Ways to Get Lenders to Work With You to Refinance a Vehicle for Financial Hardships

It's not in the interest of the lender for you to have your vehicle repossessed. Repossession of a delinquent borrower's car costs the lender money. Lenders are more than happy to assist borrowers faced with financial hardship. Contact lenders the moment you know your finances are in danger. If you wait, and chronic late payments become the norm, you may not have an avenue for refinancing.

Ask the Lender

Contacting the lender and asking for assistance is the best way to find help to refinance the vehicle. Lenders have access to numerous assistance programs designed to help those faced with financial hardship. Loan modification programs can allow the borrower and lender to redraw the terms of the loan and bring the payments down for the borrower. Call and make an appointment with the lender today or stop by your lender's location and take the next available appointment with a loan officer to find out what they can do for you.

Use a Cosigner

When financial hardship happens, chronic late payments cause a borrower's credit rating to drop, and banks will likely require a cosigner for additional refinancing. Find a cosigner before discussing refinancing with your lender and ask the cosigner if they are willing to help you. Cosigners should have a substantially better credit rating than you and not have large amounts of debt. They should also understand that by co-signing the loan they are responsible for payments if you fail to make them. Parents, relatives and friends are where to start when looking for a cosigner.

Consolidate Loans

Contact a lender you have other loans with and ask about including the car loan in a consolidation. Lenders may be willing to restructure a mortgage or other type of loan to include the car loan. This means the lender would pay off the original car loan and add the total of the payoff to the restructured loan. Consolidation loans can occur from any lender; you do not need to have a loan history with the bank to be extended a consolidation loan. Contact banks in your area and ask if they offer consolidation loans.

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How to Calculate a Car Payment When Trading in an Upside Down Car

An upside-down car is one that is worth less than you currently owe on the loan. This leaves you in a sticky situation because even if you sell the car, you still owe money on the loan. When you trade in an upside-down car, you have two options. The first is to apply the trade-in value toward paying off your old car loan and making a large payment to pay off the remainder of the loan. The second option, if your lender allows it, is to roll over the negative equity into a loan for your new car.

Instructions

Calculate Payoff Amount

1

Look at your most recent car loan statement to find the outstanding balance on the loan. If you have made a payment since the statement, check the outstanding balance by calling the lender or logging into the online account management section for your car loan.

2

Divide your annual interest rate by 1,200 to find the monthly decimal interest rate. Multiply the result by the outstanding balance to calculate a month's worth of interest. Add this to your outstanding balance to get your payoff amount. You might not owe quite this much if your payment gets processed quickly, but the conservative estimate ensures that your payment will be enough.

3

Add a prepayment penalty if your car loan includes one. Look at your loan origination documents or call your lender to find out what the penalty is.

4

Go to a car dealership and ask for an estimate on your car's trade-in value. Alternately, you can look this up online by entering your car's information on a website that estimates used car values.

5

Subtract the trade-in value from the total payoff amount on your car loan. This is the amount of the final payment you will need to make to finish paying off the loan.

Future Car Payments

6

Complete the first three steps above to calculate the total amount of money you need to pay off your current car loan.

7

Add the purchase price for your new car. If you have already made a purchase agreement, use the exact price you settled on. Otherwise, you will have to estimate it.

8

Subtract the amount of the down payment you plan to make on your new car, if any.

9

Subtract your car's trade-in value. The result is the amount you need to borrow through your new car loan. When your car is upside-down, the amount you need to borrow will usually be more than the purchase price of the new car, unless you make a very large down payment.

10

Enter the amount you need to borrow, the interest rate you qualify for and the length of your repayment term into an online loan calculator to determine your monthly payment. You can also calculate this by hand by plugging the information into the formula: [A(r/12)]/[1-(1+r/12)^-m]. A is the amount you will borrow, r is the interest rate as a decimal and m is the number of months in the repayment term.

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Auto Repo Rights

If you don't make your car payments, the finance contract that you signed at the time you purchased the car gives the loan company the right to collect their money, using legally available means. Repossession is when the bank takes your vehicle, and sells it to recoup the money you owe. You have rights in this process, and the bank's failure to follow the law can affect their ability to collect the debt.

Taking the Vehicle

If you are late on your car payment, you are at risk to have your vehicle repossessed. If the bank considers you a flight risk, they may repossess the car as soon as 10 days after you become late, but usually, it is two to three months before it takes this step. The agent repossessing a vehicle cannot tow it with someone inside, and he cannot enter a garage with closed doors to repossess a vehicle. Generally, the agent cannot use extremely aggressive methods to take a vehicle, because he must not breach the peace when carrying out his duties.

Personal Property

If the agent takes your vehicle and you are not around, you may have personal property stored in the vehicle, such as car seats. Repossession agents must log any personal property found in the vehicle, and keep the property for a certain length of time, often 30 days. You are allowed to claim it within that time frame. Accessories attached to the vehicle, such as aftermarket stereo systems, must often remain with the vehicle.

Sale

The bank will sell your vehicle in order to collect the amount that you owe. Often, these sales are made at private auctions only open to car dealers, but auctions may also be public. In some states, the bank must notify you of the date and time of the sale, so that you can participate in the bidding. The bank must sell the car in a commercially reasonable manner, meaning they should make every effort to get the highest value possible for the vehicle. You may have the right to purchase your vehicle before an auction, or reinstate your loan by paying the past due balance, depending on your local laws.

Deficiency

Your obligation does not end after the sale of the vehicle. Usually, the sale does not bring enough money to pay off the debt, particularly if the loan is fairly new or if you rolled negative equity from a trade into the loan. The bank will add its repossession and sale fees to the balance of the loan and will attempt to collect the rest from you. The bank can use all legal collection methods, including lawsuits, to collect this balance. If the bank violated your rights during the repossession, you may be able to collect damages, which may include a forgiveness of the deficiency balance.

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Will They Check My Wife's Credit When I Buy a Car?

You've got your eye on a hot new set of wheels, but with your spouse's credit, you're bound to be going nowhere fast. That assumption is a common one for married couples when one comes into the union with stellar credit and the other's credit is a little lacking, but that common assumption is often a false one. Your spouse's credit doesn't have to slow your financial roll at all, and it doesn't have to be an issue when you're trying to get an auto loan. It all comes down to how you structure the deal.

Credit and Marriage

When you get married, your lives may become one, but it is another story for your credit reports. Your credit remains completely independent of your spouse's credit until you apply for joint loans. As long as you keep credit accounts in your own name only, no one running your credit will have any idea what your spouse's credit score is.

Car Loans

Securing financing for a car is all about whose Social Security number is on the loan application. Even if your spouse drove with you to the dealership, is the only one who drove during the test spin and picked out the color and upholstery, if your spouse's name and Social Security number are not on the application, your spouse's credit will not be checked.

Pros and Cons of Individual Car Loans

If your spouse has bad credit, an individual auto loan in your name only is advantageous. Even if your spouse's negative credit history does not prevent you from getting approved for a loan, it could land you with a higher interest rate than you could secure if only your own stronger credit standing was considered.

There would be a blip in the road, though, if you needed your spouse's income to be considered to qualify for the loan. If your credit is good, but your income does not meet the loan requirements, then you will need to seek a joint loan that includes your spouse's earnings. If you want to include your spouse's earnings, then they must be included on the application and the spouse's credit will be run -- for better or worse.

Getting Help

If you have the good credit for loans, but not the income, and your spouse is facing the opposite situation, consider working as a couple to improve your spouse's credit before making any large purchases. Focus on bringing delinquent accounts current, making on-time payments and paying down debt to improve the health of a credit score.

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What Happens if We Surrender Our Leased Vehicle?

If you surrender your leased vehicle without paying for the early termination, it's known as a voluntary repossession. If the bank seizes your car for non-payment, the instance is known as an involuntary repossession. Both terms affect your credit score and future lending opportunities just the same.

Paying Fees or Repossession

Call your leasing bank to find out how much it costs to terminate your lease. Depending on how far along you are in your lease contract, you might have to pay a termination fee in addition to any payments due for the remaining of the contract term. If you can't afford to pay at all, you can voluntarily return your vehicle by calling your bank to find out where to drop off the car. If you don't pay your payments or contact your bank, it will hire a repossession company to seize the vehicle.

After Repossession

If you pay the lease termination fee to the bank, you dont need to do anything more. If the car was repossessed, the bank will resell it. Once the bank resells the car, the bank will contact you to let you know how much you owe toward the car's balance which is no longer just the lease amount, but rather the total cost of the car. If the car's sale price doesn't satisfy the vehicles purchase balance and repossession fees, you must pay the remaining balance to the bank. If you don't, the bank can pursue court action and garnish your wages. If you settle the remaining balance, you must pay taxes on the portion of the balance you didn't pay.

Credit Report and Score

Repossession damages your credit. It makes no difference to your credit score or future credit providers whether the vehicle was voluntarily or involuntarily repossessed. If you dont pay the balance due to the bank, it may pursue a judgment to garnish your wages, which is also listed on your credit report. Furthermore, if you settle the amount due on your loan and don't pay your taxes, the IRS can issue a tax lien, which results in another derogatory mark on your credit. After your credit is damaged, obtaining another loan or line of credit will prove difficult.

Before You Surrender the Vehicle

You originally had good to excellent credit to obtain approval from a leasing bank. Don't surrender your vehicle before you research other lease-end options; you may be able to avoid a negative credit rating. Consider letting another person assume your lease, if your bank allows it. Check with your bank to find out whether you can sell your car while you don't own it, you might be able to sell it to a third party, depending on the rules of your bank and state. Ask your leasing bank to defer one or more lease payments. Many banks can work with borrowers who are experiencing financial hardship.

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When to Refinance a Vehicle?

While the refinancing of home loans is relatively common, vehicle owners are also often able to refinance the loans that they have taken out to pay for the purchase of their vehicles. Refinancing auto loans is similar to refinancing home loans. However, the process is generally less expensive.

Refinancing

When a vehicle loan is refinanced, a lender purchases the original loan and pays it off. Afterward, he issues the borrower a new loan with different terms. Although borrowers may have various reasons for wanting a new loan, refinancing is mostly undertaken if the borrower believes he can gain some financial advantage from the transaction. The financial benefit must be large enough to overcome the cost of refinancing, which may entail the payment of various fees.

Change in Interest Rates

One of the main reasons a person may wish to refinance is if interest rates available to borrowers have dropped since he took out the original automobile loan. If lenders are offering lower interest rates, it may be a financially wise decision for the borrower to swap out his current loan for a new one on which he can pay less interest. However, if his current loan has a prepayment penalty -- a fee for paying off the loan early -- refinancing may not make financial sense.

Change in Financial Situation

A person may also wish to refinance if his personal financial situation has changed and the size of his income or his expenses have changed. In addition to changing the interest rate of a loan, a person can refinance to change the repayment structure. The person may be able to pay over a longer or shorter period of time, which will change the size of his payments to suit his ability to pay.

Change in Credit Rating

A person may also wish to refinance a vehicle loan if his personal credit rating dramatically improves from the time in which he took out the initial loan. Many lenders heavily base their interest rates on an individual's established ability to meet his debt obligations. If a credit rating bureau has raised the person's rating, he will receive lower interest rates. To determine whether his credit rating has changed, a person should request a copy of his credit report.

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Can They Repo Your Car at Work in North Carolina?

In North Carolina, a vehicle repossession agency has a legal right to repossess vehicles on the purchaser's property, even when the purchaser does not consent to the repossession. A lender can instruct the repossession agency to perform the repossession during work hours on business property. As long as the agency does not breach the peace, then the state will not interfere with the lender's rights.

Advance Notice Rights

Neither repossession agencies nor banks have a legal duty to provide borrowers with prior notice of repossession, according to North Carolina law. Both may proceed with repossessing vehicles without first providing notice. Furthermore, banks can repossess their vehicles after one late or missed payment if their contracts give them the right of repossession after a missed payment. Since most vehicle loans will provide lenders with a right to accelerate or demand future loan payments after one late or missed payment, the bank may demand immediate payment from the debtor.

Location of Repossession

Repossession agencies may tow vehicles from the buyer's private property, from public property and from his place of employment. As long as the repossession agency does not violate North Carolina's "breach of peace" laws, they may proceed with repossessing the borrower's vehicle while she is working.

Sale and Deficiency Rights

After repossessing a vehicle, the lender will most likely sell its vehicle through judicial sale, auction or to a private party. The lender must provide the car buyer with advance notice of the location of the sale, the time of the sale and its asking price for the vehicle. Under North Carolina law, lenders can sue borrowers for any deficiency after they sell their vehicles. The deficiency amount is the remaining loan amount minus the sale proceeds.

Full Payment of Outstanding Fees

In addition to suing a borrower for a deficiency judgment to collect the remaining loan balance, a lender can sue the borrower for any incidental costs of towing or repossession. The North Carolina General Statutes, Chapter 25A or the "Retail Installment Sales Act" governs the rights that lenders have when borrowers default on their loan obligations.

Considerations

Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

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