influence pricing, and then take steps to lower your out-of-pocket expense.

A bad driving record indicated by a several speeding tickets or other traffic violations can increase your monthly and yearly insurance premiums. On the other hand, drivers with a good driving record typically pay less for auto insurance. Pay attention to speed limits and exercise extra care when driving to avoid accidents and tickets. Drivers with several traffic violations may consider taking a driving improvement course to add positive points to their driving record and perhaps qualify for a lower insurance premium.

Auto insurance deductibles refer to your out-of-pocket expense before the insurance takes effect. For example, if you agreed to a $200 deductible, you will need to pay $200 after an auto accident, and your insurance provider will cover the remaining balance to repair your car. Choosing a low auto deductible reduces the amount you will need to spend out-of-pocket. Unfortunately, low deductibles trigger higher insurance prices. Increase your deductible to save money on insurance.

Insurance companies tend to reward customers with a good credit rating by offering them cheaper insurance. Take steps to fix your credit before renewing your auto insurance policy. Pay your bills on time and get rid of consumer debt to help you qualify for a better premium. Insurance companies reduce premiums because a good credit history signals a measure of responsibility

The more coverage you have on a car, the higher the insurance price. If driving an older car, consider dropping collision or comprehensive coverage to save on the monthly cost. Refer to Kelley Blue Book to learn how much you car is worth. Take your insurance premium and divide this number by 10. If your vehicle is worth less than this figure, you can likely drop the coverage and reduce your insurance price.

How to Trade a Car When I Owe More Than It Is Worth

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Trading in a car when you're upside down on the loan, or owe more than the car's worth, can create a financial hurdle. Even so, it's possible to trade in your car and acquire a new vehicle. Know the options available to you and then choose the solution that best fits your needs.

Instructions

Pay a large down payment to compensate for the negative balance. If you owe $10,000 on your car loan and the dealership is willing to give you $7,000 for the trade-in, bring a $3,000 down payment to pay off the negative equity.

Roll the negative balance into your new car loan. If you don't have cash for a down payment, negotiate to have the dealer pay off your trade-in and then wrap or include the negative balance or equity into your new car loan. This method increases the final price of your new car.

Lease your next car. Because leased car payments are often cheaper than buying, consider trading in your old car and leasing your next vehicle. The dealer still wraps the negative equity into the leased car price, but you'll have a smaller payment. Keep the car until the end of the lease term to avoid another upside-down loan.

How to Buy a Leased Car From an Owner

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Purchasing a leased vehicle from a seller is very similar to purchasing a vehicle with a current loan. The lease buyout price must be paid to release the car's lien and title, which allows you to transfer ownership. Expect to work with the buyer and the bank to pay off the lease amount. Because you're not purchasing from a dealership, you'll have to pay taxes and register the vehicle on your own once you have the title.

Instructions

Get the lease buyout or sales price from the lessee. The original lessee can sell the vehicle for the amount he owes or more to make a profit. Check the vehicle's value at Edmunds.com and the Kelley Blue Book website to ensure you are paying a fair price.

Arrange to make payment to the leasing bank. Your seller should supply you with the bank's phone number and his account number or at least the vehicle's information, such as its year, make, model and vehicle identification number. The lessee should update her account with the bank to note that you'll be making a payment to satisfy the lease and purchase the car.

Call the bank and ask about the payoff process before providing your payment. Validate the buyout amount and determine how long you'll wait to receive the title or other necessary forms to transfer ownership. Unless the leasing bank is local, the process is not immediate.

Ask the bank where to make your payment or where to send it. Find out who to make the check payable to. Ensure the bank accepts your preferred method of payment or make other arrangements.

Wait to receive the vehicle's title. In most cases, the original lessee has to sign paperwork, as well. You should have a clear understanding of the process and the time required for processing the title paperwork. Contact the bank to follow up if you need to.

Call your state's motor vehicle department to determine the process for titling and registering your new vehicle. You likely need to show proof of insurance to register and title the car, so obtain proof of coverage. Go to your state's motor vehicle department with the car's title and lien release, if applicable.

Fill out all necessary motor vehicle forms. Pay for your registration, title and taxes; fees vary by state. Obtain your license plates and arrange for a ride to the vehicle you purchased. Attach your plates and registration to the vehicle before taking it.

Can You Refinance a Car Balloon Payment?

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Once your lease is up, you can purchase the car for its balloon payment, which is the buyout price stated in your contract. Unless you can pay cash for the remaining balance, you'll have to finance instead. Technically, this requires a new finance, not a refinance, as you are purchasing the vehicle from the bank for the first time.

To finance your balloon payment, apply at any lender you'd like. Be sure to check around for competitive rates. Local banks, such as credits unions or nationally based lenders with a local presence, such as Chase or HSBC, offer local convenience; you can apply at a local branch. You may also apply to your leasing bank, or the manufacturer's bank. Compare rates against your leasing bank. Many leasing banks are not competitive for used car financing, which is the kind of loan you'll need to pursue. New car rates are lower than those offered for used cars.

Call your leasing bank to confirm your car's balloon payment amount. It should be the same amount as stated in your lease contract. Gather your vehicle's information, including its year, make, model, level, identification number (found on your insurance card), mileage and options. Note options such as alloy wheels, a sunroof or other advanced features to increase the car's lending value. Expect to provide the lender with your address, employment information, Social Security number, address and date of birth for the credit application. Once your loan is approved, your lender will pay the leasing bank for the balloon payment amount.

The bank is the official owner of the leased vehicle, not you. Even though you have driven the vehicle since it was brand-new, your balloon payment serves as an initial purchase for a used car. Expect to pay taxes. Contact your state motor vehicle office to determine your tax rate so you can budget appropriately. Plan for title and registration fees, as well. Your tax is based on your balloon payment amount, so check ahead to determine if you will need to add the tax amount to your finance or come up with a down payment.

If you're purchasing your vehicle for its balloon payment to avoid excess mileage or wear-and-tear fees, you have other options. If you don't want to keep the car, you can trade it in to a dealer toward another purchase or lease. This process is similar to trading a vehicle with a current loan. The dealer will pay the leasing bank for the car's balloon payment. If your vehicle's value is more than the balloon payment, you can use the profit toward your next purchase. If not, the negative balance is applied to your new purchase instead.

How to Give a Car to a Fiance as a Gift With Taxes in Virginia

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If youre engaged to be married and have an extra car you dont need while your fiance is in desperate need of transportation, a logical solution is to gift the car over to your new partner. Gifting a car to your fiance simply means that you agree to transfer it to her name without requesting payment in return. In Virginia, both you and your fiance must comply with car transfer rules that still require a sales tax payment on the transaction.

Instructions

Write an official bill of sale between you and your fiance. Even though you are soon to be married, you must still have a formal agreement describing the transaction. Write in the bill of sale that the car is a gift to your fiance (use her full name and contact information) with a sales price of zero dollars.

Sign the back of your current Virginia title, and fill out Section A. Enter your fiances current name (maiden name if still an unmarried woman) as the new owner as well as her address. Write Gift under the sales price section.

Hand your fiance the signed title, keys and car (take the license plates off first) -- it is now her vehicle to register. Transfer your plates to another vehicle or return them to the Virginia Department of Motor Vehicles.

Visit your local Department of Motor Vehicles office with your fiance to title and register the vehicle in her name (she can go alone as well). Ensure that she pays the required sales tax. Since the sales price was zero, the sales tax fee is equal to 3 percent of the NADA (National Automobile Dealers Association) trade-in value for the car. The Virginia DMV issues a new title in your fiances name via mail.

Are There Grants to Help Low-Income People Purchase Cars In Missouri?

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A number of private charitable organizations recognize that people need reliable transportation to hold jobs and take care of their families. Low-income families in Missouri and throughout the nation often struggle to afford the car that could dramatically improve their lives. Although there are no government or nonprofit cash grants to purchase vehicles, a number of organizations grant vehicles in-kind. Those in need can apply to select nonprofits for free vehicles. Organizations usually have more families in need than they have cars, so applicants should expect a wait.

Cars4Christmas (cars4christmas.org) is a nonprofit organization that supplies Midwest families in need -- including those in St. Louis -- with vehicles. Usually, the organization provides fixed-up used cars supplied by donors within its communities. Because of the weather facing the region, Cars4Christmas frequently provides relief to those affected by tornadoes. Applications for cars are available online.

The working poor, vicitims of natural disasters, residents of transitional shelters and victims of domestic violence are some of the people who qualify for donated cars from 1-800-CharityCars (800charitycars.com). This nonprofit program solicits used cars from donors around the country and matches them to those in need. Missouri residents can call to begin an application.

The National Consumer Law Center's Working Cars for Working Families program (workingcarsforworkingfamilies.com) assists low-income and struggling families across the country receive free cars. The center believes a vehicle is essential for people to work and support their families and has therefore developed a network of nonprofits focused on providing vehicles to those without.

Although Goodwill Industries (goodwill.org) is best known for helping people get back on their feet through job training and placement services, Goodwill helps struggling individuals and families with a variety of special needs. On occasion, this can include low-interest auto loans and vehicle donations. Those in need can visit their local Goodwill offices or the organization's website to get help with their personal situations.

Alternative Financing Options for New Vehicles

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If you can't obtain a traditional vehicle loan approval through a dealership or local bank, alternative financing may prove to be a lending option. Subprime lenders extend loans to people with poor or limited credit, also known as high-risk borrowers. Before pursuing a loan from an alternative source, consider your budget and the benefits and disadvantages of alternative lending.

You can locate a subprime lender online, locally or through a dealership. Rates are higher than normal, and many subprime lenders require a significant amount of money down. Shortened terms, higher rates and money down requirements may prove unfavorable, but this might be the only option for some borrowers. You'll likely have to shop for a new car with enough rebates to offset money down requirements, so obtain a pre-approval from a subprime lender before you begin your car search.

If you don't want to use a subprime lender, consider applying for your loan with a co-signer. A good co-signer should have good to excellent credit, a stable income and verifiable employment and address history. With a good co-signer, you can take advantage of low interest rates and longer terms. However, locating a co-signer may not prove easy. The co-signer is liable for your loan as if it were his own. If you're late on payments, it affects the co-signer's credit. Consider asking a close friend or family member.

Subprime interest rates are not competitive -- they can be as high as 29 percent in some states. High rates can raise your car payment substantially. If you can obtain lending with a co-signer, you can shop for good rates instead. You can find rates as low as zero percent for some new cars. Because a high interest rate increases your payment, you may find you can't afford the high payment a subprime lender offers.

If you plan to use a subprime lender, budget your payments. Do not take out a loan you can't afford, even if an alternative lender is your only option. If you default on your loan, your credit will suffer immensely. If your payment is too high, pursue a used-car purchase instead. Even if you have to buy a car without the options you truly want, your credit will improve over the term of your loan if you make your payments on time. With good credit, you can likely pursue a new-car purchase for a better rate and payment in the future.

Your Rights Against a Repo Man in Illinois

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In Illinois, repossession law protects the consumer, the creditor and the hired hand doing the repossessing, otherwise known as a repo man. While it may seem like the creditor has the upper hand when it comes to your property, you should keep in mind that your rights as an Illinois resident are also protected by law, particularly if the repossession was illegally obtained.

Illinois law stipulates that your personal property can only be taken if a creditor has a security interest, which is a legally-binding, pre-arranged contractual agreement between you, the debtor, and the creditor. If there was no security interest, the creditor needs to obtain a court judgment before repossessing your personal property. A repossession is considered illegal in Illinois if the repo man takes any property that was not in default at the time of retrieval.

Whether its your purse, wallet or CD collection, the personal items left in your vehicle are not part of a creditor's repossession. If a repo man takes them, Illinois law states that the creditor must return the personal items at your first written request, or the creditor will be charged with theft.

In Illinois, a repo man must retrieve your property in a manner that doesn't violate the breach of peace, a legal term that applies to the civil temperature of a situation. In other words, the repo man cannot take the vehicle against your will, harass you or your household members, break into a locked garage, or otherwise upset the natural peace. However, the breach of peace law also applies to the debtor in the situation; you can politely ask the repo man to leave, but you cannot lock your car in a garage or otherwise cause a scene. Illinois law also protects consumers who do not want repo men inside their homes. If a repo man comes to your door, you or any of your household members can legally ask him to leave under penalty of illegal entry.

If your vehicle was repossessed in Illinois but you have paid at least 30 percent of the vehicle's total sale price, which includes any down payment, trade-in value and total monthly payments thus far, the creditor has three days to inform you of his intent to sell. Once you have been notified by the creditor, you have 21 days to redeem your property by paying the overdue amount in full and any other repossession fees. Two loopholes do exist with this 30 percent rule: if a credit union repossessed your vehicle, you do not need to pay the repossession charges, and consumers can only take advantage of the 30-day rule once during the lifetime of the vehicle contract. For all other non-vehicle property, the debtor has a right to retrieve his property back at any time, but he must satisfy both the overdue balance and the repossession charges before the creditor decides to sell.

How Much Interest Will I Pay on a Car Loan?

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Interest rates can range a great deal; your credit information, credit history and current income are used to determine your approved rate. With poor credit, rates can soar as high as 29 percent in some states. To know your exact interest rate, you should ensure your credit history is correct and obtain a pre-approval before shopping.

Incorrect information on your credit report can result in a higher interest rate, costing you money. Before applying for a loan or pre-approval, check your credit information with the three major credit bureaus. The FACT (Fair and Accurate Credit Transactions) Act allows consumers to view their personal credit report from each bureau for free once every 12 months; go to AnnualCreditReport.com to obtain your report. Check over your information and rectify any issues before you apply for a car loan.

Obtaining a pre-approval before shopping can ensure your interest rate. You can apply to a bank of your choice; most banks provide an online application option. You can find rate offers on bank websites to help you to determine where to apply. The pre-approval process can take several days, so be sure to apply before you choose a vehicle. Once you have your interest rate, you can also set your budget. An interest rate can affect your monthly car loan payment by more than $100 per month.

Most banks use a tier scale to determine which rate to offer a buyer, meaning an "A" tier will receive the best rate, and a "B" tier may face a point increase for approval. Manufacturers often offer lower rates to increase new-car sales. You can check manufacturer websites to determine if special interest rates apply to the vehicle you want to buy. The rates you see advertised are easier to get than those from banks that use a tier-scale approval method. Manufacturer banks do require borrowers to have good or excellent credit, but either approve the borrower, or don't.

If you have limited credit history or poor credit, your may not obtain an approval or an affordable interest rate. In this case, a co-signer can help you obtain a better rate. A co-signer ensures your loan; he goes on the credit application with you to secure the loan. A co-signer should have good credit and decent income. With a co-signer, you can obtain the same interest rate the co-signer would if applying alone.

Car Affordability Based on Salary

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Several lenders may approve an auto loan for you, especially if you have high credit scores and a steady employment history. Nonetheless, you shouldn't rely on a lender to determine how much you can afford to spend on a vehicle. You should compare costs associated with owning a car with your monthly income to avoid paying more than you can afford for a vehicle.

The purchase price of any vehicle you buy should consume no more than 20 percent of your monthly income after taxes, according to Bankrate.com. Your after-tax income is your actual take-home pay, not your annual salary. Remember that cars usually aren't good investments for people who buy them for everyday transportation. Vehicles generally begin to lose value from the first day consumers buy them. Therefore, tie up as little of your income as possible for monthly car payments.

Consider things such as the purchase price, the interest rate on an auto loan and your down payment to determine if you would spend more than 20 percent of your monthly income to buy a vehicle. You could keep your monthly loan payments at 20 percent or less by increasing the amount of your down payment. However, Bankrate.com notes you would likely spend more than you should with a larger down payment, because you've used more of your income to lower your monthly payments to the 20 percent mark. Extending the amount of time you have to repay an auto loan also could lower your monthly payments, but then you would pay more in interest charges over the life of the loan.

Online calculators offered by Bankrate.com, MSN Autos and other financial websites can help you estimate the type of deal you need to make to keep your car payments near 20 percent of your monthly income. For example, someone who brings home $1,500 per month could pay up to $300 per month in car payments. The MSN vehicle affordability calculator indicates that someone who can make a $2,000 down payment and a $300 monthly car payment could buy a vehicle that costs about $17,500 with a five-year loan and a 6 percent interest rate. However, the calculator doesn't include other costs, such as taxes and dealership fees.

Auto insurance is one of the biggest expenses that increases the cost of owning a vehicle. Contact your insurer before you buy a car to get an estimate on how much it will cost to insure the vehicle you want. Determine what you can do to keep your insurance costs down. For example, it costs more to insure luxury vehicles and sports cars than a no-frills family sedan or minivan.

What Happens When an Auto Loan Defaults

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When you default on an auto loan, the lender will send letters and make phone calls in an effort to contact you regarding your delinquent account. A lender wants to make arrangements with you to bring your auto loan current. Sometimes agreeable terms are met and other times they aren't. If your account remains in a state of default after numerous attempts by the lender to resolve the issue, they will look at other ways to collect your outstanding balance.

If you ever default on an auto loan the lender will contact a third party to repossess your vehicle. When a repossession order is put through, the borrower can face additional fees including a repossession fee. Once the vehicle is repossessed the lender will send written correspondence giving the borrower a certain amount of time to retrieve the car. All fees, expenses and past-due payments must be paid before the auto will be relinquished to the borrower.

When a borrower is unable to come up with all money due, the lender will sell the car at an auction to the highest bidder. The proceeds from the sale will go toward the loan balance and the fees incurred by the lender. If there is a deficiency balance the borrower could be responsible for paying depending the state.

A lender could seek a judgment in an effort to collect a balance from the debtor. If a judgment is obtained, the lender has further ammunition to use to collect the balance. The lender could proceed with a bank levy which freezes a checking account, including all or a portion of the funds in the account. The bank is obligated to release the funds to the lender and the money will be applied toward the balance.

A lender could also garnish the wages of the borrower. The amount of the garnishment can vary from state to state, but usually it will be about 25 percent of the check amount. Any money taken from a pay check will be applied toward the deficiency balance.

As a last resort, the lender could file a lien on any real estate the borrower owns. There is a good chance that a lender won't resort to these extremes but the possibility exists. If the home is sold or refinanced, the lender will be paid from the proceeds of the sale. Liens aren't the quickest way to collect on a judgment but they can be effective over time.

Judgments and repossessions will show up on a credit report for seven years and will drop a credit score significantly. The exact amount a credit score is decreased will vary. A repossession will most likely keep someone from being approved for credit in the near future. Some lenders are willing to take a chance and advance you credit, but the interest rate will be high and there will be a number of fees.

How to Qualify For Auto Loans with Bad Credit

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Getting a car loan with bad credit can be just as tough as getting a mortgage loan with bad credit. However, just like any other loan, there are many things you can do to increase your chances of getting approved for bad credit auto loan financing. Even bankruptcy auto loans are possible. Here are a few tips to help you qualify for bad credit auto loans.

Instructions

Know your credit score. Everyone is entitled to one free credit report online. Knowing your score before applying for a car loan is important. If your credit rating is too low, nothing can help you and you will just end up wasting everyone's time. If your credit score is below a 600, I would advise taking some time to boost your credit rating before applying for any auto loans with bad credit.

Head to the largest car dealership you can find at the end of the month. Big car dealerships have higher quotas to fill. They also hit larger manufacturer bonuses which makes them more resourceful when it comes to getting cars out towards the end of the month. They try harder to push deals through finance no matter how bad your credit may be. Larger car dealerships also tend to have special finance departments. More skilled and experienced finance officers are better at getting people qualified for auto loans with bad credit. Some dealerships will even refinance auto loans with bad credit.

Increase your down payment. One of the first things any dealership will ask you to do is put more money down. Lenders like to see more commitment on behalf of people with bad credit. This helps show them that your not planning on taking the car and then just stop making payments when you drive off the lot.

Have a cosigner sign for you. A friend or relative acting as a cosigner can over ride your credit and greatly increase your chances of getting approved for a car loan with bad credit. Preferable someone with a high credit rating. The stronger their credit rating, the better chance of approval you have.

Saturday, September 29, 2012

Benefits

Disadvantages

Considerations

Warnings

Thursday, September 27, 2012

Legal in Some States

About Title Loans

A Typical Scenario

Bottom Line

Determine the Car's Value

Recondition the Car

List the Car for Sale

Meet with Buyers

Negotiate a Fair Price

Complete the Sale

Know Your Credit

Set a Budget

Comparison Shop

Ask For it in Writing

Wednesday, September 26, 2012

No Prior Notice Required

Rights to Reclaim or Redeem

Subsequent Notice Necessary

Notice of Sale

Considerations

Friday, September 21, 2012

Instructions

Thursday, September 20, 2012

Wait it Out

Make Extra Payments

Sell to a Private Party

Be Smart Next Time

Tuesday, September 18, 2012

You Provide: Basic Information

Seller Provides: Car Maintenance History

Seller Provides: Buyer's Guide

You Request: A Written Return Policy

Monday, September 17, 2012

Instructions

Breach

Early Termination Penalties

Credit Reporting

Alternative Option

IRS Depreciation

Significance

Rule of 78 vs. Simple Interest

Sunday, September 16, 2012

Contract Agreement

Proving Payment

Unfair Charges

Considerations

Wednesday, September 12, 2012

Repossessed Cars

Locating Repossessed Vehicles

Negotiating Terms

Financing Bank Owned Cars

Tuesday, September 11, 2012

Instructions

Instructions

Instructions

Monday, September 10, 2012

Instructions

Sunday, September 9, 2012

Coverage

Itemizations

Warranty

Reasonable Number of Attempts

Considerations

Saturday, September 8, 2012

Effects

Significance

Misconceptions

Considerations

Warning

Thursday, September 6, 2012

Driving Record

Low Deductible

Credit Factors

Type of Coverage