Managing a Car Loan

Monday, April 29, 2013

Can You Borrow Less Than $5,000 From a Bank for an Auto Loan?

9:38 PM 1 comment

Having a good credit score, a high paying job and no debt could still mean a rejection for a $5,000 auto loan. Not because you lack the credit requirements, but it might be too low of an amount for some lenders to bother handling. Fortunately, if you qualify for an auto loan, but do not need more than a few thousand dollars, you can go for a personal loan or other lines of credit.

As of the date of publication, most lenders require borrowers to take out at least $5,000 for an auto loan. Anything below this amount may not be profitable enough or too much trouble for the bank. However, the minimum loan amount requirement varies from lender to lender, so you may have to search around to find a bank willing to issue a $5,000 auto loan.

If you are looking to refinance an older car loan, most lenders won't bother with anything less than $7,500, according to CreditProvider.com. Like with an original auto loan, there is a breaking point where it is too expensive and risky to maintain such a small account even when you are creditworthy.

When creditors reject your application due to not meeting the minimum loan amount, you could go with a personal loan. You can use personal loans for just about any expense, such as remodeling a home or buying a car. Lenders usually charge more in interest for an unsecured personal loan because they can only go after the borrower in court in case of default. A secured personal loan, which requires you to put collateral, garners a lower interest rate.

Shop around for the lowest possible rate on whatever loan you choose. At $5,000, a home equity line of credit or loan -- a loan secured by your home -- tends to have an extremely low interest rate because of the security. Credit cards are an option if the dealer agrees to put the entire purchase on credit -- many dealers refuse credit cards because of the processing fees. You are also likely to earn cash back on the purchase if your credit card provider offers a cash rewards program. Also, the dealer might offer in-house financing, but expect higher rates than a loan from a bank because some dealers do not perform a credit check.

Help With Auto Credit

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Buying a new or used car can provide the transportation you need to commute to work or school. But if you don't have cash to purchase a car outright, you'll need financing to acquire a car. Before meeting with a salesperson, explore ways to secure auto credit with a bank.

Banks and finance companies work with all types of car buyers. With this said, having bad credit or a low credit score won't necessarily disqualify you for financing, but you may pay a higher interest rate on the auto loan, which can increase the monthly car note. When applying for credit, you're likely concerned with keeping payments affordable. Keeping a high credit score, such as 700 plus, is key to qualifying for the best financing rate and keeping payments manageable. A timely payment record and keeping consumer debt to a minimum helps improve credit.

The average car buyer tends to choose a five-year loan term to keep payments affordable. But if your finances allow a higher monthly payment, consider financing the car for three or four years. Decreasing the term on the auto loan can help you secure a cheaper finance rate, and you'll pay less interest over the duration of the auto loan.

Reduce the amount you finance with the bank and subsequently reduce your monthly payment with a down payment. Many dealerships offer "sign and drive" deals that allow buyers to purchase cars with no money down. Although not required, a down payment can help you negotiate a cheaper interest rate on the automobile; and if you've had a bad credit history, a down payment can also increase your odds of getting credit with the bank or finance company. Aim for 10 to 50 percent of the purchase price.

Getting auto credit after a bankruptcy or with no prior credit history can prove tricky. Banks working with people in your situation will issue a higher interest rate. Using a co-signer on the auto loan can help you acquire credit at a more reasonable interest rate. With co-signers, banks factor in both credit scores and they take the median score to determine whether you qualify and the interest rate on the car loan. For example, if you have a score of 580 and your co-signer has an 810 credit score, the median score used for the auto loan 695.

What Are the Charges of Driving With a Suspended License in Colorado?

10:15 AM 1 comment

To drive on any public road in Colorado, a driver must possess a valid driver's license. A driver may have his license suspended for a variety of reasons, at which time he temporarily loses his privileges to operate a motor vehicle. If a driver is caught driving on a public road after his license is under suspension, he could face misdemeanor charges, depending upon the circumstances in which the license was suspended.

To prove that a Colorado driver was operating a motorized vehicle after her driver's license was suspended, police must prove beyond a reasonable doubt that the driver was operating the vehicle in question. The court must also prove that the driver received notification that her license was revoked, either at a prior court appearance or through certified mail. Prosecution must also prove that the defendant is actually the driver named on the suspended driver's list, and not merely someone with the same name.

If a driver's license is suspended for any reason other than drug- or alcohol-related reasons and the driver is found guilty of driving under a suspended license, he faces misdemeanor charges. The driver may face up to $500 in fines and six months in jail for the violation. If caught driving with a suspended license for a second time within five years of the first violation, the driver loses his driving privileges in Colorado for three years.

If the driver's license was suspended because of pending charges or a conviction for driving under the influence, driving while impaired, habitual drug use or underage drinking and driving, the driver faces stiffer penalties. While still a misdemeanor charge, the minimum fine is $500 but cannot exceed $1,000. If convicted, the driver also must serve at least 30 days, but no more than one year, in prison. Subsequent violations earn two-year jail sentences and fines of up to $3,000.

Drivers may lose their licenses for several reasons in Colorado. If a driver's license accumulates too many points assessed against it for moving violations -- which vary by license type -- a driver may temporarily lose her license. Drivers who refuse roadside sobriety tests immediately lose their licenses for a year, and drivers convicted of driving under the influence of alcohol and drugs face suspension. Additionally, those found guilty of purchasing liquor for minors, even if no motor vehicle violations occur, may face a suspended license. The state may also suspend a license if a driver is found guilty of nonpayment of child support.

Is Buying a Car With Cash a Smart Decision?

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Most car buyers can't afford to buy a car outright with cash, and they're forced to finance the vehicle. But if you have the cash in your personal savings, weigh the benefits of buying a car with your own money, and decide if this is the right decision for you.

The ability to buy a vehicle often depends on your credit history and whether you can qualify for a loan or financing. But if using cash for your next vehicle purchase, qualifying for financing isn't a concern, and you can get the car with no credit history or with bad credit. Auto dealerships only check credit when a buyer plans to use a lender to finance the car. Credit history not only determines approval but also determines the interest rate on the vehicle loan.

Financing a vehicle purchase generally involves paying interest or financing fees unless you qualify for zero percent interest. Financing costs increase the final loan balance and plays a huge role in the monthly payment. Borrowers who qualify for a low interest rate pay less each month than someone paying a higher interest rate. If paying cash for a car, financing costs are not an issue, and you'll ultimately save money on the vehicle.

Financial situations can change rapidly -- layoffs, job loss, illness and divorce can affect your ability to afford your auto loan payment after acquiring financing. Buyers who pay cash for their vehicles own the cars outright. Therefore, if they encounter unexpected financial hardship, they don't have to worry about a car payment or the risk of repossession due to the inability to keep up with their payments.

Because cars depreciate fast, the chance of becoming upside-down on a vehicle loan is high. This refers to owing more than the vehicle's worth. Borrowers in this situation may experience difficulty when trying to sell the car or deal with negative equity when trading in a car. But if paying cash for your car, you won't run into this problem. You can sell the car or trade it in without worrying about being upside down.

Best Ways to Lease a Car

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Car leases typically involve short-term loans with an average duration of two to four years. When leasing a car, avoid rushing the financing process in order to quickly get behind the wheel of an amazing new car. Think objectively and approach the lease by asking questions and negotiating. Do not mention that you are interested in leasing until after you discuss the sales price.

Start by understanding basic finance terminology. For example, APR refers to the annual percentage rate, or interest, your lease will maintain. Even though car dealerships advertise low leasing rates (like a brand new BMW for $300/month), your credit score plays a major role in your ability to get a great lease. Before you consider leasing, clean up your credit report by working with creditors to charge off or settle accounts. Realize that most gimmicks are based on an extremely limited quantity of vehicles. As leases usually involve new car models, it is vital that you detach emotional ties and approach the lease as if you were purchasing a house. Read contracts (especially the fine print). Avoid paying a large down payment. Negotiate for higher mileage limits so that you can drive 14,000 miles a year (instead of the typical 10,000 mile lease limit) without being penalized. Another important factor in getting the best lease is to negotiate the selling price below the MSRP, or manufacturer's suggested retail price.

In leasing a car at a dealership, you negotiate with the dealer. But often your lease is actually with an outside lender. If you cannot get preapproved financing, then work with the dealer to lease a car with a low- or no-security deposit, dealer fees and bank fees. Do not simply discuss expected monthly payments. Also ask if the lease includes maintenance plans, such as for oil changes and tire rotations. Evaluate the lease's required insurance coverage so that you are not faced with high premiums since cars depreciate, not appreciate, in value.

A great way to lease a car involves obtaining preapproved financing. Contact a legitimate online lender or a local credit union to find a reasonable loan without excessive fees. Upon receiving financing, you should shop around and evaluate different dealer prices. Never accept a dealer's offer without counteroffering. Unless you are seeking a rare or limited edition car, then you should have a few sources to consider, such as dealerships or independent car leasing companies. A nontraditional way is to assume someone else's lease. Many people enter into leases that they cannot keep so swapping leases can benefit both you and the other party. Evaluate the financial cost and benefit and search for leases with added incentives, such as a financial bonus for assuming a lease.

How to Make Car Payments While on Short Term Disability

4:50 AM 1 comment

Short-term disability insurance pays a percentage of your salary if you are unable to work for a short period of time because of illness, injury or pregnancy. Many companies and businesses offer this type of coverage to their employees for a small monthly fee, but you can obtain short-term disability insurance on your own. Short-term disability benefits can help cover your bills while you are temporarily disabled (typically up to six months), which is especially helpful if you have a large debt such as a car note.

Instructions

Speak to the insurance provider about your benefits. You will need to confirm the start date of your monthly benefits, the exact amount of your payments and the length of time your policy will allow you to receive short-term disability benefits.

Contact the auto lender to discuss your options. For instance, the lender may allow you to make partial or interest-only payments until you are financially able to make your regular scheduled payments. The lender may even allow you to defer your car payments for a short period of time. In addition, the lender may give you the option to refinance your current auto loan in order to lower your monthly payments. Please note the lender may require you to provide documentation of your disability in order to qualify for a deferment or new payment plan.

Get the agreement in writing. Once you work out a reasonable payment arrangement with the lender, ask for a confirmation letter. The letter should provide specific details about the arrangement, such as the amount of your monthly car payments and your scheduled due dates while you are temporarily disabled.

Submit your payments to the lender in a timely manner. It is important that you make your payments on time according to the agreement. If you fail to make the required payments by the due dates, the lender may withdraw the payment arrangement and demand payment in full from you. In addition, if you become delinquent on your account, the lender may attempt to repossess your car.

How to Fix Bad Car Loans

2:08 PM No comments

You can get stuck with a bad car loan for several reasons. The most common is having a bad credit history: Lenders might not have been willing to extend credit unless you paid a high interest rate. But you could have gotten bad terms even if you have a good credit score. Either way, you should be able to fix your bad car loan.

Instructions

Check your credit report to make sure it is in the best possible shape, advises Carbuyingtips.com. If you got a bad car loan because of credit problems, you will need to build up a history of on-time payments for at least six months. Even if you had good credit, it's still smart to check your report for any possible mistakes. You are entitled to a free copy from all three bureaus (Equifax, Experian and Transunion) annually. Dispute any mistakes. You can get a free copy of all three reports from www.annualcreditreport.com

Contact the financial institutions where you currently have accounts. A bank or credit union is often more willing to give you a car loan if you have established a long-term business relationship. They are also more likely to give you favorable terms. Carbuyingtips.com says credit unions tend to give the lowest interest rates. Philip Reed of the Edmunds auto research website says you also should search online through sites like Bankrate.com.

Get the exact payoff amount from the current lender once you find a financial institution that agrees to give you a better car loan. Ask how long you have to pay that amount before it goes up. Typically it will be good until your next car payment. Ask if there are any other fees or early payoff penalties. These are often part of a bad car loan; if they are in your contract, you will have to pay them to get free off the loan.

Get a check from your new lender that covers the loan payoff and any fees. Make a copy of it before you send it to the current loan company. Make the payoff in person if possible so you can get an immediate receipt. Otherwise, mail it certified so you can prove it was delivered by the correct date to avoid paying a higher amount.