The Best Loans for Teenagers

For teenagers, who typically have little to no credit, obtaining money through the form of a loan can be a challenging process. Whether for a car, college or personal reasons, teenagers seeking loans do have some options as they start their financial portfolio.

Parental Loans

Depending on the responsibility level of a teenager, the best option for a first loan may be borrowing money from her parents. Even with this type of assistance, parents can still establish a monthly repayment plan as well as penalties for late payments. This introductory type of lending can help parents determine if their teenager is ready for the fiscal commitment and responsibility of taking on a bank loan.

Car Loans

When searching for a car loan for a teenager, there are important decisions to make. Considering the depreciation value of new vehicles, it is best to have a new teen driver purchase a used vehicle. The next essential step in finding a loan for a teen driver is to identify a cosigner for the auto loan. Most lenders will require a cosigner due to a teenager's lack of credit or demonstrated consistent income. Parents should assist their teens in researching the lender to ensure it is a reliable source.

Student Loans

The world of student loans is often complicated. The first step for any teenager entering college is to fill out a Free Application for Federal Student Aid, or FASFA. After filling out a FASFA form, the applicant is then informed as to what amount of federal student aid he is eligible for. With assistance from parents, teenagers can make the important determination of choosing a loan type, either subsidized or unsubsidized, and lender.

Personal Loans

For teenagers who want to take out a loan for personal use, options are limited. If teens and their parents can agree on an amount and a cosigner, and find an affordable repayment option, personal loans are a much better choice than introducing teenagers to credit cards. When weighing the pros and cons of taking out a personal loan, teenagers should ask themselves if it is possible to create a savings plan that would get them the amount of money they need versus taking out a personal loan.

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How to Reduce Auto Loan Payments

Consumers who buy a new or used vehicle may not always be able to make their monthly payments. They may have been offered a bad deal with a high interest rate and now need to find ways to lower their monthly payments. Other buyers may have had more money when they originally bought their cars, but unexpected financial setbacks may have affected their ability to pay on time every month. These consumers have some homework to do as they choose the best option for their individual situations.

Instructions

1

Read your auto loan paperwork and highlight your current interest rate. If your current monthly payment is too high for you to comfortably pay on time every month, the bank or loan company can help you refinance your current loan.

2

Call your loan company and ask what your current payoff amount is. If you want to try for a lower interest rate, the loan company will pull your credit score; if your credit is good, you may qualify for a lower interest rate. Decide if you want to extend the term of your loan, or ask for a lower interest rate with a refinance loan.

3

Explain your financial situation to the loan officer and ask if the loan company can help you by refinancing your loan. If it agrees to do so, a refinancing loan pays off the old loan. You are starting at the beginning, as if you had just purchased your car. The loan company may extend the term of your loan or may lower your interest rate.

4

Make larger payments and ask to have them applied to the principal of your car loan. This makes your interest rate shrink more quickly and brings your principal balance down more quickly as well.

5

Consolidate your car loan payment with other loans you have, both secured and unsecured. With a consolidated loan, you make one lump-sum payment, meaning you can pay off your car faster.

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How to Break a Lease for a Ford Car

Leasing a Ford car means that you have the right to drive that vehicle for a predetermined amount of time, as long as you're making timely payments. When the lease term ends, you return the car. When you lease a Ford, you're actually dealing with your leasing company, which could be the Ford dealership or a bank. They purchase the car from the Ford manufacturer and allow you to lease it for a certain amount of time. Talk to your lease holder if you want to be free of your Ford lease.

Instructions

Return

1

Locate a copy of your leasing contract. If you cannot find one, then contact your Ford leasing company and request a copy of the contract.

2

Read the early termination clause in your leasing contract. It should have an explanation of how the penalties and fees for an early termination are calculated.

3

Calculate the early termination fee that you'll have to pay, using a copy of your latest bill. If you cannot find one, contact your local Ford leasing company to have a copy sent to you.

4

Bring the car, along with a check for the early termination fee, to the Ford leasing company. Explain that you want to break the lease on your car and are prepared to pay the penalties.

5

Sign the paperwork and give your check to the Ford leasing employee.

Swap

6

Contact your Ford leasing company and ask if you can transfer your lease to another qualified person.

7

Find someone willing to assume the remainder of your lease. One way to find a person is with a lease transfer company (see "Resources"). These companies can match you with someone who wants to assume a car lease.

8

Pay the fee and create your profile, if you choose to use a company.

9

Talk to the person who will assume your lease about how they will pick up your car. Determine who will pay the lease transfer fees to Ford.

10

Go with the person to your Ford leasing company. Ask them to transfer the lease to her. They will have to check her credit and create a new contract before the lease can be transferred. If you found her through an online company, they may negotiate the transfer with your leasing company, so you won't have to go in person to the leasing company.

Sign the forms and give the Ford to the person who assumed the lease.

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Do You Have to Put Money Down When Financing a Car?

Whether a down payment is required when an automobile purchase is financed depends on your credit rating, the value of the vehicle and---in some cases---your personal preference. A down payment lowers your monthly loan payment and decreases the amount you will pay back over the life of the loan. While some financing offers leave the decision regarding a down payment to the buyer, in other circumstances you may have no choice but to provide a down payment.

Loan-to-Value Ratio

A down payment may not be optional. Auto loan providers assess a vehicle's value and a borrower's credit standing to determine the amount of a vehicle loan, known as a loan-to-value ratio. With poor credit, you may obtain a loan approval, but for as low as 60 percent of the vehicle's bank-determined value. For this reason, you may find that you can't finance your tax charges, aftermarket purchases or complete vehicle price, so you'll have to put money down toward the loan.

With excellent credit, you might obtain a loan for up to 120 percent of the vehicle's value.

Income Issues

If you have good credit but your income is limited, your lender may require a down payment to ensure your monthly payment is affordable. Without a down payment, you may not obtain an approval. For example, if you make $22,000 per year but your monthly expenses when annualized total $17,000, your lender will decline a loan that requires a payment of $500 per month. It may, however, approve financing of a vehicle that requires a payment of $200 per month. You may have to increase the length of your loan term and provide a down payment to obtain a loan approval to purchase the more expensive vehicle.

Interest Rate and Term Consideration

Most auto loan providers adjust interest rates by term length. You may obtain the same rate for purchases financed for up to a 60 months. Rates increase for a 72-month loan and increase again for a longer term. To obtain a competitive rate and an affordable monthly payment, you may want to provide a down payment to avoid paying back excess money for interest charges. Also, if you have an opportunity to obtain a zero percent loan for 36 months, the monthly payment may be too high for your budget. You may have to put money down toward the loan to afford the monthly payment amount.

Depreciation and Loan Amount

Even if you don't have to provide a down payment toward your loan, consider doing so to create equity. Financing more than your vehicle's value results in an upside down car loan, meaning you owe more than the vehicle is worth. This creates problems when you try to sell your vehicle or trade it in toward another purchase. While a collision policy is required by most lenders during the term of a loan, it only pays your lender for the vehicle's market value if the car becomes a loss. You'll have to satisfy the remainder of the loan to protect your credit standing.

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Can You Transfer a Car Loan to Someone Else?

Banks do not allow car loan transfers for various reasons. Loan terms are based on credit history and income; the person you want to transfer to likely has a different credit score, history and income than you. The loan is based on your vehicle's value, which has likely changed since you initiated your loan. To end your loan, you must sell your vehicle. The person you want to transfer your loan to must apply for financing of his own to purchase the car from you and your lender.

Loan Determination

Most lenders base approved interest rates on a tier scale. While lenders advertise their lowest rates, usually only excellent credit borrowers can obtain approval for the best rates. Vehicle age and mileage also influences loan rates and term. Depending on approved tier, rates may increase by one interest rate point or more. Loan determining factors also include income, term applied for, vehicle and credit history. For this reason, approved interest rates, term and down payment requirements may be different for another borrower.

Buyer's Application

The person you want to transfer your loan to is considered the vehicle's buyer. To help speed the selling process, ask the buyer to apply for his loan through your lender. This way, the loan is paid off quickly and most of the paperwork is handled by your lender. The buyer can also apply to a different lender. To release ownership of the vehicle, you must satisfy your loan balance. You or the buyer must come up with the remaining loan balance due if the sales price or approval amount is not enough to cover the balance.

Additional Buyer Charges

Because the vehicle loan can't be "transferred," the buyer can expect to pay all applicable purchase fees as required by your state. Most states charge taxes on a vehicle purchase, so the buyer will have to come up with her tax fees as a down payment, or apply for a larger loan amount than expected. The buyer must also pay your state's registration and title application fees. Most states also require some form of inspection or emission testing upon the transfer of ownership.

Another Option

If you want to remain the vehicle's co-owner, you can add your buyer to your car loan. You will have to reapply for finance either at your lender or another, also known as a refinance. You can avoid paying additional taxes and state fees this way. With good credit, you and your co-owner can likely lower the loan's monthly payment amount if lower interest rates are available. You can also use a down payment or increase the loan term to lower monthly payments.

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Advantages of Having a Trade-in When Leasing a Car

Using a trade-in toward a lease may prove beneficial when the trade is used as a down payment. Leasing only requires you to pay for about half of the car's value over the lease term, so using your trade as a down payment can have a significant impact on your monthly payment amount, or it can reduce or eliminate the down payment.

Lower Lease Payment

Leasing payments are based on vehicle depreciation, which results in paying for about 50 percent of the vehicle's value over the term of the lease. Because of this, any down payment or trade allowance greatly reduces your monthly payment amount, more so than a comparable loan deal. Expect to receive a discount of about $30 per month for every thousand dollars you put toward your lease. For example, a trade-in worth $4,000 can reduce your lease payment by $120 per month.

Less Down Payment

Most lease advertisements require a down payment to reach a specific monthly payment. You can avoid having to use your out-of-pocket cash by offering your trade instead. Lease advertisements often call for taxes, fees and an additional down payment, which can easily add up to thousands of dollars. Some leases require as much as $5,000 for a down payment. Rather than sell your vehicle on your own or tap into your savings to provide the down payment, you can use your vehicle as a trade instead.

Avoid Private-Sale Issues

Selling a vehicle privately is often time-consuming. Expect to advertise your vehicle, clean it and show it to potential buyers. Even if your vehicle has repair issues, you can trade it to a dealer without having to worry about the next owner or reducing the vehicle's sales price because of the car's running condition. If you owe money on your trade-in's current loan, the dealer must pay it off. You can transfer money to your current lease and avoid having to come up with the extra money to satisfy your loan if you owe more than the car's worth. If selling privately, you'd have to pay off the remainder of the loan balance if your sale price is not enough to cover the loan.

Warning

When leasing a vehicle, the leasing bank is the car's owner, not you. As a condition of leasing, you must maintain an insurance policy with your leasing bank listed as the policy's loss-payee. In the event that your vehicle is determined a loss, you won't receive any of your down payment or lease payments back. For this reason, consider offering a minimum down payment toward your lease. You stand to lose substantial money if your trade value pays off the total lease amount or a large portion of it.

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How to Answer: What's My Credit Score?

A credit report and a credit score are different things. By law, you are entitled to get a free credit report once a year from each of the three credit-reporting companies -- Equifax, Experian and TransUnion. You can get another credit report if you are denied credit for any reason. However, these reports don't usually contain your credit score, which is based on the information in your credit reports. In most cases, you will have to buy your score from one or all of the credit-reporting companies.

Instructions

1

Log on to the websites of the credit-reporting companies and view their services. Each one should allow you to purchase a credit score report. Each company has different criteria for creating your credit score, so the scores may be different. If you can afford it, purchase all three credit scores.

2

Sign up for the service or services that you need. Sometimes, the companies will offer a free credit score as a promotion, so look out for this. You will need to provide all of your personal information and answer some security questions. You'll probably have to create a login ID as well.

3

Log in to the services that you signed up for and view your credit score. Credit scores range from 300 to 850. Higher scores are preferred by lenders. If your score is low, pull up your free credit report and see where you can improve your credit.

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