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.

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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.

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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.

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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.

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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.

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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.

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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.

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