What Is Required to Get a Used Auto Loan?

Buying a used car can be an effective way to avoid the rapid depreciation that comes with buying a new car. If you want to buy a used car, you may need to get financing to help with the purchase. Qualifying for a used car loan requires you to meet certain guidelines.

Used Car Loan Differences

Getting a used car loan is similar to getting a loan for a new car, but a few key differences are evident. One of the differences between a new and used car loan is in the term. Most of the time, a new car loan will give you a longer term to borrow the money. Another difference is the interest rate. With a used car, the interest rate will usually be higher than that for a new car loan.

Credit Requirements

One of the most important factors in getting loan approval for a used car loan is your credit score. The lender wants to verify that you have a high credit score before approving your loan. Each lender has different requirements for credit scores. For example, if you have a score above 700, you should qualify for a loan. If your score is lower, you might not qualify or you may have to pay a higher interest rate.

Down Payment

To get a used car loan, you may have to come up with a down payment -- which tends to increase as your credit score goes down. If you have poor credit, the lender wants a larger down payment from you. If you can come up with a large amount of cash, loan approval for a used car is much easier than if you have no money for a down payment.

Employment Verification

When you apply for used car loan, the lender usually will verify your employment. The lender wants to know that you have the money to make your car payment every month. If you do not have steady employment, you may not qualify for a loan. The lender may call your employer to verify your employment and how much money you make. At that point, if you meet the other credit requirements, you should qualify for a loan.

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How to Buy a Semi With a Bad Credit Score

Bad credit can affect many financial decisions you make in your life. It can also affect the type of employment you seek. When it comes to semi-truck financing, the best credit scores get the best loans---which can become quite costly. Learning to obtain financing even with bad debt can help you develop your business with an owner-operated semi-truck.

Instructions

1

Obtain a copy of your credit report. You'll want to know exactly what your credit looks like before you begin seeking financing. Some red flags that lenders will see as increasing a credit risk are charge-offs, judgments, maxed-out credit lines, excessive trade lines (usually over four revolving accounts), delinquencies and any bankruptcies. Attempt to clear up any negative credit before seeking financing.

2

Limit your search to trucks that are not new. Financing a brand new semi-truck will be exorbitantly expensive---and with bad credit, your monthly payments will most likely be unmanageable. On the other hand, your credit may disqualify you from obtaining older models as the risk will be two-fold: both your creditworthiness and the age and potential viability of the vehicle. As such, look for used truck models with modest miles and a record of solid maintenance. You'll want to mitigate your risk as much as possible with poor credit.

3

Continue to lease a semi-truck if you have a semi-truck repossession on your credit report. While some lenders may be willing to offer high-cost financing to borrowers with poor credit, virtually no lenders will offer financing to borrowers with a history of truck repossession and poor credit. If you do have a repossession on your credit, continue to repair your report by making on-time payments, paying down your total debt load and generally being a responsible borrower with credit.

4

Research lenders who extend credit to borrowers with poor credit. It's important to be careful when you begin applying to lenders. Some unethical lenders will prey upon vulnerable and desperate borrowers---often charging illegal rates and fees, and, in the worst cases, defrauding borrowers. It's best to begin your search by asking colleagues in the trucking industry for recommendations. Invariably there are some who've used high-cost financing and have had positive experiences. Remember to research all potential lenders on the Better Business Bureau website to make sure their lending records are clear of complaints and charges of predatory lending.

5

Apply to two to three lenders. Stay abreast of the loan process---sit down with your loan officer if any terms change. Do your own personal DIR calculation (Debt to Income). For example, if your total monthly income (before taxes) is $3,000 and your monthly obligations (including a proposed loan payment for the semi) is $1,900, your DIR is 63 percent---which is too high. You'll want to stay under 50 percent to make sure you can afford the payment.

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How to Refinance a Motorhome

When you financed your motorhome, your lender gave you a set interest rate that helped to determine your monthly payment. That interest rate was based on the average interest rates at the time of your purchase, your credit and the basic policies of your lender. Motorhomes can take more than a decade to pay off, and some of those variables can shift during that long period of time. Refinancing your motorhome could give you a better interest rate, lowering your monthly payment and reducing the amount you pay altogether at the end of your contract.

Instructions

1

Obtain a free copy of your credit report. If your credit is worse than when you first financed your motorhome, you may not want to refinance until it has improved. You can get a copy of your credit report from TransUnion, Equifax and Experian once each year at the AnnualCreditReport Web site (see Resources).

2

Gather your motorhome purchase agreement, your last two tax returns with W-2s and any other documents that show your income and ability to make payments on your motorhome.

3

Find a refinance company online who can give you rates from several different lenders. There are several motorhome refinance companies listed in the Resources section to help you get started. Many of them tell you the credit score they require up front, so you know whether you can be approved before applying. Some companies will only refinance you if you have a base amount or more left on your loan.

4

Select "Refinance," "RV Refinancing Application" or "Apply" to start your application. You'll have to give your personal information, including your name, address and Social Security number. You'll also have to put in the make, model and year of your motorhome, as well as the lender you're currently with and how much money you still owe. You may have to include your employment information.

5

Choose "Submit" or "Apply"' once you've put in all your information. Depending on the company, you may be given offers to consider right then, or you may have to wait to receive a phone call later with your offers.

6

Accept an offer that has a lower interest rate. The new lender will contact your old lender about the payoff of your original loan. Sign the paperwork for your new loan terms with the new lender. You may have to pay closing costs again or even the entire down payment, so check with your new lender about the final costs of refinancing before you close your old loan.

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Tips on Getting a Car Loan

Reliable transportation is a must for busy adults. And while many people would prefer paying cash for an automobile and avoiding a car payment, not everyone has this kind of cash on hand. Fortunately, auto lenders provide financing, which allows buyers to purchase a new or used vehicle. But before applying for an auto loan, it's smart to familiarize yourself with lending requirements.

Improve Credit History

You don't need perfect credit to get approved for an auto loan, and many lenders work with people who have bad credit and no credit history. But just because you can finance an automobile with poor credit doesn't mean you should. Your credit rating determines your finance rate, which in turn impacts your monthly payment. Someone with an excellent credit history may qualify for a 4 percent interest rate, whereas someone with bad credit may acquire an interest rate of 9 percent or higher. Fix your credit before completing an application. Pay your bills on time and pay down your debts. Check your credit score after a few months to assess your improvements. A score of 700 or higher can help you get the best rates.

Income History

A steady source of income is another requirement for getting a car loan. Self-employed individuals will need to provide tax returns for the past two years, whereas someone with an outside job will need to supply his most recent paycheck stubs. Some lenders will contact employers to verify length of employment, whereas others do not require proof of income if the borrower meets the minimum credit score requirement.

Down Payment and Co-signer

Interest rates and monthly payments determine whether you're able to afford a used or new automobile. And if the auto lender is hesitant to approve you for a low rate auto loan, putting money down on the vehicle or having a co-signer can help you negotiate a better rate.

A down payment lowers the amount you'll need to finance, which reduces your monthly payment. Put down as much as you can afford, but typical down payments range between 10 and 20 percent of the sale price. Co-signers are beneficial when you don't have good credit or a long credit history. But to benefit from a co-signer, you'll need to select someone with good credit and an income source.

Secure Your Own Financing

Dealerships want you to use their finance department so that they can also make money on the deal. The finance company charges an interest rate, but the dealer may increase the rate to add to its bottom line. Shopping around and securing your own financing from your personal bank or credit union can help you acquire the lowest rate on the auto loan.

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What Forms Do I Need to Sell a Car?

Selling your car allows you to rid yourself of an unwanted vehicle and make some money in the process. Additionally, selling your vehicle will allow you to put funds toward purchasing a new vehicle. Although selling your car is a simple process, you need to turn in a few forms at the time of sale.

Car Title

A car title is a legal form that establishes proof of an individual's ownership of a given vehicle. Although car titles vary slightly from state to state, they typically contain information such as the owner's name, Social Security number and home address, as well as the car's make, model, color, year and vehicle identification number, or VIN. Additionally, vehicle titles typically include important car data, including mileage, outstanding liens or loans and past selling price. For legal and security reasons, virtually all car sellers must present a copy of a vehicle's title to a buyer.

Bill of Sale

Individuals may need to present a bill of sale document when selling a car. Like a car title, a bill of sale contains key information such as the car's VIN, year, make and model, as well as a statement that the seller is the legal vehicle owner. However, the bill of sale also contains a formal statement transferring ownership from the seller (you) to the buyer (another individual or car dealership). Additionally, car bills of sale contain a statement from the seller on the condition of the car, affirm the correctness and currency of the title, and lay out the responsibilities of the seller and buyer.

Location-Specific Documents

In addition to the vehicle title and bill of sale, certain state and local governments require car sellers to present additional, location-specific paperwork to buyers. For example, some California locations require individuals to present receipts of smog certification and emissions testing. You should check with your state's department of motor vehicles to see which location-specific documents you should present when selling your car.

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How to Calculate the Monthly Payments on Buying a Car

Several online calculators on the Internet allows you to calculate monthly payments on car loans. However, if you want to crunch the numbers yourself, you can follow a simple formula to find the monthly payment amount. Both methods allow you to tweak the interest rate and other inputs to see how changes affect the monthly payment amount. As long as you know the price, down payment amount, interest rate and loan term, you can perform simple calculations to find the monthly payments.

Instructions

Online Calculator

1

Launch your Internet browser.

2

Go to the web page of an online car loan calculator such as MSN Autos Affordability Calculator or Auto123.com Car Calculator (see Resources).

3

Enter the down payment, car price, interest rate and term of the loan. The online calculator will show the amount of monthly payment you have to make.

Manual Calculation

4

Write down the loan amount, annual interest rate and the loan term in months. The car price minus the down payment equals the loan amount.

5

Use letters to represent the various figures. P stands for principal amount or loan amount, r indicates interest rate and m signifies the number of months.

6

Plug the numbers into this formula: [ P ( r / 12 )] / [ 1 - (( 1 + r / 12 ) ^ -m )]. For example, if the loan amount is $15,000 at seven percent interest per annum and the loan term is three years, the calculation would be: [ 15,000 ( 0.07 / 12 )] / [ 1 - (( 1 + 0.07 / 12 ) ^ -36 )].

7

Perform the calculations according to the formula to obtain the amount of monthly payment. In the example, the monthly payment would be $463.16.

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Tips on Buying a Used Vehicle

Buying a used vehicle can save you a substantial amount of money since the moment a new car is driven off the lot, the value of the car drops by several thousand dollars, according to Car Search. After three years, a car is only worth 60 to 70 percent of what was paid for it new. Although buying a used car makes economic sense, if you do not go about it in the right way, you risk problems such as having to repair damage you did not see and suffering from a bad deal from an unscrupulous car dealer. Take the right approach and your pocketbook will profit while you enjoy your vehicle.

Planning

Before looking for cars, decide on the price range you will pay. Include an estimate of financing costs in your calculation. If you have a certain model in mind, research the model online to make sure there have been no problems with it such as recalls from the manufacturer. Check on mileage efficiency, since the cost of gasoline is another consideration.

Private Seller

Look for individuals selling used cars directly. A private seller wants to sell the car quickly since he advertised the car directly, according to the site Autos. Private sellers may give you a lower price than used car dealers who must mark up the cars to make a profit. A private seller also knows more about the history of his car than a used car dealer moving hundreds of cars each month. Look for private sellers in newspaper ads, at classified ad sites like Craigslist or on any local classified advertising site.

Dealer Negotiation

If you are buying your car from a used car dealer, check on the dealer's reputation with consumer reporting agencies. When the salesman asks the price range you are willing to pay, do not share the highest price, so that you leave room for negotiation.

Shop Around

Speak with several dealers and sellers, and let them know you are looking elsewhere. Checking multiple places will give you a better understanding of the market and what you can expect to pay.

Vehicle History Report

Before buying any used vehicle, get the vehicle identification number (VIN) for the car and obtain a vehicle history report. A vehicle history report contains a record of accidents, some that may be hidden from normal view when inspecting a car.

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