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

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.

How the Dealer Knows

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.

Dealer Variations

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.

Pursuing Another Loan

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.

Declines

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.

Read More

Motor Vehicle Repossession Laws in South Carolina

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.

Default Rules

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.

The Repossession

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.

Reclaiming Your Car

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.

If You Can't Reclaim 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.

Read More

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

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.

Down Payment

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.

Credit Score

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.

Assets

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.

Alternative 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.

Read More

How Do Car Dealers Check Your Credit?

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.

Filling Out a Loan Application

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.

Checking Your Credit

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.

FICO Score

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.

Good Credit, Bad Credit and Car Loans

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.

Read More

How Does Auto Loan Interest Work?

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).

Basics

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.

Formula

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.

Function

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.

Read More

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

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.

Clean Up Your Credit

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.

Incentives and Rebates

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.

The Down Payment

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.

Beware of Zero Percent Financing

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.

Read More

Problems With Taking Over Payments When Selling a Car

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.

You Don't Own the Car

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.

In the Event of an Accident

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.

In the Event of Car Repair

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

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.

Read More

Can I Pay My Deceased Parent's Car Loan?

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.

Cosigning

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.

Paying Your Parent's Loan

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.

Refinancing

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.

Other Heirs

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.

Read More

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

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.

Monthly Payments

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.

Mileage Restrictions

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.

Lease Return

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.

Warning

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.

Read More

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

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.

Dealing With Your Lender

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.

Credit Score and Report

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.

Credit Consequences

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.

Re-establishing Credit

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.

Read More

How to Calculate Monthly Payments on a Motorcycle

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

Using a calculator, pen and paper

1

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.

2

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.

3

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.

4

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.

5

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

6

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.

7

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

Using MotorcyleFinancingGuide.com

8

Visit MotorcycleFinancingGuide.com.

9

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

10

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

11

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

Read More

Tips on How to Buy a Car Online

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.

Investigate the Seller

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.

Ask for Photographs

Ask for photos of the automobile.

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

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.

Check the Vin Number

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.

Online Car Financing

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.

Read More

Things You Need When You Are Buying a Car

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.

Payment

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.

Credit Requirements

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.

Insurance

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.

State and Motor Vehicle Requirements

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.

Read More

The Best Time to Refinance an Automobile

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.

When You Have a Down Payment

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.

When You Qualify for a Better Rate

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.

When You Have a Co-signer

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.

When You Want to Change Your Term

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.

Read More

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

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.

Buy the Car

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.

Negotiate

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.

Sell the Car

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.

Pay the Fee

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.

Read More

How to Calculate the Effective Interest Rate for Leases

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

1

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.

2

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.

3

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.

4

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

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

6

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.

Read More

Help With Car Finance

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.

Build Your Credit

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.

Visit the Bank

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.

Family and Friends

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.

Consider Leasing

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.

Read More

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

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 Details

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.

Considerations

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

Loan Requirements

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.

Personal Liability

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.

Read More

What Is the Difference Between Residual Amount & Payoff Amount?

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.

Mechanics of Leasing

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.

Residual Price

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.

Payoff Amount

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.

Determining the Lease Payment

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.

Read More

How Is a Beacon Score Evaluated When Purchasing a Car?

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.

Credit Score

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.

Payment History

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.

Debt-to-Income Ratio

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.

Loan-to-Value

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.

Read More

Can Car Refinancing Improve Your Credit?

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.

What is Refinancing?

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.

Avoiding Default

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.

Credit Score Significance

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.

Downside

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.

Read More

How to Get My Car Payment Taken From My Checking Account

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

1

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.

2

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.

3

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.

4

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.

Read More

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

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.

Point Reduction

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.

Hard Inquiries

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.

Lender Considerations

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.

Before You Obtain Your Preapproval

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.

Read More

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

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.

Auto Loans

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.

Paying Off Loans

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.

Refinancing

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.

Minimum Amounts

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.

Read More

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

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.

New Cars

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.

New-Car Considerations

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.

Trade-in Vehicles

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.

Other Vehicles

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.

Read More

List of Needed Documents When Selling a Car

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.

Title and Registration

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.

Disclosing Odometer Reading

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.

Bill of Sale

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.

Smog Report

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.

Read More

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

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

1

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.

2

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.

3

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.

4

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.

Read More

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

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.

Auto Loan Default

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.

First Payment

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.

Consequences

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.

Tips

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.

Read More