What Do You Need to Provide for a Vehicle Loan?

The initial stages of applying for an auto loan are similar to the process of applying for any other form of unsecured credit. The most important decision to make before buying your new car is whether to shop by lender or dealer. If you find a car at a dealership that insists you use a specific lender, the terms may be less favorable than those offered by a major bank.

Authorized Dealer

Many lenders will lend you money to buy a car only if you're dealing with an "authorized" trader -- a firm they're happy to do business with. If a loan provider stipulates that you have to buy a car from a dealer it's approved to qualify for an auto loan, ask for a list of authorized traders near you. Some lenders offer a function to search for authorized dealers on their website. You won't need to submit the details of the dealership you're considering when you make your initial application, but make sure that you're using a trader that has the approval of your chosen lender before you proceed. If you're not fussy about what company you use as a lender, ask about financing at any dealership. If you decide to use a lender recommended by your dealer, make sure you thoroughly read the terms and conditions of your loan before signing anything.

Personal Details

When making your initial application -- be it online, over the phone or in person -- you must provide a range of personal details. Give your full name and address and any previous addresses if you've lived in your current home for less than three years. Submit details about your employment, including your annual income. Nearly all lenders need your Social Security number, while others may ask for additional details such as your driver's license number. The information you provide is checked against records held on you by credit bureaus to confirm your identity and assess your credit-worthiness.

Proof

If the checks carried out by your lender prove unsatisfactory, you may be asked to provide further proof of your identity, address or income. Forms of accepted verification vary by lender, but state-issued documentation, utility bills, bank statements and pay slips from your employer commonly are requested.

Documentation

Before your loan is approved and you drive your new car off the lot, your lender needs a purchase order detailing the full price of your car, including any extras, from the dealer. You also need to provide proof of full insurance coverage if your lender is to be named as the lien holder.

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Can I Get Car Financing if I Receive Unemployment?

Unemployment payments are temporary. Some lenders won't consider extending a loan to someone with a temporary income, although other lenders might, depending on your credit score. Low unemployment wages tend to result in high debt-to-income ratios -- particularly for those used to substantial incomes -- which are also used to determine a loan approval.

Income

Your lender might accept other forms of income from rental properties, child support, disability, social security or a pension. If you earn additional income, find proof of income statements to provide to your lender for your application. Some lenders don't accept bank statements to prove income, while others do. You'll have to search for a lender that can assist you based on your circumstances. If you're nearing an unemployment extension period, wait until after you're approved for your extension. Otherwise, the lender may assume your unemployment period is nearing its expiration.

Finding a Lender

Compare lender interest rate offers as you normally would. Once you narrow your loan options to several providers, call the lender's loan departments to inquire about income requirements. You may find a lender who accepts unemployment wages as income. Otherwise, consider using a dealership for financing. Many dealerships work with numerous lenders, so it may know of one that can approve a loan for someone in your circumstances. Consider using a buy-here, pay-here lot, which may charge higher interest rates but is also more lenient with income and credit issues.

Loan Restrictions

You might end up with a restricted loan because of the amount of your unemployment wages. If you have a poor debt-to-income ratio, you might find a lender to approve you but only for a certain monthly payment. For example, if you apply for a $20,000 loan, the lender may approve you for only $12,000, which may result in a large down payment. Or you might have to choose a different car, even with good credit. Based on other debts listed in your credit report, the lender may determine that you can afford a car payment of only $120 or less, restricting the cars you can finance.

Co-Signers

To avoid a restrictive loan or a large down payment, apply for a car loan with a co-signer. A co-signer's credit history, score and income secure your auto loan. If you have excellent credit, a lender might allow a fair-credit co-signer for income purposes only. With poor credit, your co-signer should have good to excellent credit and debt-to-income ratio. If you default on your auto loan, the co-signer's credit suffers, which means you might find it hard to find a willing co-signer. Ask close friends or family members to help.

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Pros & Cons of Financing a Car

You may have seen TV commercials, radio ads or newspaper ads from companies offering to help finance your car. If you're in the market for a car, you've probably asked yourself if getting an auto loan is worth it or not. The answer depends on your financial status and whether or not you can afford a car loan.

Credit Score

When you finance a car, you affect your credit score either in a positive way or negative way. If you consistently make your monthly payments, then your credit score will increase (assuming you're not hurting your score elsewhere). If you don't make your payments, however, your credit score will decrease. As long as you can afford the monthly payments, then financing a car will help your score in the long run. If you doubt your ability to make the payments, then buying a less expensive car with cash is probably the way to go.

Debt

While financing a car looks good on your credit score as long as you make the payments, it's not going to look good in your bank account. Car loans are considered unpaid debt, which can cause problems if your job is not secure or you do not have a large savings fund. Paying cash for a car removes the debt factor, because you don't need to pay anything else (repairs notwithstanding). Unless you qualify for zero percent interest rates, you will also pay more for the car with a loan than if you paid in cash, due to interest.

Warranty

Almost all new cars come with a warranty, some as long as 100,000 miles. Warranties allow you to relax if something happens to your car, such as a $3,000 transmission problem. Warranties are especially important on used cars, because the reliability of a used car is typically less than a new car.

Insurance

When you sign the loan papers, you agree to pay back the financial company or bank for the amount of the loan. You also agree to do it on their terms, which usually means that you must purchase comprehensive car insurance. Comprehensive auto insurance covers your car in case of any damages and anyone involved in the accident. The cost of comprehensive coverage depends on the auto insurance company, but typically costs significantly more than just purchasing liability insurance. You normally cannot drop comprehensive insurance until you pay back the loan.

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Car Buying Help

Buying a used or new car often requires applying for a car loan and negotiating the sale price of the automobile. Seasoned car buyers know how to get the best price for a car, and they know the factors a lender takes into account when approving loan applications. Familiarize yourself with car buying tips to help ensure a smooth deal.

Credit and Interest Rates

It's possible to finance a car with bad credit. However, your credit history and credit score impacts the interest rate a finance company gives on the auto loan. Finance companies make money by charging interest on each loan; and the lower your credit rating, the higher the interest on the car loan. Improving bad credit, or simply improving your score to acquire the best rate, involves paying bills on time and keeping debt on credit cards to a minimum.

Negotiating the Price

Knowing the invoice price of a new car can provide a price point when negotiating the price of an automobile. Invoice price refers to the dollar amount that dealerships pay the manufacturer. Dealerships increase the invoice price to make money on each deal, and this increase is called the sticker price. Research invoice prices with the help of consumer car buying guides such as Edmunds.com.

Buy Within Your Means

The interest rate and sale price determines the monthly payment on a vehicle loan. Carefully check your budget to determine an affordable monthly payment. Getting a preapproval from a bank or finance company beforehand eliminates the guesswork. These companies will check your credit, income and current debts, and preapprove you for an auto loan amount before you step foot on a dealership's floor.

Other Considerations

Buying a car with no credit history or a bad credit history is easier with a down payment and co-signer. Down payments reduce the amount financed through a bank, and co-signers (someone with good credit) are held responsible for monthly payments if you default. Down payments between 20 and 25 percent of the sale price are typical. Keeping track of tax returns and income also helps the approval process because lenders will need to verify employment and see copies of paycheck stubs before approving your auto loan application.

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Is it Possible to Get Out of Car Lease if the Car is a Lemon?

You can't know everything about a car when you buy it. Unfortunately, a car that looked good on the lot can start falling apart on the drive home. There is legal protection for people who end up with lemons. In many states, the protection extends to both lessees and buyers.

Definition

Your car must meet your state's definition of a lemon before you can take any legal action. Generally, a car must have a defect that affects its value or safety and a reasonable number of attempts must have been made to repair the vehicle. The defect also must happen within a certain mileage or time limit, typically 12,000 miles or one year. In some states, a car must meet two criteria -- a set number of failed repair attempts for the same defect and a set time period out of service. In other states, the car may meet either of those limits. A few states, such as Maryland and Hawaii, will designate the car as a lemon with just one failed repair attempt if the defect is something that can be life-threatening, such as a problem with the brakes or steering system.

Laws

The laws governing the conditions under which consumers may petition for reimbursement of the lease price of a car are under the jurisdiction of individual states. While many states' lemon laws cover leases, there may be special provisions. It's important to understand your rights before signing a lease agreement.

Compensation

Lemon laws allow consumers who can prove they have a lemon to gain reimbursement from the manufacturer. Those who have purchased cars can choose between a refund or a replacement. Lessees sometimes have the same choice, but in many cases the holder of a leased lemon is only entitled to a refund. The refund includes all payments and fees that you've made minus some usage cost that is based on the mileage of the vehicle.

Considerations

If you think you have leased a lemon, seek legal representation. There are lawyers who specialize consumer laws. Look for a lawyer who works on contingency. This means that you do not have to pay an upfront fee, typically paying only if the lawyer wins your case. You also need to keep good records, documenting the mechanical problems and the attempts to repair.

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How to Buy a Hearse

Though typically used by funeral homes, anyone can buy a new or used hearse. If you are a collector, finding and buying a hearse is similar to purchasing any other vehicle. The hearse is a heavy vehicle with the typical gas mileage ranging between 10 and 15 miles per gallon. A variety of hearse models are available since the older models actually doubled as ambulances.

Instructions

1

Look in your local newspaper classifieds for someone in the area offering a hearse for sale. Focus on the section featuring collector cars and limousines listings.

2

Browse online classifieds on sites such as Auto Trader, Hemmings and eBay Motors (see Resources). Quickly find the hearse listings by doing a keyword search for "hearse" on the sites. The listings you'll find will be from all over the United States, not just your local area.

3

Shop for a brand new hearse from sites such as CW Coach Sales or Hearse Works (see Resources).

4

Inspect the hearse for problems, if you are buying used and come across a vehicle you are interested in buying. Expensive problems include broken glass because hearse glass is custom made. Engine problems in models older than the 1970s can be difficult to repair.

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How to Prove a Breach of Contract in a Car Purchase

Buying a car requires a legally binding contract. This contract states that the seller certifies the vehicle as being in a certain condition, while the buyer agrees to pay a set amount for said car. The seller can easily cancel the contract if the seller refuses to honor the contract. The buyer will need to do a bit more work proving that the seller has breached the contract by not delivering the vehicle in the stated condition.

Instructions

1

Review the original sales contract. Focus on claims of functionality in throughout the contract. Highlight these claims.

2

Take the car to an ASE-certified mechanic on duty at a licensed garage. Tell him that you suspect a problem with the vehicle. Pay the mechanic to inspect the car and write a report of all defects or damage.

3

Review the report with the mechanic. Photograph every defect on the vehicle as he points them out to you.

4

Make a list of all of the defects. Add details to the list. Give the list to the mechanic for review and his signature.

5

Leave the car at the garage throughout the process. Get an invoice from the mechanic for storage charges.

6

Approach the seller with your list and photographs. Demand a refund in exchange for the vehicle. Base your demand on a breach of contract. Quote the contract where it says that there are no functional defects on the car.

7

Visit your local court clerk's office if the seller refuses to cancel the sale. File the necessary paperwork with the clerk to file a claim against the seller. Provide copies of list, your photographs and the original contract as evidence.

8

Attend court and contest the validity of the contract. Ask the judge to award a refund plus court costs and storage fees.

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Can a Car Company Run Your Credit Without Permission?

When you go to finance or lease a new or used car, one step in the process requires that the car company check your credit report. This is because your creditworthiness determines whether you qualify for the loan or lease and what interest rate you will pay. Laws govern when the car company can check your credit.

Fair Credit Reporting Act

Your privacy with regard to your credit report is protected by the Fair Credit Reporting Act. The specific part that pertains to running your credit without specific written or verbal permission is section 604(a)(3)(F). It says that company with "legitimate business need for the information in connection with a business transaction that is initiated by the consumer" has the legal right to run your credit.

Implications

When a car company has reason to believe that you are initiating the purchase or lease of a vehicle, it can run your credit. This is because it has a legitimate need for this information to tell you more about what your monthly payments will be. For example, if you sit down with a dealer and ask the dealer to finance your car, this is considered to be giving your verbal permission for the dealer to run your credit.

Prevention

When you do not want a car company to run your credit, explicitly state that you do not give your permission to check your credit. Say that you are just looking and are not yet interested in discussing financing for the vehicle. This makes it clear that you are not yet initiating a business transaction, and therefore, does not allow the car company to legally run your credit. If the company runs your credit despite your statement, you have a clear legal case against this company.

Significance

When a car company runs your credit, this puts a hard inquiry on your credit report. Having inquiries on your credit report makes you more of a credit risk because it shows that you have been applying for credit recently and must need money. Each inquiry should not hurt your score by more than five points. However, this can be significant if those five points bump you to a tier with a higher interest rate when you get your car loan.

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Is it Best to Payoff a Previous Car Loan Before Getting Another One?

If you plan to trade your car in, it may not prove beneficial to pay off your loan first, depending on your vehicle's value. If you want to take an additional car loan, you may be able to do so depending on your credit standing and income. Determine your budget and overall loan costs before deciding if it is beneficial to pay off your loan.

Trading the Vehicle

If you trade in a car that still has a loan on it, the dealer will pay off the loan amount to take ownership of the vehicle. If you owe less than your vehicle is worth, the value after the loan payoff amount goes toward your new loan as a credit. If you owe more than your vehicle's worth, you can transfer the extra amount into your new car loan. You do not have to pay off your car loan in either circumstance, but you should put down enough money to cover your negative equity.

Pursuing a Second Loan

Your bank considers your income, credit history and the term of your current loan to determine whether or not you can borrow a second loan. You must have sufficient income to pay for both car loans and a stable employment history. Having two car loans is not uncommon, but you should ensure your income is stable. You may want to make sure you have less than a year left on your current loan to ensure you will own at least one vehicle should unforeseen events affect your income .

Sell Your Car

If you don't want to trade your vehicle in or prefer to have one car loan, you can sell your current vehicle on your own to pay off the loan amount. Private sales warrant more than the value of trade-in amounts. Also, you can use any extra profit from the sale to put down toward your new vehicle loan. If you owe more than your vehicle is worth, you must have the cash to pay off the excess loan in addition to your sale price. Most states don't allow title transfers when a loan exists.

Considerations

Consider your current interest rate. If you can afford to pay off your current loan, do so to avoid paying toward interest. Your interest rate can cost thousands of dollars during the term of your loan. Trading in a negative equity car also has its consequences if you don't put money down; you will own your new vehicle for more than its value, which causes problems if you try to sell or trade again in the future.

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How to Pay Debt Collectors for Car Repossession

Paying debt collectors for your repossessed car is one way to have it returned to you. If your car is sold by the debt collector, you still may owe the balance of the loan that was not satisfied by the sale. Whether you are paying the collection agent to retrieve your vehicle or satisfy a deficiency on your loan, it's important to know what to do so you no longer have to worry about being hounded by debt collectors.

Instructions

1

Pay back the entire amount due to get your car back after it is repossessed but before it is sold. You may owe your past-due balance plus fees to repossess and store your vehicle. Your lender should send you a notice about two weeks before your car will be sold. It will detail the total amount due and how to pay it to retrieve your car.

2

Call your lender and offer a new payment plan. You may be allowed to make additional payments in order to get your car back. If agreed upon, ask the debt collector to put the terms in writing. Make your payments on time to avoid having your car repossessed again.

3

Attend the car auction and buy your vehicle back. The notice from your lender should give you the information about when and where your car will be sold. You may have to pay the entire amount of your winning bid in cash.

4

File for bankruptcy if your car is in threat of being repossessed. Chapters 7 and 13 will stop debt collectors from taking your car back during bankruptcy proceedings.

5

Reaffirm your debt with Chapter 7 by continuing to make payments on the loan after you have been in default. Alternatively, Chapter 7 may allow you to negotiate a lump sum to pay for your car. It can be the amount of current market value instead of the debt owed.

6

Make a repayment plan with your debt collector under Chapter 13. Depending on how long you have owned the car, you may have to continue making payments toward your current loan balance or you may be allowed to make payments on the market value of the vehicle only.

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Americorps Members & Car Payment Reduction

Serving in AmeriCorps might be a great way to reduce student debt, but the service doesn't impact your car payments.

Background

In September 1994, AmeriCorps sent its first class of 20,000 volunteers into more than 1,000 field locations. The popular U.S. service program connects about 75,000 volunteers per year to local and national nonprofit groups (as of 2010).

Benefits

AmeriCorps service helps students manage college loans. Volunteers who complete a term of service receive $4,725 to pay toward student loans.

In addition, the Department of Education forgives outstanding balances and accrued interest on certain kinds of student loans for AmeriCorps volunteers. AmeriCorps support is limited to educational loans, not to other consumer debt.

Transportation

While you can bring your car with you, the program doesn't cover its costs nor does it cover the costs to transport it to your assignment. You may receive a stipend, which you can use to make car payments, but there are no policies for reducing a car loan while performing volunteer service.

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How to Sell a Car With Negative Equity

The life of your car loan may outlast the life of your car. If you took out a 72-month loan with small monthly payments, you'll find yourself quickly slipping into a negative equity situation, which could make it financially difficult for you should you decide to sell your car -- or if it is totaled in a collision. If you made a small down payment (or no down payment) and your credit is bad, giving you a high interest rate, you will be dealing with negative equity as you work to pay your vehicle off.

Instructions

1

Talk to your loan company or bank about modifying the terms of your loan contract. Modifying your loan contract allows you to get a lower interest rate or a higher monthly payment so you move more quickly to gaining positive equity, according to Loan.com. Make sure you modify your contract terms sufficiently that you can build equity faster than the vehicle depreciates. Once you have modified your loan's terms and achieved positive equity, sell the car and pocket the difference.

2

Trade in your current vehicle, even though you have no equity in it. Lease your new vehicle. Even with the amount you still owe on your old car, the monthly lease payments on your lease vehicle will be lower than the the payments on your current vehicle, even after you add in the amount of your negative equity, according to Lease Guide. The catch with this strategy is that you have to pay off the full lease on your leased vehicle so you don't end up in a negative equity situation again.

3

Sell your car to a new buyer, then pay what you owe on your loan, according to Loan.com.

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How to Negotiate Your Car Repo

Borrowers usually have two opportunities to negotiate a car repossession: before the lender repossess the vehicle or after the vehicle has been seized and resold. If you know you'll have trouble making your car payment, contact your bank to negotiate your loan terms or ask for a payment deferment. If your vehicle has already been repossessed and your lender agrees to negotiate the balance due on your loan, the agreement is considered a settlement. Loan settlement cause tax issues with Internal Revenue Service, so be prepared to pay taxes on the amount of the loan balance you didn't pay.

Instructions

Before the Lender Seizes the Vehicle

1

Call your lender and ask whether it can defer one or more loan payments. A payment deferment allows you to skip car payments without penalties, such as late charges or a negative mark on your credit report.

2

Sign an agreement with your lender if it agrees to defer payments and keep the document for your records. If you find you still can't make your payments before the next payment's due date, contact the bank again and ask whether it offers loan modification. A loan modification extends the term of your loan and lowers your monthly payment.

3

Submit a credit application if your lender requests one. Some lenders may require proof of financial hardship before approving a loan modification application, so submit proof of hardship if requested by your lender. Your lender will tell which documents are acceptable.

4

Sign your new loan contract and abide by its terms to avoid future issues with repossession. Keep a copy of the new contract for your records.

After Repossession

5

Wait for a statement from your lender, which states the vehicle's selling price and the balance due on your loan. This letter usually comes about two weeks after your car is resold.

6

Determine how much you can afford to pay, either monthly or as a lump sum. Call your lender and make an offer. Your lender is more likely to take less than you owe if you pay the settlement balance in full.

7

Ask your lender to remove the repossession from your credit report as a term of paying the balance in full or for satisfying the total balance. Even if you don't negotiate the total balance, arranging to have the repossession removed from your credit report will significantly improve your credit rating. Get any agreements in writing in case your credit report shows the repossession after you've paid as promised.

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How to Get a Bad Credit Auto Loan With No Dealer Contact

Getting an auto loan with bad credit and no help from the dealer will be challenging--but not impossible. Dealers can be a big help because they generally know all the auto lending sources in town, including lenders comfortable with bad credit borrowers. You have the right to find financing on your own, but be prepared to spend considerable time calling around as you look for finance companies willing to give you a loan.

Instructions

1

Get a free copy of your credit report from Annual Credit Report, a website operated by the three nationwide credit bureaus--Experian, Equifax and TransUnion. The credit bureaus created the website to offer free credit reports as required by the Fair Credit Reporting Act. You can view and print your report online or follow instructions on the homepage to order by telephone or mail. The report will include instructions for ordering your credit score separately. Get your score as well.

2

Compare your credit with the scores of others who have shopped for car loans. Your chances of being approved through a bank or credit union are slim if your credit score is below 620. According to Microsoft Money, only 1 of 10 borrowers with a score of 620 or below was approved for a car loan in April 2010. On the other hand, 8 of 10 borrowers with scores between 620 and 749 were approved.

3

Improve your credit score as much as possible by bringing all your accounts current and paying off negative items on your credit report such as charge-offs and collection items. Charge-offs are accounts that were closed by your creditor after you defaulted on the account. Collection items are charged-off accounts that were sold to debt collectors.

4

Save as much money as possible for a down payment. The larger your down payment, the better your chances for a loan, no matter what your credit score is.

5

Apply for a loan at your bank or credit union, but see a loan officer first. Tell her about your credit, including your score. Point out that you are willing to make a significant down payment. Fill out the paperwork and wait for a decision that could come within one business day,

6

Call the loan officer if you are turned down for credit. Ask her to refer you to finance companies or other lenders in your community who specialize in bad-credit auto loans. For other referrals contact a nonprofit credit counseling agency, including those affiliated with Consumer Credit Counseling Service. Find the agencies by seeking referrals from community organizations such as The United Way or Urban League.

7

Apply for car loan from a finance company. Keep applying to different companies until you are approved.

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Repo Cars and Lease Laws In California

In California, repossession agencies must comply with the state's licensing and consumer protection laws. To conduct business as a repossession agency within the state, the agency must first apply for a license with the Bureau of Security and Investigative Services. California's consumer protection law also governs the rights that buyers have when they default on their vehicle loans.

Repossession Licenses and Rights

Although the state requires that third-party repossession agencies possess a valid license before they can legally conduct business within the state, it does not impose a licensing restriction on financial institutions that do not rely upon third-party agencies. If a lender performs a self-help repossession or directs an employee to repossess its property, then it does not need a license from the Bureau of Security and Investigative Services. Both lenders and repossession agencies have a legal right to proceed with repossession on private property, public property or secured lots, and car buyers who attempt to interfere with their legal repossession rights are in violation of California law.

Notification

Repossession agencies and banks must provide the local law enforcement agency with notice of repossession after towing the vehicle. They must provide this notice within an hour after repossessing a buyer's vehicle. After notifying the police, repossession agencies must also notify borrowers within 48 hours following repossession. However, banks do not have to comply with the 48-hour rule to notify its borrowers who are in default of their loan obligations. Additionally, lenders must provide their borrowers with a written redemption letter notifying them of their rights to redeem their cars after they pay the outstanding loan, interest, any late charges, finance charges, legal fees and costs of repossession.

Bailments

Both third-party agencies and banks must comply with the California bailment laws. The bailment laws impose personal custodial duties on repossession agencies and banks to safeguard property. Any personal property remaining in the vehicle must be safeguarded for at least 60 days, and the vehicle driver must be able to retrieve his personal effects. After 60 days, agencies and lenders no longer have bailment duties and may dispose of them or sell personal property. Although California requires repossession agencies to maintain a written inventory or accounting of all personal effects, the state does not require lenders to inventory their items. A repossession agency's written inventory must record the date of disposal, sale and sale proceeds.

Considerations

Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

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How to Obtain a Lost Title on a Car With the Bill of Sale

A lost title on a car can be a pain when you're ready to register it. Titling is done by the agency that regulates motor vehicles in each state. Titles are tied to the owner of the vehicle at the time the title is created. Once you've purchased a car with a lost title, you'll need the original owner's help to get a new copy of the title so that you can have it transferred to you. You can bring the bill of sale with you to the motor vehicle agency and get the car registered and transferred the same day if you prefer.

Instructions

1

Go in person to the motor vehicle agency. Request an application for a replacement title.

2

Fill out the paperwork required.

3

Hand the paperwork to the clerk. Show her the bill of sale and your photo identification.

4

Pay the required fee with cash, check or credit card, depending on your state.

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Risks If You Cosign for a Car

The biggest risk of co-signing for another person's auto loan is the amount of damage it might cause to your credit. As a co-signer, an auto loan affects your credit the same as it would if you borrowed the loan by yourself. Consider the risks to your credit and finances before you decide to take on the role of a co-signer.

Late Payments

Any time the person you co-signed for pays his auto loan payment late by more than 30 days, the lender reports the instance to the credit bureaus. Your credit report lists the lender's name, your original account balance, loan term and current balance. Next to this account information is a code that lists late payments and the number of times the payment was reported as late. For example, if the borrower pays 30 days late three times, your credit report shows "30 3," which is viewed by potential lenders. Each late payment lowers your credit score and remains on your credit report for at least seven years.

Repossession

If the borrower doesn't abide by the terms in the contract you signed, such as making timely payments or maintaining full coverage insurance, the lender can repossess the vehicle. A repossession significantly damages your credit score and also remains on your credit report for a term of seven years. Once the lender seizes the vehicle, it will resell it and bill you and the borrower for the amount due on the loan. You must pay the remaining balance to avoid additional consequences for non-payment.

Wage Garnishment and Tax Issues

If you or the borrower don't pay the remaining loan balance, the lender will likely sue you. If the lender wins its case, it can pursue a judgment, which is listed on your credit report, and wage garnishment. Your lender may offer to settle the loan balance, but this also affects your finances. For example, if you settle a $8,000 balance for $3,000, the Internal Revenue Service considers the non-paid amount of $5,000 as taxable income. You must report the income on your taxes and pay the amount due to avoid further credit damage. A tax lien remains on your credit report for 10 years.

Debt-to-Income Ratio

The person you co-signed for might pay all her loan payments on time, but you might find it difficult to obtain another line of credit for yourself. Since the debt is listed on your credit report and you're just as responsible for the payment as the other borrower, your debt-to-income ratio decreases. Potential lenders review your credit report to determine the amount of debts you're responsible for paying and compare the amount with your income. You might find yourself declined for other lines of credit because of your debt responsibility.

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What Is the Difference Between Selling a Car and Having Someone Take Over Payments?

You cannot actually transfer your car loan to another person. You can, however, sell your vehicle and ask the buyer to apply to your lender. This simplifies the selling process when a loan is involved. There is no guarantee of your buyer's approved monthly payment, interest rate, term or down payment requirements; approvals are based on personal credit information.

Selling Your Vehicle

Obtain your loan's payoff amount. You can sell your car for the amount you owe or more, if you want. If you simply want to get rid of your car and its loan, sell the vehicle for its payoff amount even if you're entitled to more. Check your car's private sale value at Edmunds.com and the Kelley Blue Book website. If you owe more than the vehicle's worth, you'll have to come up with the remaining balance due if the payoff exceeds your car's selling price. You can keep any profit you make if you sell the car for more than the loan amount.

Benefits of Using the Same Lender

Your buyer can apply to your lender. Because some states send the vehicle's title to the lien holder and not the borrower, the ownership transfer process is likely quicker. Expect to sign the title to release ownership. Once your buyer's application is approved, the bank can pay off your loan immediately and handle most of your paperwork. You'd likely have to wait for the title or lien release after paying off the loan if you and the buyer do not use the same lender.

Individual Loan Information

Your buyer's approval is based on the vehicle's value and his credit rating and history. Someone with poor credit may not obtain an approval for the requested loan amount, which is called a loan-to-value ratio. The borrower, depending on his credit, may obtain an approval for up to 120 percent of a vehicle's bank-determined value or as low as 60 percent. A down payment might be required. Poor credit might also affect the loan's term and interest rate. The buyer's monthly payment may be higher than yours for this reason.

Other Options

If your buyer can't obtain an approval similar to yours, you can offer to cosign the loan. If you don't know the buyer, consider selling the vehicle on your own for the vehicle's private sale value. Call your lender to find out the process involved with selling your car; the process to complete paperwork can take several weeks. In most cases, you can bring your buyer to your lender to pay off the loan and receive the lien release immediately. However, some banks do not handle loan payoffs, titles or lien releases at a local branch.

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Can a Vehicle Lien Show Up on My Credit Report?

If you borrow money for an auto loan, that information will find its way onto your credit report. Your lender has a lien on your vehicle, which means you cannot sell or otherwise dispose of your car until the debt has been satisfied. Once you have paid off your loan, then your credit report will be updated to reflect that action.

Vehicle Financing

When financing a vehicle, your bank, credit union or finance company holds a lien on the vehicle's title until you have paid off your debt. In some cases they will hold the actual title, transferring it to you once your debt has been satisfied. Details about your auto loan including lender, outstanding balance and payment history are part of your credit report.

Payment Problems

Problems you have with making payments for your vehicle on time can find their way to your credit report. Your lender may notify the three major credit reporting bureaus---Experian, Equifax and TransUnion---of your tardiness, a move that can adversely affect your credit score and make it more difficult for you to receive additional credit. Your lender may also charge you fees and penalties if you fall behind on your auto loan.

Vehicle Repossession

Your new car purchase agreement spells out the consequences of falling behind on car payments. Beyond penalties and related fees, a provision detailing under what circumstances your car can be repossessed will be outlined. Once your auto loan has fallen into default, your creditor can seize it without notice. A vehicle repossession will appear on your credit report, a move which will damage your credit rating.

Working With Your Lender

Contact your lender and explain your situation. Offer to make a partial payment or give them a date when payment in full for that month can be expected. Negative action on your part may not find its way into your credit report if you show good faith by staying in contact with your auto lender.

Your Reports

You can obtain one free copy annually of each of your three credit reports from AnnualCreditReport.com, the only site authorized to dispense that information to you upon your request. Those reports will tell you what creditors are saying about you including your auto lender. Incorrect information about you should be corrected including liens that have been removed.

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How to Assume Car Payments in Florida

The process for assuming car payments for another person mirrors the process for purchasing a used car and financing the balance of the cost. In Florida, the private seller is not bound by law to disclose the same Buyer's Guide required of car dealerships, nor are they obligated to provide any implied warranties. Buyers who seek an assumption of payments will need to do their own research on the vehicle and secure an independent inspection and warranty prior to purchasing the vehicle.

Instructions

1

Contact the financial institution financing the car to determine the remaining balance owed by the current owner.

2

Choose a bank or financing company to finance the balance owed. Provide the pertinent information about the car to the prospective lender. The information should include the make and model of the car as well as the mileage and condition of the car. The vehicle identification number will be sufficient in identifying the vehicle make and model. You will have to record and submit the condition and mileage of the vehicle.

3

Apply for an auto finance loan from the financial institution you have chosen. Disclose your income, other debt and Social Security number to obtain a credit history report for review by the bank or lender. You will also be required to furnish evidence of your financial stability. Stability is expressed by the time you have been employed by your current employer and length of time you have resided in your home or apartment.

4

Choose among the terms available for the loan amount, including monthly payments, payment options such as automatic electronic transfer and length of the payment in number of months. Approval will be determined by your credit worthiness and ability to pay, as will the available terms including interest rates available.

5

Purchase a vehicle history report to review any past accidents and other maintenance issues related to the car you are purchasing. The seller is not bound by Florida law to furnish the report or a Buyer's Guide before selling the vehicle to you according to the Office of the Florida Attorney General.

6

Secure any relative warranties on the car in writing as the individual for whom you are assuming payments is not obligated by Florida law to provide you with any such guarantee.

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How Much Does a Vehicle Depreciate Annually?

Purchasing a new car is one of the biggest financial steps that the average person takes in a lifetime. While purchasing a car is a big financial investment, it does not improve your financial situation in the long run. The vast majority of vehicles actually depreciate in value over their life. Vehicles do not all depreciate at the same rate, but in most cases, you can be sure that your car is losing value.

First Year Problems

One of the biggest disadvantages of buying a new car is that it depreciates rapidly in the first year. When you buy a new car, it typically depreciates the most of any year during the first year that you own it. According to The Motley Fool, new vehicles depreciate an average of more than 20 percent during their first year. Typically, as soon as you drive it off the lot, it loses a big portion of its value.

Rule of Thumb

While every car is different, plan on most vehicles depreciating at about the same rate each year. According to Bankrate.com, the average car depreciates about 15 to 20 percent every year. This means that in the second year of ownership, it will be worth about 15 percent less than what it was worth at the end of year one. With a depreciation rate like this, it is no wonder that so many people end up owing more than their cars are worth at some point.

Protecting Against Depreciation

When you buy a new car, to protect yourself against this depreciation. Otherwise, if you are in auto accident, you could end up owing money on a vehicle that you cannot drive anymore. Your auto insurance company is only obligated to pay what the value of the car is at the time of the wreck. If you owe more than that, the insurance company will not pay it. To protect against this risk, you may want to purchase a gap insurance policy. This type of insurance pays the difference between what you owe and what the auto insurance company pays if you total your car.

Buying Used

Because of the high rate of depreciation of new vehicles, many people choose to buy used cars. Since the highest percentage of depreciation occurs during the first year of ownership, savvy buyers typically buy a used car that is one to two years old. This way, they can take advantage of the new car features without having to fall victim to the rapid depreciation occurs in the first few years of ownership.

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When Does Leasing a Car Make Sense?

If you don't have the money to purchase a car outright, then you have two options: leasing or applying for an auto loan. Auto loans are popular because at the end of the loan, you own the car. A lease essentially allows you to borrow the car for a certain amount of time, so you never actually own the vehicle. Ownership aside, there are a few major benefits to leasing a vehicle.

No Down Payment

A typical down payment for a new car is usually 20 percent, and that can mean $3,000 or more out of your pocket. As long as your credit score is good, which is typically a score above 620, leasing a car usually doesn't require a down payment, although you can still elect to do so if you want lower monthly payments. If you have poor credit, the finance company may require you to put something down. The amount depends on how poor your credit is.

Lower Monthly Payments

If you want lower monthly payments, then leasing a car is definitely the way to go. You only pay the depreciation cost plus interest, whereas you pay the entire price of the car plus interest when you buy a car. For example, if you lease a $25,000 car for 36 months, and the estimated resale value is $12,000 after 36 months, then you will only pay the depreciation cost of $13,000 plus interest. If you bought a car for the same price, you are responsible for the entire $25,000 plus any interest owed.

Driving a New Car

Leasing allows you to drive a new car every two to three years, depending on how long your lease term is for. If your lease is for 36 months, you turn the car back into the dealership at the end of 36 months and you can lease a new car. If you often get tired of your vehicle after a few years and enjoy new technology and features, then leasing a car is the way to go.

Miles Driven Per Year

Most lease agreements stipulate that you are only allowed to drive a certain number of miles per year, typically 12,000 to 15,000. If you go over your allotted number of miles, you must pay additional money that's determined by your lease agreement. Some leases do not have a miles restriction, but most do. If you drive long distances every week, then you can often work something out with the finance company to allow for more miles per year, although you'll pay more per month.

Downside

The downside to leasing a car is that you never actually own the car. Long-term leasing is always more expensive than buying a car outright. For example, if you lease two cars for the $25,000 each, you're going to pay more in the end than if you bought a car for $25,000.

Tips

The ideal length to lease a car is 36 months, according to Edmunds.com. Most warranties last 36 months, and during that time you typically won't have to fork up too much money for repairs and maintenance, only the occasional oil change and tire rotation. If you lease a used car, then you're typically going to have to put more money into repairs and maintenance than if you lease a new car.

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How to Negotiate Buying Your Leased Vehicle

With most vehicle leases you have the option to buy the vehicle at the end of the lease period. This is called a "lease payoff" and just means that you have the option to purchase the vehicle from the leasing company. If you choose to purchase the vehicle, this benefits the lease company because they don't have to worry about finding something to do with the vehicle after you return it. For this reason, many lease companies are willing to negotiate the terms of the lease payoff at the end of the lease period.

Instructions

1

Check the residual value of your vehicle in the lease contract. Compare this value to the values published in automotive price guides like Edmunds, Kelley Blue Book and the NADA guide. Note that if the residual price is equal to or lower than the published value of your vehicle, you will not likely be able to negotiate a lower price; however, purchasing the car may be in your interest even without negotiation if this is the case.

2

Call the leasing company and speak to a representative about lease-end options. Ask for the buyout price for the vehicle. Note that this might be slightly different than the residual value of the car because your security deposit and other fees may be deducted. Ensure you are talking to someone with the authority to modify the buyout price before you attempt to negotiate a lower price.

3

Understand that the leasing company will either be forced to sell your vehicle as used or accept a wholesale price at auction if you choose not to buy the car. Choose a starting point for negotiation that is well below the residual value but still realistic. Make your offer to the leasing company and wait for a counter offer. Know that if you don't receive any response to your offer, your leasing company may not negotiate buyout prices.

4

Avoid telling the leasing company about any problems with the car. Remember that if the company thinks you are buying the car because it is damaged or you have exceeded the mileage limit they will be less willing to negotiate a lower price.

5

Negotiate with the company for as long as necessary until you arrive at a fair price for the vehicle. Understand that you may have to extend your lease for a month or two if negotiations take an extended amount of time; you can expect to spend at least a few weeks in negotiations before arriving at a price to which both you and the company can agree.

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How to Find a Car With Bad Credit Problems

So, you are interested in purchasing a car, but your credit is not too good. Well, even though you've experienced some credit problems, you may still be able to find a car. In fact, many people have dealt with bad credit at some point in their life--so you are definitely not alone. Fortunately, there are resources that you can use to help you find a good car.

Instructions

1

Speak with a loan specialist at your bank. If you are currently employed and have a checking or savings account in good standing, then your bank or credit union may approve you for a car loan. Please note that you may be required to meet other requirements before your bank approves you for a loan and you may also need collateral in order to secure your loan.

2

Search for a car on the Internet. There are a variety of companies and lenders that offer special car-loan financing for people with bad credit. So, even if you have late payments, judgments, bankruptcy or a repossession in your credit history, you may still qualify for a loan through a special financing lender.

3

Locate an in-house financing dealership in your area. Some car dealerships offer in-house or buy-here, pay-here financing programs for those with bad credit. With in-house financing, the car dealership is the lender who collects your monthly payments--rather than a financial institution. Fortunately, these types of car lots normally do not perform a credit check on applicants.

4

Find an appropriate co-signer. Consider asking a family member or friend to serve as a co-signer on your application. Quite often, lenders will approve someone with bad credit if the person has an appropriate co-signer listed on the application--someone who has an acceptable credit score and income.

5

Pay cash for a car. If you have a sufficient amount of money in your savings account, perhaps you should consider paying cash for a car. Many car dealerships have cash cars for sale--or you can purchase a car at an auction or simply browse through the classified section of your local newspaper to find a car.

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How to Combine Two Car Payments Into One

If you have two household cars with two separate monthly payments, you may be able to combine those two car payments into one. Combining two car payments into one not only serves to eliminate a bill that you must remember to pay each month, but sometimes gives you the opportunity to change the terms of the loans. By refinancing two car payments into one loan with a lower interest rate, you lower your total monthly payment.

Instructions

1

Try to refinance the two car loans into one with the lender who issued the loans. While refinancing two cars into one loan is not a common practice with lenders, according to Wells Fargo it can be a possibility. Generally, since the vehicles serve as collateral in auto loans, in order to refinance two cars into one payment with a lender, the remaining amounts of the loans for both car loans must be less than the total worth of one of the vehicles, so that the one vehicle can still serve as collateral on the loan.

2

Get a home equity line of credit if you own your own home. The most common method used to refinance a car payment, according to Interest.com, a home equity line can be used to pay off any living expenses, including car loans. Once you pay off the car loans with your home equity line of credit, the car payments roll into the home equity payment, giving you only one monthly payment.

3

Take out a personal loan. Personal loans can be difficult to come by, especially if the economy is weak, but, if you can get one, you can use it to pay off both of the cars and have only the one loan payment to pay each month. A lender is more likely to give you a personal loan if you have collateral that you can put up for the loan, such as another paid-off vehicle or property.

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How to Finance Buying a Car With Banks

Several different financing options may be available to you depending on your credit standing and income. Manufacturers often offer incentives to buy, such as low-rate financing or lease options. You may also finance your car at a credit union, which may offer lower interest rates than a bank. Once you decide where to apply for your loan, you must fill out a credit application and submit your vehicle information for an approval. Based on the information you submit, your lender will approve or decline your loan.

Instructions

1

Check auto loan interest rates. Go to bank and credit union websites to view the rate and lending terms, which may differ by new or used car purchases. If purchasing a new car, visit the manufacturer's website or ask your dealership for its new car interest rates, which are often lower than traditional lenders offer.

2

Call any potential lenders to discuss your loan options, or discuss options with a salesperson if using a dealership. Be sure to discuss your target monthly payment and how you plan to handle tax and fees, which you may roll into your loan or offer as a down payment.

3

Complete your loan application, whether online, on the phone or in person. Have your information ready, including your date of birth, Social Security number, employer address and phone number, an accurate estimate of your time at your job and at your address, and your gross annual income.

4

Submit your vehicle information. Have the following information ready: vehicle identification number (VIN), year, make, model and car features. Features include vehicle options such as a sunroof, DVD system, alloy wheels or a sunroof, which increase vehicle lending value. Also include the amount of the loan you want.

5

Wait for your approval. You may receive it instantly or it may take up to one week depending on where you apply. Once approved, confirm the terms of your loan with your lender.

6

Add the vehicle to your insurance policy, insuring the car with a full-coverage policy. Ask your lender for its requirements and add any limits it requires. Obtain proof of insurance coverage with your lender listed as the policy's loss-payee and submit it to your lender.

7

Sign your loan contracts. Go over the contract to ensure the terms are as you previously discussed. Obtain your loan check to provide to the vehicle's seller. Keep copies of all of you loan paperwork in a safe place for future reference.

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