2013 ~ Managing a Car Loan

Thursday, September 26, 2013

Can I Trade in My Car When It Is About to Be Repossessed?

5:08 AM 14 comments

You can trade in a car if you are behind on payments, but the process might prove difficult. Most lenders require up-to-date accounts, meaning you'll have to pay the past-due amount. Late payments also affect your credit score, which ultimately affects your chances for a new loan and fair interest rate.

Let the dealership know that your vehicle is about to be repossessed. Even if you bring your vehicle's loan payoff amount or arrive after bank business hours, the dealership will obtain your loan payoff directly from your lender before completing a car sale. The automated payoff system that banks and dealers use will not offer the loan's payoff amount. When your sales representative calls to obtain the information, she will be transferred to your lender's collection department.

The dealer can require you to pay your past-due payments or tell you it won't accept your vehicle for a trade until the loan is current. Your dealer might even offer to give you cash back from your new loan to pay the past due amount. Regardless, the dealer must pay off your loan to take your car as a trade. If you can obtain a new loan through the dealer, he may speak to the bank's collection department to discuss the loan payoff date so you don't have to make additional payments.

Lenders review all of your credit information, including past-due accounts. Most require up-to-date payments on any revolving accounts. If you have a poor payment history or low credit score, you might not obtain an approval from a new lender. Work with a dealer to find financing, it may be able to find you a loan, even with a high interest rate if no other options exist. Obtaining a new loan while another one is past due is likely to cause lending issues.

If you can't find a new lender to approve your loan, try to find a cosigner. Or, catch up on your old loan as soon as possible. Repossession damages your credit score and history, making it hard to receive a loan in the future. Talk to your lender to work out a payment plan so you can keep your car. Once you become current on your car loan and maintain a positive payment history again, trading your vehicle is a possibility.

Motor Vehicle Repossession Laws in South Carolina

7:23 PM 4 comments

People often find themselves struggling to pay car loans. When this happens, lenders can repossess, or take back, the car. They can then sell it to satisfy the loan amount. In some instances, the lender may choose to keep the repossessed car rather than sell it. Like all states, South Carolina has specific rules governing when and how cars can be repossessed.

South Carolina allows lenders to repossess motor vehicles when borrowers default. Some lenders consider a borrower in default if she allows the car's insurance to lapse, permanently moves the vehicle out of state without authorization or damages the car to decrease its value. Typically, however, default means a person is 10 days late on a payment. At this point, the lender must send a "Notice of Right to Cure" informing the borrower that she has 20 days to bring the loan current to avoid repossession. Note that, if you catch up on your payments but fall behind a second time, your lender can repossess your car with no notice.

Lenders have two repossession options in South Carolina. One involves filing a Claim and Delivery lawsuit against you. Theoretically, your car cannot be repossessed under a Claim and Delivery suit until after you and your lender appear at a court hearing. The lender can, however, be granted permission to repossess before the court date if he can show reason to believe that you will hide or damage the car. Under the second type, self-help repossession, the lender can simply come and tow your car from any location--your driveway, your workplace, the street or a parking lot. The only stipulation is that it be done peacefully.

You have the right to reclaim your repossessed car. After repossessing, the lender will send you a Right to Redeem notice explaining what will happen to the car and how you can get it back. The lender can require you to pay off the entire balance and may also make you pay expenses associated with having repossessed your car. Borrowers have only about two weeks to meet the requirements. After that the lender is entitled to do as he pleases with the car.

South Carolina law allows a lender to sell a repossessed car if the borrower is unable to reclaim it. If the borrower has paid 60 percent or more of the loan, the borrower can force the lender to sell the repossessed car within 90 days. Any money left after settling the loan and covering the expenses associated with selling and repossessing the car must be given to the borrower after the sale. If the borrower has paid less than 60 percent of the loan, the lender may sell the car. If the lender gets more money than was owed on the car, he may keep it. If he gets less, he may go to court and seek a judgment against the borrower for the difference between the amount owed and the amount actually received for the car. Attorney fees, repossession costs, sales costs and car repair costs may be added to this judgment.

Can I Get an Auto Loan Even If I Have No Job?

11:38 AM 3 comments

When a person has no job he may find it difficult to take out a loan. This is because the lender may be unconvinced that the person will be able to pay the loan back, as he does not have much, if any income.However, he may be able to take out a car loan if he can provide the lender some alternative reassurance that he will pay back the debt.

A finance company will generally seek a down payment for a car loan, regardless of the borrower's financial or credit history. However, a person who does not currently have a job may have to make a larger down payment. Not only does a down payment allow the lender to recoup some of his money, but it allows the lender more security because he knows the borrower has already put money into the car.

Any lender will also want to know a borrower's credit score. As a borrower's credit score will not be affected by her employment status, a good credit score can go a long way to convincing a lender to loan the person money. A good score will show that she has paid back loans in the past, meaning that she is financially responsible. This can partially offset a lack of income.

In lieu of income, a borrower may be able to show a lender that he has a large amount of assets, such as savings or a portfolio of investments that, if push came to shove, he could use to make payments on the car loan. This may help satisfy the lender that he is financially capable of paying back the loan, although a large number of assets is not as valuable as a steady income.

Just because a person does not have a job does not necessarily mean that she is not making any money. Many people who are unemployed still have money coming in, such as through severance payments, unemployment insurance and returns from investments. Showing these to a lender may convince a lender to make the loan, particularly if the income is not just temporary like unemployment benefits but steady, like income from a rental property.

How Do Car Dealers Check Your Credit?

11:39 AM 1 comment

Most people who buy new or used cars that cost more than a few thousand dollars plan to finance their vehicle by making a down payment and taking out a loan with monthly payments for the remainder of the purchase price. The amount of the down payment and the interest rate and duration of the loan are the key factors in determining the size of the monthly payment.

The first step in getting a loan from a car dealer is filling out a loan application. The application will at a minimum require your full name and address, Social Security number, banking information and annual income.

One of the boxes you check on the loan application authorizes the dealership to check your credit. The finance department at the car dealer will use the information to check your credit score at a credit bureau such as Experian, Equifax or TransUnion. Most car buying experts stress the importance of knowing your credit score before shopping for a car so you can more effectively negotiate a loan.

Most dealerships do not order an entire credit report (which costs more), and just receive your FICO score (sometimes just called credit score). Your FICO score is a number between 300 and 850 that reflects your credit history. You generally will get the best available interest rate with a score of 750 or above. Anything below 650 usually means you will only qualify for a high-interest-rate subprime loan.

Keep in mind that your credit score is just one factor in the loan decision-making process. While a very high credit score will almost guarantee you a low interest rate, lenders do consider other factors. Your income, years on the job, length of current residence, home ownership, total debt load, debt mix and other factors go into the loan decision, so do not despair if your credit score is not great.

How Does Auto Loan Interest Work?

10:20 AM 2 comments

Auto loan interest is usually calculated using a simple interest formula, as opposed to a compound interest formula. This means that your monthly payments include principal and interest paid only on the principal (and not on incurred interest balance).

Common auto loans are established for 36- to 72-month payoff terms. Similar to home mortgages, auto loans are paid on an amortized schedule that takes into account the principal, interest rate and loan period.

Your total interest paid over your loan term is calculated by multiplying the original principal balance by the interest rate and multiplying that total by the loan term in years.

Your initial loan payment has the highest proportion of interest to total payment ratio. Each month's payment has a portion applied to the principal balance, which reduces your principal. This means the next month's interest will be calculated on a lower balance. By paying additional principal as possible, you can pay less total interest over the loan term.

Tips on Buying a Car With the APR Based on the Credit Score

5:49 PM 2 comments

Your credit score is an important player in the purchase of a new or used vehicle. Unless you have the cash on hand to buy the vehicle outright, you're going to finance at least a portion of the vehicle's price. There are several strategies you can employ to manipulate the interest rate attached to your auto loan to net you the largest savings and the lowest possible rate.

If you don't have a lot of cash saved up to put a down payment on a vehicle, the best thing you can do to secure a low interest rate on a car loan is clean up your credit score. This strategy begins three to four months before purchasing a vehicle and involves you paying down your monthly revolving accounts, like credit cards, as much as possible. The more available credit you have in your credit accounts, the better your credit score is going to be because credit bureaus interpret this as responsible use of available credit.

If you have good enough credit to get the car loan you need but the interest rate is undesirable, try targeting a vehicle on the lot with dealer buying incentives like a rebate. You can often use this rebate to act as a down payment for the vehicle which lowers the overall amount you need to finance which can in turn lower your interest rate. This may require you to compromise on the vehicle you want to buy but it could also be the difference in you affording a car and having to walk to work.

A cash down payment lowers the overall amount you need to finance to purchase a new or used car. This is particularly important if your loan interest rate is based solely off your credit score. If you have borderline good credit/bad credit a bank or other lending institution may be hesitant to loan you a large sum of money so the more cash you can apply directly to the cost of the vehicle the better. A serious cash commitment can also lower your loan's interest rate as the lender is able to see your serious commitment to the purchase.

You see advertisements all the time for automobiles with "zero percent financing." What you miss is the end of the commercial when the announcer says, "for qualified buyers." This means you could be lured down to the dealership with promises of thousands of dollars in savings only to lose out because your credit score doesn't qualify you for the sale. Always have all the information on this type of incentive before consenting to have your credit report checked by the dealership.

Problems With Taking Over Payments When Selling a Car

12:48 AM 1 comment

When you find the car of your dreams, you may go through extreme lengths to obtain that vehicle. This could include taking over someone else's car payments. This is a risky transaction, even if you're taking over the payments of a friend or relative. If you do decide to take over someone else's car payments, your safest bet is to go through the lender.

If you take over payments for a friend, relative or even a random seller and you don't go through the bank to have the loan transferred to you, you don't legally own the car. You're therefore making payments on a vehicle you don't own. If the owner of the vehicle decides at any time that she doesn't want to sell you the vehicle, there are an abundance of legal issues that can arise. The seller could decide at any time that she wants her car back --- you'd be in a legal dispute over ownership of the vehicle.

If you get into an accident in the car that you're making payments on and the car isn't legally yours, the insurance check for the damage to the vehicle may go to the owner of the car. New cars usually have gap insurance, which covers the gap between what's owed on the car and what the car is worth, according to Progressive. If the car you're making payments on is "totaled," a dispute may arise over who gets to keep the check from the insurance company.

If the car you're making payments on needs repairs, you may have problems when you take it to the repair shop because you're not the registered owner of the vehicle. If the repair shop does allow you to have repairs done on the vehicle, legal problems could arise if you're not satisfied with the work that was performed on the vehicle.

If you go through the lender and the vehicle is on a lease, you can have the lease transferred from the other party over to you. The problem here is that you may not have the same financial situation as the person to whom the vehicle was originally leased. According to Loan.com, if your credit isn't as good as the original lessee's, you may have to obtain a new loan with different terms. If your credit is poor, the financial institution that leased the vehicle to the other party may not do business with you.

Can I Pay My Deceased Parent's Car Loan?

2:23 PM 1 comment

Cars often carry sentimental value to people, and when the owner of a vehicle dies, his heirs, particularly his children, may want to keep the vehicle in the family. Even without sentimental value, the vehicle may be reliable and worth keeping to one of the deceased's children. Under many circumstances, a son or daughter may pay on a parent's car loan and keep the vehicle.

If you are a cosigner on your parent's car loan, you should plan to continue paying because you are responsible for the loan. The cosigner is jointly and severally liable for the loan that he cosigns. This means that he and the first borrower are both responsible for the entire amount together, as well as separately. Generally, the cosigning borrowers are also named on the title of the vehicle as a co-owner, so a borrower cosigning for his parent may become the owner of the vehicle upon the parent's death even if the parent has no will.

If a descendant is not a cosigner for his parent, but is the heir to his parent's property, he will be able to take ownership of the vehicle through the inheritance and probate process. This process does not eliminate the lien against the vehicle by the lending bank unless the borrower had life insurance on the loan. In order to keep the vehicle, the heir will have to pay off the loan, or continue making payments as the parent had agreed to, if the bank will allow this. The bank may accelerate the loan when the borrower dies, requiring payment in full immediately.

If an heir inherits a vehicle with a lien against it and the bank will not allow him to continue making payments, he will need to refinance the vehicle in order to keep it, or pay it off. The bank holding the lien may have a streamlined process for refinancing the loan into the heir's name. If not, the heir may need to apply for a new loan and be approved by the bank. At that point, the heir would make payments on the loan in his own name.

If multiple heirs, such as multiple siblings, all have a claim to the vehicle, the situation becomes more complicated. If one sibling is a co-borrower, he will assume ownership to the exclusion of the other heirs as he is probably also listed as a co-owner. If there is no co-owner of the vehicle and a will does not apply to divide the inheritance, the probate court will divide the estate, including the vehicle, as it sees fit under the law. If you still want the vehicle, you may need to buy out the other heirs and continue making payments or refinance the loan.

What Are My Responsibilities As a Co-Signer on a Car Lease?

2:01 AM 1 comment

As a cosigner, you're responsible for the same leasing requirements and contract provisions as the borrower. Billing and correspondence usually goes to the registered borrower, however, so you might not be notified if the person you cosign for is missing or late on payments. Before cosigning for someone else's lease, consider your various responsibilities and how they can affect you financially.

As a cosigner, you are responsible for the consignee's monthly car payment. Even though you are likely not making the payment, you are liable if the payments are not made on time. Late payments are reported to the credit bureaus, and if you or the person you cosigned for do not make payments, both of your credit reports will reflect a history of late payments. If the vehicle is repossessed for non-payment, it will also mark your credit history, as well.

Even though you are not driving the vehicle, the vehicle must remain under the contracted mileage allowance when it is returned. If you are cosigning for 36 months and 12,000 miles per year, the vehicle must be turned in with 36,000 miles on it or less. If the driver goes over the contracted mileage amount, both of you are responsible for over-mileage fees. Usually, these fees are 12 to 18 cents per mile over the mileage allowance. If neither of you make the payment, it will reflect on your credit history as an unpaid debt.

During the time of the lease, both of the contracted lessees must maintain the vehicle and pay for repairs before the car is turned in. If the person you are cosigning for does not maintain the vehicle or brings it back without completing repairs (for body work or broken items), the leasing bank will send a bill for the cost of completing the work. It is equally your responsibility to pay the bill. This debt is also reported to the credit bureaus if it is not paid.

Consigning for a lease is risky, as leasing requires more than just timely payments. You must have excellent credit for lease approval, and the person you are cosigning for likely has a limited or poor credit history. Make sure the person you cosign for makes all payments on time and follows all contracted requirements. If the person you cosign for does not abide by the contract, you can face negative credit reporting, which affects your credit score, future lending opportunities and future interest rates.

Does a Repo Affect Your Credit if You Get the Vehicle Back?

7:50 AM No comments

A repossession affects your credit even if you pay to get your car back. It's unlikely a lender will repossess your vehicle the day after you miss your payment, so your negative payment history has already been reported to the credit bureaus. Late payments and repossession both affect your credit.

Ask your lender directly if it reports the repossession to the credit bureaus after you pay to have your car returned. Not all lenders report the event if you catch up on the loan payments, collection and repossession fees. If so, ask the lender to retract the repossession reporting. If you can refinance the vehicle with another lender, offer to pay off the loan in full to reach a compromise. Refinancing your loan might prove difficult if you are past due on your payments so you made need a co-signer.

If the lender reports the repossession, your credit score drops significantly. If the repossession isn't reported, your credit still suffers from a decreased score and negative credit history because of late payments. Your credit report states in-depth information about your car loan. For example, your report states the opening balance for your loan, current balance, number of payment's you've made, term of the loan and the number of times you've been late on your payment. The repossession shows as a loan reinstatement.

Because of late loan payments and the possible repossession reporting, you might be declined for future credit opportunities, such as credit cards, auto loans, a mortgage and personal loans. Or, you might obtain an approval, but for a restrictive loan or a limited line of credit. To minimize risk, a lender might approve a future loan, but for a short term or a high interest rate, which increases your loan payment. Interest rates are as high as 29 percent in some states.

After you pay to get your car back, re-establish your credit rating by paying all of your accounts on time. Keep your credit balances lower than your credit limits and create payment histories on your accounts. For example, keep paying your current lender; don't refinance the loan soon after. Maximizing your loan and credit balances decreases your credit score and affects your debt-to-income ratio. Even though the loan information remains on your credit report for seven years, you can still improve your credit by paying your long-term accounts on time.

How to Calculate Monthly Payments on a Motorcycle

6:47 AM No comments

So you've found the perfect motorcycle that you want to purchase, and you can see yourself cruising down the road on it. But, as is the case with almost everything, you have to find a way to pay for it. If you don't have the cash to pay for the entire thing, you will probably have to take out a loan. Calculating your monthly payment is important to ensure it fits into your budget.

Instructions

Convert the interest rate on your loan to a decimal by dividing it by 100. For example, if you have a 7 percent interest rate, divide seven by 100 and reach .07.

Convert the length of your loan from years into months by multiplying the number of years by 12 months. For example, if you have a four-year loan, multiply four by 12 to get 48 months.

Calculate your monthly interest rate by dividing the answer in Step 1 by 12. For an annual interest rate of .07, the monthly rate would be .00583.

Add one to your answer in Step 3 and raise it to the negative Pth power, with "P" being the total number of payments determined by Step 2. So you would raise 1.00583 to the (-)48th power, which equals 0.75641.

Subtract the answer in Step 4 from 1, which for our example would be 0.24359.

Multiply the principal amount of your loan, which is the total amount borrowed, by the answer from Step 3, your monthly interest rate. If you are borrowing $10,000, with our example, this would be 58.333.

Divide the answer in Step 6 by the answer in Step 5 to reach your monthly payment, which would be $239.47.

Visit MotorcycleFinancingGuide.com.

Click the "Calculator" link on the right-hand side of the page. It is the fourth link from the top under "Financing Menu."

Type in your loan amount, annual interest rate and term of your loan in years.

Click "Calculate," and your monthly payment will appear.

Tips on How to Buy a Car Online

9:21 PM No comments

If you're in the market for a new or used automobile, you can save time and money by purchasing online. Many car dealerships and auto sales websites offer a variety of new and used vehicles for sale online, and all transactions can be completed electronically. Sometimes, your car can even be delivered right to your driveway. However, buying online could leave you subject to scams and con artists. But a few tips on how to buy cars online can help you prevent that from happening.

Avoid con artists by investigating the seller.

When shopping online, you should thoroughly investigate the person or company advertising the vehicle you're interested in. Many trusting consumers have fallen victim to Internet scams and sent off a deposit for a vehicle, only to watch the seller disappear after receiving the funds. If you're dealing with a website like eBay motors, research consumer feedback on the seller to find out if he's legit. And be sure to investigate all auto sales websites with the Better Business Bureau as well online customer reviews.

A good writer can easily author a positive-sounding advertisement describing the car of your dreams, but you could still find yourself with a lemon. Check to see if a term like "rust colored" means "full of rust," or "minor dents" means a demolished front end or quarter panel. One way to get an idea of the car's appearance--without viewing it in person--is to ask the seller for multiple photos. Ask them to email you pictures of every angle of the vehicle including the interior and engine.

View the car in person whenever possible.

Whenever possible, view the car in person. If you're buying locally, shopping for a car online can save you the time of going from dealer to dealer. Once you find a car you like online, you'll be able to see exactly what condition it is in--and perhaps test-drive it--by viewing it on-site. Checking it out before making a deposit can save you from scam artists and costly repairs.

A good practice--particularly if you are buying a used car--is to run the Vehicle Identification Number (VIN) of the car through a national database. Every car manufactured has a unique individual VIN that is kept on record at all car dealerships, repair shops, police departments and DMV facilities that the car has been associated with. Checking the VIN can help you gain knowledge of the car's history and find out how many owners it's been through, how many accidents it's been in, and if it has endured any major internal damage or been involved in any criminal activity.

Use an online auto loan company to finance your car.

If you need help with financing, consider an online car dealer that specializes in car loans and financing. Another option is to find a car at a dealership and have an online debtor finance it. Online auto loan companies such as Up2Drive and MyAutoLoan offer instant approvals for car loans. In some instances, you can get approved before you even visit the dealer. In these cases, a check for the purchase price will expedited and electronically delivered to the dealership on the buyer's behalf.

Things You Need When You Are Buying a Car

1:04 PM No comments

Most states require at least liability insurance to register a vehicle. If you plan to finance your car, your lender likely has its own specific insurance requirements as well. Before pursuing a car purchase, make sure you have all you need to satisfy a dealer, lender or state requirements for a car purchase.

Determine how you will pay for your car before you begin to shop. If you intend to use an auto loan for your purchase, obtain a pre-approval from an auto lender of your choice. Use your loan terms to adjust your shopping price range so you can stay within your budget. If you plan to pay cash for your vehicle but plan to take it from an account that requires you to apply for your funds, such as a money market account, submit necessary withdrawal forms before you shop as well. Otherwise, either payment can take up to a week to receive, which can affect your purchase.

If you want to apply for an auto loan, expect to submit a credit application to your lender. You must have a valid Social Security or tax identification number to apply. If you plan to pursue a lease or other manufacturer offer, such as low-rate financing, you must have good to excellent credit. Many lenders require proof of income, so expect to provide a previous paystub or previous tax forms if you are self-employed. Auto loan providers also like to verify at least a two-year address and work history.

Most states require proof of insurance coverage for vehicle registration. If you purchase from a dealership, you'll have to provide proof of insurance before you leave with your vehicle. Most states require at least a liability policy for registration, although auto loan providers require more coverage. If you finance or lease your vehicle, you'll need to purchase a full-coverage insurance policy, which includes liability, comprehensive and collision coverage. Check with your insurance provider before purchasing a car, as you may find that the cost of coverage requires you to readjust your purchase budget.

Whether purchasing from a dealership or private seller, you'll have to pay fees for registration and title application that differ by state. Rates for sales tax may differ by town or county. Depending on your area, you may have to complete emissions or safety inspections before or immediately after purchasing your car. Because these fees are required, budget for them ahead of time. If you intend to finance or lease your car, you can roll your fees into the lease or loan amount. Otherwise, budget appropriately. Call your state's motor vehicle department or ask a dealer which state fees you'll pay.

The Best Time to Refinance an Automobile

8:57 AM No comments

The best time to refinance a car varies by person and individual circumstance. Refinancing can offer a borrower an opportunity to lower her car payment, reduce loan payback amount or shorten a current loan term. Determine the ideal times to refinance and if the option can benefit you financially.

You can lower your current car payment and shorten your loan term if you have a down payment to offer toward your refinancing. Even if you don't obtain a lower interest rate, you'll save money over the term of your loan when providing a down payment. Providing several thousand dollars toward your current car loan will not lower your payment, although you'll decrease your loan payback term. Refinance if you have several thousand dollars to put toward your loan; every $1,000 you use for a down payment should reduce your monthly payment amount by about $20 per month. If you also obtain a lower rate, you'll save even more money.

If interest rates have dropped since you initiated your loan or your credit has improved, obtaining a lower rate is advantageous. You can save thousands of dollars over your loan term or up to $100 per month if you can obtain approval with a competitive interest rate. If you originally financed through a dealership to take advantage of manufacturer discounts, you likely obtained a rate that was higher than average. Check the rates of auto loan providers in your area or online to determine if your current rate is higher than average.

If your current rate is high but your credit history is less than excellent, a co-signer can help to refinance your loan. You can change your term or obtain a lower rate. Because a co-signer secures your loan with his credit and income, you'll qualify for the same rates as the person who co-signs for you. Your co-signer should have good to excellent credit. If you have experienced financial hardship and your credit has suffered, using a co-signer can help you to achieve a lower monthly payment without having to abide by various loan restrictions.

Extending your loan term might also offer some benefit. If your financial needs have changed, you've changed jobs or lost income, you can lengthen your loan term to take advantage of a lower monthly payment. If you need to increase your loan term because of your financial circumstances, you may want to check with your current lender first. Some lenders offer loan modification programs to help during financial hardship, such as unemployment or disability.

What Happens When I Go Over the Miles on My Lease?

7:23 AM No comments

Leasing a car has a number of considerations and drivers who spend a lot of time in the vehicle may exceed the number of miles allowed in the contract. Though excess miles can lead to very high lease fees, drivers have a number of options that range from negotiating with the lease company to an outright purchase of the vehicle.

In a 2005 article, Fox News reported drivers who exceeded the mileage allocation in a lease may benefit most from just buying the vehicle. The article went on to explain, though, that drivers do not typically receive the most benefit from buying the car as soon as they realize they will exceed the mileage. Instead, Fox News recommends waiting until the end of the lease term to settle with the finance company. Over the full lease term, several years of low mileage driving may balance out early excess driving. During the interim, the monthly lease payments remain the same regardless of the car's mileage. In addition, Fox News notes that the lease buyout price at the end of the term more closely matches the vehicle's actual value than buyout prices earlier in the agreement.

In the same 2005 article, Fox News also observed that many leasing companies do not want drivers to return high-mileage vehicles. Though these cars may lead to lucrative excess mileage fees, leasing companies risk expensive repairs and the cost of shipping and marketing when accepting lease returns. For this reason, many leasing agencies negotiate with drivers to find an affordable, reasonable buyout price. Even if the driver does not want to keep the vehicle, it may make more financial sense to buy the car and resell it, rather than paying the excess mileage charges.

Some leases allow drivers to sell the vehicle during the term of the lease. Drivers with marketing know-how may be able to sell the vehicle for more than the lease buyout price even with higher than average miles, according to the financial website Bank Rate, but even a small financial loss on the car may be more affordable than paying the excess mileage fees. Drivers should carefully review the lease, though, to verify that selling the vehicle does not incur any additional charges.

Bank Rate also notes that drivers who rack up more miles than their leases allow may simply opt to pay the overage charges. Don Taylor, a certified financial adviser for Bank Rate, observes that leases often charge drivers about 25 cents per mile in excess of the allocation, and few drivers could find another comparable vehicle to use at that rate. For this reason, Taylor notes that some drivers may choose to simply pay the overage fees when returning the lease, then either negotiate a higher mileage lease or avoid leasing altogether for their next vehicles.

How to Calculate the Effective Interest Rate for Leases

8:30 PM No comments

Many consumers who choose to lease a vehicle aren't aware that they're effectively paying interest in addition to the amount the vehicle depreciates over the lease term. Automotive dealers aren't required to disclose the effective interest rate in their lease contracts. Financing charges are usually referred to as a "money factor," a decimal figure with little obvious correlation to typical interest rate yields, and aren't usually disclosed to customers. With the application of Newton's method and basic financing formulas, a lessee can determine the effective interest rate he pays on a vehicle lease.

Instructions

Determine the depreciated amount of the vehicle over the course of the lease term by subtracting its sticker price from its declared value at the end of the lease. Let this value be variable A. For example, a $20,000 car that is worth $12,000 at the end of its lease has a final value of $8,000, so A = 8000.

Set variable P as the monthly payment amount, and variable N as the total number of monthly payments in your lease term. In the example, the lessee agrees to pay $164.21 monthly on a five-year lease -- 60 total monthly payments -- so P = 164.21 and N = 60.

Research common automotive loan rates for your area, and reduce that figure to a monthly interest rate by dividing it by 12 set that variable to I. Newton's method relies on trial and error to reach its final calculation, so starting with an estimate of a likely interest rate should help streamline your calculations. In the example, above, interest rates in the area are 8 percent, which is equivalent to 0.0067 interest monthly. So I = 0.0067.

Apply the variables to the monthly payment formula to determine if your estimate was accurate.

Pp = I * 8,000/[1 -- (1+I)^-n]

So, for our example:

Pp = 0.0067 * 8000/[1 -- (1+0.0067)^-60]

Pp = 162.37

If Pp = P, the estimate used to determine the interest rate, I, was accurate. The interest on the loan is I multiplied by 12. If not, continue to Step 5

Apply Newton's method to find a new test value for I, known a Ix, using the Pp value determined in the previous step.

Ix = I -- ([Pp-Pp*(1+I)^-N --I*A]/[N*Pp*(1+I)^-(n -- 1) -- A)

For the example,

Ix = 0.0067 -- ([162.37-162.37*(1+0.0067)^-60 -- 0.0067* 8,000]/60 * 162.37 *(1+0.0067)^ -- (60 -- 1) -- 8,000)

Ix = 0.0069

Set I = Ix, and return to Step 4. After a few permutations of Newton's method, we arrive at I = 0.0071 for our example, which results in a Pp value of 164.21, the same value as P. The interest rate on the lease was 8.5 percent.

Help With Car Finance

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When it comes to purchasing a new vehicle, it's always ideal to pay with cash. By paying with cash, you have the ability to negotiate a lower price for your vehicle. You can also avoid all of the high interest fees that are charged by lenders. If you don't have sufficient cash available to purchase a car, all hope is not lost. The next option to consider is financing.

The first order of business, before seeking car financing, is to build your credit score. The best way to build your credit score is to ensure that all of your bills are paid on time. Order a copy of your credit report from each of the three major consumer credit report bureaus. Review each report for negative unpaid accounts. If there are unpaid accounts, contact the creditor and make arrangements to pay off those accounts. Each negative account you pay off can improve your credit score. If you possess credit cards, carry a low balance on those cards. High balances will look bad on your credit report. If you don't have any credit, it is just as bad as having poor credit. This is due to the fact that potential lenders are not able to assess whether you are a credit risk. Therefore, it is best to open at least one line of credit before seeking car financing.

If you have established a good relationship with a local bank, the bank may approve you for a car loan. If you are a member of a credit union, that's even better. A credit union is a better choice for financing, due to the fact that credit unions charge lower interest rates for car loans. Regardless of whether you choose a bank or credit union for financing, your credit worthiness will be evaluated. To evaluate your credit worthiness, the financial institution must request a copy of your consumer credit report. If your credit score is lower than 680, your chances of being approved for financing significantly decrease.

If the bank or credit union denies your loan application, all is not lost. Often, the bank will approve your rejected application if you have a cosigner. A cosigner is an individual who agrees to be financially responsible if you default on the loan. The financial stability of the cosigner will be evaluated by the bank, as well as his credit worthiness. One way to find a cosigner is to ask close family and friends. Only ask a family member or friend to cosign your loan if you are 100 percent certain that you are able to pay back the loan, according to the loan agreement.

If you have a sizable down payment (a few thousand dollars) toward the car you want, the lender may allow you to lease the car. By leasing the vehicle, you still get a new car. However, you will have to return the car to the dealership when the lease agreement expires. In most cases, at the end of the lease agreement, you also have the option of purchasing the vehicle. By making all of your payments on time during the lease, you increase your chances of being approved for lender financing to purchase the leased vehicle.

Is It Worth Getting Full Car Insurance on a Used Car?

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If you are paying cash for a used car, you are not required to get full-coverage car insurance. Most states require vehicles to have a minimum liability policy in effect for registration. Depending on the value of your vehicle, you may want to purchase a full-coverage policy to protect yourself from loss.

Full-coverage insurance covers damages to your vehicle caused by an at-fault accident, theft, fire or damage from weather or animal collision. A state-required liability policy covers only injury to other people and property damage caused by your car if you were at fault. No coverage is provided for your vehicle through a liability policy otherwise. A full-coverage policy pays you for the market value of your car or pays it to your lender to pay the loan's balance.

A full-coverage insurance policy is the most expensive you can purchase; minimum liability policies are the lowest priced. If you paid cash for your car and could not easily replace it, a full-coverage policy has its advantages. Also, newer cars are less expensive to fully insure than older, high-mileage vehicles. When your vehicle loses its value, the higher-priced insurance coverage will not benefit you financially. For example, if you paid $1,000 for your vehicle, you'll likely pay more than the car's value in a short period of time to maintain the full-coverage policy

If you have a loan on your vehicle, check with your loan company to find out its insurance requirements during the term of your loan. This information is usually stated in your contract, along with the consequences of not keeping a full-coverage policy in effect. In the event of a loss, your insurance company will pay the bank for the market value of the vehicle and any excess after the loan to you. Without the coverage, you would still have to pay the vehicle's loan even though you no longer have it.

People carry insurance of all kinds because of the unknown. You can get into an accident at anytime on the road, and your insurance protects you from financial loss. Often, state minimum liability policies do not offer adequate coverage for damages that can occur in a serious accident. Check with your insurance agent to discuss coverage limits and purchase an effective policy that you can afford. If you do not have enough coverage in place, you become personally liable for any damages you caused and can face potential lawsuits or out-of-pocket expenses.

What Is the Difference Between Residual Amount & Payoff Amount?

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Financing and leasing options can be voluminous when shopping for an automobile. Automobile dealers often refer to payoff and residual amounts when discussing leasing options. A payoff amount can also refer to vehicle financing.

When you lease a car, you agree to pay a specified amount over a set period of months to use the vehicle. The process begins similarly to a traditional purchase; you agree upon a purchase price. A lease payment and term is then agreed upon and the lease contract is signed.

At the end of the lease term, the vehicle may be returned to the dealer or purchased for a specific guaranteed price known as the residual value. This value is the projected wholesale value of the car at the end of the lease term.

The payoff amount is how much it will cost you to terminate your lease and purchase the vehicle before the end of the lease term. You must ask your leasing company to provide you with a payoff value; an early payoff amount can be difficult to calculate, as it is based on both the residual value and the amount you still owe on your lease. The leasing company will recalculate your lease balance, attributing most of your payments to finance charges rather than paying down the lease.

In traditional financing arrangements, the balance due on the installment contract is also considered the payoff amount. Unlike leasing arrangements, this payoff amount can be calculated as the principal balance remaining plus any accrued interest charges.

A lease payment is made up of three components: a finance fee, a sales tax fee and a depreciation fee. The finance fee is similar to an interest charge in a traditional financing transaction. The sales tax fee covers any sales tax that is charged by the state.

The depreciation fee is the portion of the payment that pays for the loss in the car's value over the number of months it is used. Divide the original cost of the vehicle less the residual value by the term length to determine the monthly depreciation charge.

How Is a Beacon Score Evaluated When Purchasing a Car?

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Edmunds.com states that an excellent-credit borrower is defined by a credit score of 720 or more, while poor credit borrowers have a credit score of 620 or less. A borrower's credit score alone does not ensure a loan approval or decline. Before you apply for a car loan, consider which other credit information lenders use to determine a loan approval.

Some auto loan providers may approve loans based on credit score alone. Most lenders, however, use a combination of credit and personal information to ultimately determine a loan approval. Be sure to check your credit score with all three credit bureaus. Not all accounts are reported to each major bureau, so you may have a higher score with one bureau than others. Some lenders may use a median score from all three bureaus.

Auto loan providers review borrower credit and payment history thoroughly. Even with a high credit score, you can still have credit issues caused by late payments that aren't accounted for in your scoring. Additionally, a low credit score does not automatically warrant the decline of your application. All accounts should be current, meaning you aren't past due on any payments for any of your accounts. Even if previously past-due accounts are now current, potential lenders may not penalize you for getting behind in payments at some point.

Most lenders determine loan approvals based on a borrower's debt-to-income ratio, which does not include your credit score. Expect to provide your lender with a copy of your most recent pay stub, which lists your year-to-date income. The lender determines the costs of your monthly debts by reviewing the information on your credit report and credit application, which lists your monthly mortgage or rental payment. Even poor credit customers can obtain a loan with a decent debt-to-income ratio. Someone with a good credit score and insufficient income may not obtain a loan approval.

Lenders also use a borrower's loan-to-value ratio to determine a maximum loan amount. Based on credit score, payment history and the vehicle's bank-determined market value, a borrower may obtain an approval for 60 to 120 percent of the car's value. Depending on your loan-to-value ratio, you might need to provide a down payment. Even with an excellent credit score, you cannot borrow $20,000 for a vehicle worth only $12,000. For poor credit consumers, you may obtain a loan despite a low credit score but may have to provide a large down payment.

Can Car Refinancing Improve Your Credit?

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A car loan can represent a significant portion of your monthly budget. The amount that you pay in interest to buy a car, especially with a low down payment, can easily reach several thousand dollars over the life of the loan. This is why refinancing, which may depend on your credit score, can be a way to save money and protect your credit history.

Car refinancing may seem to be a complicated process surrounded by confusing terms and numbers, but it is actually relatively simple. When you refinance a car, you get a new loan to pay off the balance on your existing car loan. Refinancing allows you to take advantage of lower interest rates or extend the term of your loan, each of which will lower your monthly payment.

The biggest way that refinancing a car helps your credit score is by reducing the risk that you'll default on your loan. Car loans have fixed interest rates that let you predict what they will cost each month, but a dip in your income or an unforeseen expense can make it difficult to pay bills on time and in full. If you fail to make your payments, your loan will go into default and you may incur late fees, penalties and, eventually, lose your car to repossession. Each of these events will hurt your credit score, so a monthly payment that you can make more easily serves to protect your credit.

While car refinancing can help to preserve your credit, your credit score can also have an impact on how you refinance. Lenders save their best interest rates for borrowers with excellent credit. This means that if your credit improves as you pay off your auto loan, you may be eligible for a lower rate than the one offered when you were shopping for the car. In the future, if a lender sees that you chose to refinance, it will have a very small impact on your ability to borrow money. On the other hand, if you decide not to refinance and find yourself unable to make your payments, your credit score will start to drop immediately.

If you refinance your car with a loan that gives you more time to pay off the vehicle, you help protect your credit but risk paying more for the car in the end. Each month that you have the loan means more time for the lender to charge interest. A lower rate with a longer term might cost more than a loan with a higher interest rate that you can pay off sooner. While shopping for refinancing options, lenders will need to run credit checks as you apply. Each credit check appears on your credit report as an inquiry. Too many inquiries can harm your credit score, so only apply for refinancing once you've identified a good bargain and expect to accept the loan.

How to Get My Car Payment Taken From My Checking Account

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Many lending banks offer an option to have your car payment taken from your bank account, although you most likely will need an account at the bank to have this done. If you financed through a local bank, you were probably required to open a bank account anyhow, so you may have to start using it if the bank requires you to. Some banks even offer a rate discount for getting set up on an automatic payment plan. In order to find out the benefits and requirements, you must call your lender for information.

Instructions

Call your lender. You can find your lender's phone number and account information on your loan contract or payment booklet if you were sent one. If you cannot obtain your loan information because you just purchased the vehicle, call the dealer you purchased from to get the correct information.

Connect to the bank's customer service department. Tell the representative you would like to arrange for your loan to be taken from your checking account. Ask if the bank offers any benefits for setting up automatic monthly payments, such as a rate discount.

Follow your bank's instruction to set up the new payment plan. You may be asked to come in and sign authorization paperwork, or have the information mailed to you. Or, your bank may require you to complete the authorization online.

Send in a voided check if your bank asks you to do so. The bank may also just ask for a check by phone (meaning you would have to provide a canceled check's information). You may have to obtain your checking information if you use a different bank for your checking and savings account, and may have to call that bank to obtain your account and bank routing number to complete the automatic debit process.

Does It Hurt Your Credit Score to Prequalify for a Car Loan?

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Prequalifying for a car loan, also known as obtaining a preapproval, won't substantially affect your credit if you apply for only one loan preapproval. Each time a lender accesses your credit the inquiry remains listed on your report for several years. If you constantly apply for credit, the decrease in your credit score might become significant.

Your credit score can decrease by up to five points each time a lender accesses your credit report or not all, depending on the length of time between inquiries. The My FICO website states that all inquiries made within two weeks for a credit report for the same type of loan, whether mortgage or auto, reduce your score the same as one inquiry, allowing a consumer to shop competitive rates. Wait until you're ready to pursue a loan and shop rates within the two-week time frame; otherwise, you risk lowering your credit score.

If you're concerned that your credit score was affected by recent inquiries, such as an auto insurance quote or increased line of credit from an account you already have, don't be. These credit inquiries are known as "soft inquiries" and don't affect your credit score. "Hard inquiries," the term used to describe credit reviews that you initiate to obtain a line of credit, remain on your credit report for two years. Any point reductions also last as long.

Keep in mind that potential lenders over the next two years can view the lenders you authorized to view your credit. While the credit bureaus might offer some leniency to check rates over a short time period, the consistent inquiries might be unfavorable to other lenders. Future potential lenders won't know that you were only checking rates and can only see the name of lenders who you've allowed to pull your credit information, which may make it seem as though you constantly apply for credit.

Check rates and lending terms before you decide where to apply for a preapproval to minimize the amount of inquiries that remain on your credit report. Most lenders list rates on their websites. If you apply to a dealership for a preapproval, take caution. Dealers often work with many auto loan providers and have the ability to submit credit applications electronically to multiple lenders at once. If you plan to use a dealership for financing, ask the person handling your credit application not to send your application to more than two auto loan providers.

If I Refinance My Auto Loan What Will Happen to All the Money I Put Toward the Principal?

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The process of refinancing is relatively common for people seeking to change the terms of their home loans. However, many people who have taken out auto loans may also choose to swap out their current loans for others. The process of refinancing an auto loan closely mirrors that of refinancing a home loan. When an auto loan is refinanced, the person will only refinance the portion of the loan that is unpaid, not the principal.

When a person takes out an auto loan, the lender that he borrows the money from provides him with enough cash up front to purchase the car. In return, the individual agrees to pay the lender back over time by making regular payments to him. This loan is structured like most other loans, in that, if the borrower chooses, he can seek out another lender to buy up the remaining portion of the loan and issue him a new one.

When a person pays off an auto loan, he is providing money to the finance company that is used to reduce the overall size of his debt. This money is applied to the principal of the loan -- the lump sum of cash that the person originally borrowed to buy the car and on which he now pays interest. After the principal of a loan is paid down, a person does not need to repay it when he refinances.

When a person refinances, the lender he is refinancing with agrees to pay off all the remaining principal on his current debt. The new lender then issues the debtor a loan roughly equivalent in size to the debt that he just paid off. The money that the debtor put toward the principal remains with the original lender. The new lender will not require that the debtor repay this amount a second time.

According to the car reference website Car Buying Tips, some people may not be able to refinance their auto loan if they have already paid off too much of it or if the loan was too small to begin with. Generally, auto loan finance companies will be unwilling to extend a refinanced loan for an amount less than $7,500. This is because a loan for an amount less than this is not profitable enough to be worth their time.

What Is the Dealer's Profit on Selling a Car?

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Cars sold at a dealership differ in profit. Used cars are bought from a person or source for different amounts, and sale prices are often inconsistent. For this reason, it is impossible to determine the amount a dealer makes on a used-car sale unless he tells you. Some cars do not make a profit at all. New-car profits are easier to gauge, as invoice prices are available online.

You can find new-car invoice prices online by using the "True Market Value" tool provided by Edmunds.com. The invoice price is the amount a dealership owns a car for; the invoice price subtracted from the MSRP (manufacturer's suggested retail price) is the intended profit amount. When manufacturer's offer rebates or incentives, or an immediate discount from the vehicle's price, the amount is provided by the manufacturer, not the dealer. Dealerships receive the discount amount back from the manufacturer, meaning the vehicle was sold at sticker price if there were no further negotiations.

Some dealerships modify vehicles or add different costs to the vehicle's MSRP. The amount is stated on an addendum sticker, which is usually located right next to the window sticker. Any item you see listed on the addendum sticker is more profit for the dealer. For example, some dealers may add a "Dealer and Marketing Fee" for $1,498. This is pure profit. More creative dealers add paint protection, appearance packages or aftermarket items, such as remote starters or DVD players. While the dealer incurred cost for these added items, the pricing is marked up for profit.

Used vehicles on a dealer's lot can come from a variety of sources. Many are trade-ins, meaning a customer traded his used vehicle for another on the dealer's lot. You can gauge trade-in amounts for dealerships by visiting the Kelley Blue Book website, Edmunds.com or NADAGuides.com to check "Trade-In" values. Even with an idea of how much the dealer paid for the car, the amount is not definite. Some dealers may purchase for the correct value but end up paying for repair work before resale. Once the work is done, they may own the car for more than it sells for.

Auction cars are purchased at wholesale value, an amount consistent with trade-in value. However, the market is always changing. If customers aren't trading in cars during rough economic times, prices for auction vehicles increase. A dealership may end up paying hundreds less than retail price to add vehicles to his lot. Rental vehicles are purchased from rental car lots and marked up for resale. Check a vehicle history report to see if a dealer's vehicle is a previous rental. If so, find the true cost by checking rental lots and subtracting the price you found from the dealer's asking price.

List of Needed Documents When Selling a Car

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Outside of asking for a price and fixing up your car to sell it, exchanging required documents with a buyer isn't always simple. Each state has its own requirements when it comes to passing on documents to your buyer. Most of these state laws are similar, except in California, where one specialized certificate is required.

All state laws require that you first transfer your car title and registration when selling your car. In Washington, D.C., you don't have to show your registration right at the sale. Nevertheless, the DMV in Washington says doing so can help prove to your buyer that you've kept up with all paperwork. In California, you have to report the sale of your car within five days after selling it. Do this by filling out a Notice of Transfer Release of Liability form.

A federal regulation requires you to report your car's odometer readings to the buyer. In California, the only exceptions to this are if the car is over 10 years old, if it's a commercial vehicle more than 16,000 pounds or a new vehicle through a dealer. Report your odometer readings in California by filling out the Vehicle/Vessel Transfer and Reassignment form. This document isn't available online and needs to be sent to you via the U.S. mail. In some cases, you can just fill out odometer readings on the car title.

In Oregon and most other states, a bill of sale is required as official record of your car's sale. You can print out an official bill of sale through Oregon's Department of Motor Vehicles. On the form, print the names and addresses of you and the buyer; indicate date of purchase; show vehicle make, model and year; and write your license plate number and the vehicle identification number.

When selling a car in California, you have to provide the buyer with a certificate detailing your cars emissions. This is known as a smog certificate. At any point you renewed your registration in California, you would have been required to have an emissions test and receive your smog report. In order to acquire one, California's Department of Motor Vehicles provides information on available test stations. As of 2011, this only applies to cars that are older than six years old but made after 1975.

How to Finance a Car With No Credit Check & No Money Down

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Many lenders don't want to take a chance on making business deals with people who have anything less than stellar credit. That means a good number of Americans are having a hard time finding financing. However, certain people and companies are helping people with low or no credit. You have a few options if you want to buy a car with no money down and no credit check.

Instructions

Look for a private seller willing to accept payments from you. A smart seller will ask for a written agreement between you, but he might be fine with no down payment, and there won't be a credit check.

Research third-party companies that help people with less-than-perfect credit. Depending on the company, you can often get financing without a down payment. And while these companies do have to run your credit, they already know you might not have the best credit score. These companies will probably charge much higher interest rates.

Borrow money from friends or relatives. Make a contract to pay them back over time. This way, you probably won't need to pay interest, and you won't have credit checks or down payments to worry about.

Offer an exchange other than money. For example, if you're trying to buy a car from your neighbor, ask if she'd consider giving you the car if you do his landscaping for the next couple of years. Or hand over that old dirt bike you never use. Whatever you have to trade, you might luck out and not even need to get financing.

What Is the First Payment Default Rule on an Auto Loan?

2:26 PM 1 comment

The lender for your auto loan sets several rules in the terms of the agreement. One of these is often a first payment default rule that accelerates your loan going into default when you are late on your first payment. Pay attention to these rules to avoid having your car repossessed shortly after you buy it.

Your auto loan will go into default when you fail to make payments as agreed in the terms of the loan. Ordinarily, it takes anywhere from 90 to 120 days of failing to pay or underpaying before the loan will be in default, according to Cars Direct. However, many lenders set a different timetable for default for the first payment on the loan.

Lenders often include in the loan agreement that the loan will be in default if the first payment is late. In some cases a payment is late if it is not received by the due date. Other lenders include a grace period of five to ten days before the loan enters default from a missed first payment. Strict rules apply to the first payment because missing this payment is a sign of an irresponsible borrower or fraud.

When you miss the first payment and your loan goes into default, the lender will repossess your car. At this point you have a few options. You might be able to reinstate the loan by paying the amount of your late payment, late fees and the lender's costs incurred while repossessing the vehicle. If you do not try to reinstate your loan, the lender will sell the car and require payment from you for any remaining loan balance that the sale of the car did not cover.

To avoid first payment default, make your first payment on an auto loan as soon as you can, even if the deadline is still weeks away. This will keep you from forgetting about the payment when it comes due. If you are paying through an electronic transfer, call your lender on the day it is due and make sure that the transfer was set up properly and went through. And of course, before signing a car loan, crunch the numbers to ensure that you can afford your loan payment.

Auto Loans for Limited Credit History

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About 20 million to 25 million Americans have no credit, according to the Fair Isaac Corp., the originator of the FICO credit score. Getting an auto loan, like all other loans, depends upon both credit score and your income. If you haven't used a lot of credit in the past, or have not used credit in a long time, you may have more difficulty obtaining a car loan because of your limited credit history.

As a consumer, your interaction with different forms of credit, such as credit cards or mortgages, forms the basis of your credit history. If you've never had a loan or don't use credit, you don't have any credit history. While it is possible for people with no or limited credit histories to get a loan, it is up to each individual lender to determine the standards required to obtain funds.

Whenever you apply for a loan, your lender will want to know how you've handled credit in the past. If, for example, you've always paid your bills on time, you probably look like a good candidate for a lender considering giving you money. Your credit history shows a lender whether you represent a risk or a safe investment. If you don't have much of a credit history, your lender is probably less likely to give you a loan.

Your credit score is based on your credit history. If you have no credit history, you don't have a credit score. If you have a limited history, your score is probably lower than average because part of your history is based on the kinds of credit you've used, the number of accounts you have and the length you've had them. If, for example, you've only had one credit card for the past year, you probably do not have a very high credit score. Low credit scores make it harder to get a loan.

While people with limited credit histories will have a harder time getting an auto loan and may have to pay more interest than those with a strong history, your credit history is not the only factor lenders use. A lender may also ask you to prove your income, such as by requiring you to provide your tax returns from the previous two years or pay stubs. If you can't do this and have no credit history, it will be very difficult to get any kind of loan.

How to Cancel an Auto Purchase

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Buyer's remorse is a common feeling, and it affects everyone from time to time. Certain items such as clothing, furniture and electronics are easily returnable; most retailers accept returns within the first 30 days. On the other hand, if you purchase a car and then decide to cancel the purchase, you may or may not be able to return the vehicle.

Instructions

Read your contract. Before taking your vehicle back to the dealership, read the sales agreement. Depending on your state, you may be able to cancel an auto purchase within the first two or three days.

Contact the dealership. If you're able to cancel the purchase, call the dealership and ask to speak with the sales manager. Express your desire to return the vehicle and cancel the auto purchase.

Call the finance company. Either you or the car dealer will have to contact the finance company and explain the situation. Contact the finance company after the dealership agrees to take back the car. Once the dealership receives the vehicle, it'll refund the lender.

Return the vehicle to the dealership. Bring the vehicle back to the dealership in a timely manner. Incurring excessive mileage or damaging the vehicle voids the arrangement, in which case you will be unable to cancel the auto purchase.

Pay interest on the vehicle. Interest accrues daily, and it begins the moment you sign the loan documents. You'll have to make an interest payment before the dealership will accept the vehicle and cancel the purchase.

Are Title Loans Legal in Arizona?

10:53 AM 1 comment

Car title loans, also known as secondary motor finance lines in the Arizona Revised Statutes, are cash loans that are backed by the equity in a vehicle. If the vehicle owner does not pay back the loan with interest after a month, the owner may renew the loan, or the loan company has the legal right to seize the vehicle. According to Jean Ann Fox of the Consumer Federation of America, the state of Arizona allows title loans and limits the amount of interest that a company may charge on such a loan.

Per 44-291(G) ARS, Arizona title loan companies may not charge a monthly finance rate in excess of 17 percent for vehicle loans of $500 or less in value. For loans more than $500 and less than $2,500, a finance company may not enforce a finance rate of more than 15 percent monthly. The state limits interest rates on secondary car loans between the amount of $2,500 and $5,000 to 13 percent, while all loans over $5,000 can incur a maximum monthly finance rate of 10 percent.

Under 44-287 ARS, a Arizona title loan contract must contain the names of the buyer and the seller of the loan as well as a description of the motor vehicle. Loan providers must provide the borrower with the annual or monthly vehicle financing rate in clear terms. According to 44-290 ARS, the buyer of a loan may request that the lender issue them a written statement that outlines all payment due dates and the amount of payments for recordkeeping. Title loan recipients have a right to a written receipt for any payments made in cash.

Secondary loan companies may assess late penalties for delinquent payments not made 10 days after the due date according to 44-291(E) ARS. These organizations may not charge more than 5 percent of the unpaid balance of the Arizona title loan as a penalty, and they must clearly disclose these penalties in the sales contract. The title company may seize a vehicle per the loan agreement if the borrower does not pay the loan back 11 days after the payment due date.

If a Arizona title loan company deliberately tries to collect more than the interest allowed by law or does not have a current license to issue loans, the person who took out the loan does not have to pay back principle, finance charges or penalties according to 44-291(H) and 44-295 ARS.

Government Lemon Law Information

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Sometimes a bargain that looks too good to be true is too good to be true. Even a reputable dealer may sell you a car so defective that it's either unusable or worthless. To protect buyers from being stuck with a clunker, state governments have passed lemon laws, which empower buyers to get a better deal from their dealer. Lemon laws apply only to manufacturers and auto dealers; if you buy a lemon from a private owner, you're out of luck.

State laws set standards for what constitutes a lemon. In Iowa, for example, if a problem continues after three repair attempts and it's two years old or less, you have a lemon. In Vermont, the Department of Motor Vehicles states that a car out of service 30 days while covered by the express warranty may be a lemon. If the dealer fails three times to repair the same problem and the first repair took place under warranty, that could qualify too.

Like the definition for a lemon, the remedy for the problem varies from state to state. Many governments, such as the District of Columbia's, give you the right either to request a swap for a comparable vehicle or to claim a complete refund including all the taxes, fees and charges you paid. The seller can, however, deduct from the refund to cover mileage and depreciation. North Carolina also allows you to recover any costs caused by the car's malfunctions, such as towing charges and rental car bills.

It may take more than just complaining to the salesperson to get your refund. The Iowa Attorney General's office recommends you keep records of the repair attempts and submit them to the manufacturer along with a formal request for either a replacement or a refund. If the manufacturer refuses, you can sue under the lemon law. In Vermont, you have to go before an arbitration board and make your case. The rights and the exact procedures in your state should be available online.

One thing to check is exactly which vehicles are covered in your state. According to the Vermont Department of Motor Vehicles, for example, that state's lemon law doesn't cover motorcycles, but North Carolina's does. North Carolina also covers drivers who lease their cars rather than buy. Some states extend the coverage to boats as well as land vehicles.

For How Long Does a Written Warning Stay on Your License?

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Having a "good" driving record means you have not been charged points for driving violations. However, it does not mean you've never received a written warning from an officer for poor driving, for instance. Written warnings are differentiated from traffic citations in a variety of ways. The most important of which is the former does not appear on your permanent driving record, whereas the latter does.

Every state department of motor vehicles uses vehicle codes to differentiate various counts of driver negligence. Such codes appear on a driving record for a set period of time and may adversely affect insurance rates, depending on the severity of the violation and the number of transgressions reported. All vehicle codes are documented in court and are issued to the driver as evidence of the conviction.

Although a written warning contains vehicle codes or a written description of your offense, it is not an actual citation and therefore is not reported on your driving record. Depending on the jurisdiction, the written warning will most likely show up on an in-house system, which isn't disclosed to the department of motor vehicles or outside third-parties. In some states, warnings records are maintained by the State Patrol.

In lieu of issuing you a citation, an officer may opt to issue you a written warning. In general, less serious violations receive a written warning. For example, a speeding ticket -- an example of a minor offense -- may receive a written warning, but an at-fault collision most likely will not. In some cases, you may be asked to correct an issue that resulted in the written warning, such as a broken tail light or an out-of-date vehicle registration.

In comparison, traffic citations remain on your permanent driving record for years. For example, traffic violations remain on a driving record in Wisconsin for five years, whereas alcohol-related offenses remain for 55 years. In some states, if you receive multiple written warnings for the same violation in a certain period of time, you may receive an automatic citation the next time you are pulled over for the same violation. Not all states adopt this policy.

Points remain on your driving record from the date of the conviction up to a set period of time, which is determined by state law. After receiving a ticket, you have a set period of time to contest the ticket in court. The clock starts ticking on the violation once you receive a conviction or you pay the ticket amount. The department of motor vehicles cannot charge you any points for a written warning, nor demand payment for fines or penalty fees. You will not be required to appear in court or provide an admission of guilt for any charges.

You will not lose your license or be subject to a higher auto insurance rate because of a written warning. Having multiple traffic tickets, on the other hand, can cause you to lose your license for a set period of time or be ordered to attend a safe-driving course. States evaluate the severity of your traffic violation in concert with your driving record to determine what penalty is appropriate under the law.

Can I Get My Car Title After Paying All of the Payments Except Excessive Late Fees?

6:58 PM No comments

If you're still paying for your car, you signed a contract that allows a lender to collect fees for late payments, no matter how excessive the fees might seem. Whether you have a traditional auto loan or a car title loan where you used your vehicle as collateral, you must pay any fees stated in your contract to obtain your car's title.

Read over your contract to determine the accuracy of your late fees. Lending contracts outline the cost of late fees and when the fees are charged to your account, such as after 10 or 30 days. You might find that you're charged a percentage of the payment amount, including late charges. If you determine the late fees are incorrect, call your state's attorney general's office to find out where to submit a complaint. You only have to pay the fees stated in your contract, meaning the lender can't make up fees or charge you more than you agreed to.

After you determine the fees are accurate, try negotiating with your lender to decrease the amount of your fees. Review your finances to determine whether you can pay a portion of your fees in one payment, which may motivate the lender to accept a lower offer. For example, if you owe $500 in late fees, offer $250 to dismiss the remaining charges. It might prove difficult to negotiate with a lender to decrease your late fees because you agreed to pay the fees when you initiated your loan. The lender is within its rights to collect any money due before releasing the cars title.

Ask to have your payment arrangement or the negotiated fee agreement in writing before you make your payment. Otherwise, the agreement is verbal, meaning you must still abide by the terms of your original contract. Keep a copy of the agreement for your records. If you can't negotiate a lesser fee amount, pay your late fees and find out when you'll receive the vehicle's title. If your lender is local, you might obtain your car's title immediately after making your last payments.

It can take weeks before you receive your vehicle's title, even if your lender is local. Some lenders have a title processing department, but it often takes time to process payments and complete your state's title work. Your state's motor vehicle department also needs time to process your title. Ask your lender to rush the processing of your payment and title release if you need the title quickly. Some motor vehicle offices offer a rushed-title option, meaning you can receive your title faster for a fee.

What to Know in Buying a Pre-Owned Car

4:40 PM 1 comment

Buying a pre-owned car can save you a considerable amount of money. However, even used cars represent an expensive purchase for most people, so it is important that you shop wisely to get the best value possible. By understanding what you need to know in buying a pre-owned car, you can research the history of each vehicle, get accurate pricing information and avoid getting ripped off by shady sellers.

Pre-owned cars may look perfectly fine, but may have serious problems you need to know about. Unscrupulous sellers can change odometer readings, hide mechanical problems or fail to disclose accidents. Running a vehicle history report may protect you from such scams. The most comprehensive vehicle history reporting system is Carfax. Check the VIN number for cars you are considering buying to find out about permanent damage caused by accidents or flooding, to check the mileage for accuracy and even to find out if the car received regular maintenance, such as oil changes.

Mechanics charge a fee to inspect a pre-owned vehicle for problems, which can get pretty expensive if you do it repeatedly. Check used cars for common problems before spending money on a mechanic. Pop the hood and look at the engine before and after a test drive. The engine should be clean; watch out for oily residue or signs of a leak. Clean the oil dipstick and check the levels and how clean the oil looks. Signs of water in the oil could mean a bad head gasket, an expensive repair, notes Cars.com. Check the undercarriage and wheel wells for signs of oil or leaking fluids. When you test drive the car, make sure it starts easily, shifts gears and accelerates smoothly.

It is not unusual for sellers to price a used car according to how much money they want instead of what the car is actually worth. Do your homework to avoid overpaying. Kelley Blue Book values are industry standard for pricing new and used cars. Private party cars are separated into three pricing categories based on the condition of the vehicle. Dealership prices are higher, but the dealer markup frequently includes a limited warranty to protect you from repair expenses immediately after purchase. In addition, a private seller's used car is rarely in excellent condition, while dealerships will often make repairs before putting a vehicle on the lot, notes Kelley Blue Book.

Always have an independent mechanic inspect the vehicle before you hand over your hard earned cash. Many pre-owned vehicle sales are "as is," which means you may have no recourse if the car self destructs five minutes after you buy it, warns Kelley Blue Book. A mechanic can find potential issues, such as temporary fixes to hide a serious oil leak or transmission problem, as well as alignment issues that could indicate an unreported accident. Additional things to look for during an inspection include rust spots, uneven wear on the tires and badly fitted door, trunk or hood closures.

What Happens If Your Car Payments Go Into Default?

7:36 AM No comments

When you get behind on your car payments, the loan will eventually go into default. When this occurs, your car could be repossessed and your credit will be negatively affected. You can expect plenty of phone calls from a collection agency as well as notices in the mail.

When you go into default, the lender will most likely contract with a collection agency to attempt to collect the debt. The collection agency will call you frequently as well as mail you notices. The collection agency will try to reach you to get you to pay back the debt. If you do not communicate with the collection agency or the lender, they will assume that you have no plans on repaying the debt.

After the collection agency attempts to get you to pay and you ignore the request, your car will most likely be repossessed. Every state has different laws when it comes to determining at what point your car could be repossessed. Some states will allow your car to be repossessed after one month while in others, it might take as long as three or four months. A car repossession company will most likely be contracted to take back your car.

In some cases, the lender may take additional action against you. The lender could potentially file a lawsuit against you to collect the money that you owe. The judge in the case could decide to garnish your wages or require you to pay through some other means. If the amount that you owe is much greater than the value of the car, the lender is more likely to take this approach.

In some states, when a lender takes your car through repossession, the lender must tell you what it will be doing with the car. If your car will be sold at an auction, the lender must notify you of the time and place of the auction. This way, you can actually bid on the car. If the car is sold through other means, you might have the right to buy back your car for the amount that is owed.

Instead of going through the repossession process, you may be able to negotiate with your creditor. Lenders do not want to have to repossess the car because it means that they will lose the regular payments and the interest that you have been paying. The lender may be willing to offer additional payment arrangements so that you can avoid default. For example, the lender might lower your interest rate or extend the repayment term to make your payment more affordable.

Is it Illegal to Sell My Car If I Owe Finance on It?

12:51 AM No comments

It is not illegal to sell your car if you still owe money on your car loan, but you'll have to abide by your state and lender's requirements to transfer ownership. Some states don't allow vehicle title transfers when a lien exists, so you'll have to provide a lien release from your lender. Expect to pay off your loan to sell your car.

States vary on title processes when a lien exists. Some states send the title to the lien holder; once the loan is satisfied the lender will release the title. If this is the case in your state, you won't be able to sell your vehicle without the title. Other states may send you the title, but decline transfer without a valid lien release. In states that allow title transfers while liens exist, buyers usually steer clear of a vehicle purchase if it has a lien. Your lender can repossess the vehicle from your buyer; this fact is well known.

If your lender has the vehicle's title, you must satisfy the loan before you can officially sell your car. Call your lender to discuss its payoff process and to obtain your payoff amount. Some states allow the lien holder to sign the front of the title to prove the lien has been satisfied. If no spot exists for this on the title, you can obtain the lien release document to give to your buyer after you pay off the loan. Be clear on your lender's requirements before you sell your car to avoid issues after you've found a buyer.

Selling your vehicle while it has a lien is not unusual, but you should plan ahead to sell your vehicle. Call your lender before you advertise your vehicle for sale to find out how long the title transfer or lien release process should take. If you can't sell the car for the entire loan amount, expect to come up with the rest of the money needed to satisfy the loan. If your lender is local, bring your buyer to the bank to pay off the loan. If not, allow your buyer to call your lender to pay off the loan directly.

If you had originally bought a vehicle that had a lien listed on the title or the loan is in someone else's name, you can remove the lien from the title before your sale. Look up the lender's information to call in and request a lien release. Acquiring the lien release may prove a hassle; most banks can send the release only to the original borrower. Expect to provide the bank with a copy of the car's title and registration to prove ownership. Once you have the proper lien release, retitle the vehicle. This way, you can simply sign over the title when you sell the car.

Thursday, September 26, 2013

How the Dealer Knows

Dealer Variations

Pursuing Another Loan

Declines

Tuesday, September 24, 2013

Default Rules

The Repossession

Reclaiming Your Car

If You Can't Reclaim the Car

Monday, September 23, 2013

Down Payment

Credit Score

Assets

Alternative Income

Saturday, September 21, 2013

Filling Out a Loan Application

Checking Your Credit

FICO Score

Good Credit, Bad Credit and Car Loans

Basics

Formula

Function

Thursday, September 19, 2013

Clean Up Your Credit

Incentives and Rebates

The Down Payment

Beware of Zero Percent Financing

Wednesday, September 18, 2013

You Don't Own the Car

In the Event of an Accident

In the Event of Car Repair

If You Go Through the Lender

Monday, September 16, 2013

Cosigning

Paying Your Parent's Loan

Refinancing

Other Heirs

Monthly Payments

Mileage Restrictions

Lease Return

Warning

Sunday, September 15, 2013

Dealing With Your Lender

Credit Score and Report

Credit Consequences

Re-establishing Credit

Friday, September 13, 2013

Instructions

Using a calculator, pen and paper

Using MotorcyleFinancingGuide.com

Thursday, September 12, 2013

Investigate the Seller

Ask for Photographs

View the Car in Person

Check the Vin Number

Online Car Financing

Wednesday, September 11, 2013

Payment

Credit Requirements

Insurance

State and Motor Vehicle Requirements

When You Have a Down Payment

When You Qualify for a Better Rate

When You Have a Co-signer

When You Want to Change Your Term

Buy the Car

Negotiate

Sell the Car

Pay the Fee

Tuesday, September 10, 2013

Instructions

Saturday, September 7, 2013

Build Your Credit

Visit the Bank

Family and Friends

Consider Leasing

Full-Coverage Details

Considerations

Loan Requirements