How to Refinance a Vehicle to Take a Co-Signer Off

Removing a co-signer from your auto loan will require that you reestablish the loan by yourself or with the aid of another co-signer. You can choose to refinance the auto loan through the original lender or begin financing with another lender. The process will entail reworking the loan to have the credentials of the co-signer excluded from the evaluation. If you or you and your new cosigner are not able to secure financing, you will not be able to modify or refinance the loan, and the co-signer will still be held to account for the auto loan.

Instructions

1

Search online for auto loan finance companies and banks. Inquire through the website or by contacting an agent to determine associated fees for refinancing your auto loan, including reregistration fees and transfer of lien holder fees.

2

Contact the lender through which you currently finance your vehicle to find out if there are any prepayment penalties associated with satisfying your loan before the scheduled end of the terms.

3

Calculate the payoff amount for your loan. Contact the original lender or consult your most recent statement to determine the total amount you will need to refinance.

4

Apply for a refinance with the company through which you already have the loan before seeking a refinance through another lender. The original lender may be more likely to refinance, as it already has a stake in the vehicle and is familiar with your history of payment.

5

Secure another co-signer if you are unable to refinance on the strength of your credentials.

6

Explore options through the lender to bolster your credit worthiness. Options include shortening the terms, paying a larger down payment or establishing an automatic deduction from a deposit account (savings or checking).

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Tips for Negotiating Car Interest Rates

The negotiation process involved with buying a new or used car can be an intimidating experience for the unprepared. Certain financial numbers, like an auto loan's interest rate, can significantly impact the overall price you are required to pay for an automobile. There are several strategies you may employ when negotiating an interest rate with your dealership or bank, which can put you in the best possible position to secure a low rate.

Know Your Credit Score

Knowing your credit score, especially if your score is over 760, which is considered good credit, is a useful tool in negotiating the interest rate for an auto loan. Arming yourself with this knowledge can allow you to easily deflect a high interest rate offer from a bank or a dealership. If the dealership or bank has run your credit, they know your score is above average and are simply trying to make some extra money off of you. If you feel the interest rate is too high, get up and walk away from the deal. You may be surprised at the rate the loan officer comes back with after you get up and reach for your coat.

Consider the Down Payment

A cash down payment on an automobile is applied directly to the principle. This lowers the overall amount a bank may need to finance when you apply for an auto loan. A lower finance amount can mean a lower interest rate since the bank is taking less of a financial risk. A bank may also see a large cash down payment as a serious commitment to the purchase and may approve your loan even if you don't have an ideal credit score.

Loan Term Length

Negotiating the length of your loan term can also have an impact on your overall interest rate. If you are able to accept a loan that is repaid over five years, as opposed to six, you may secure a lower interest rate because the bank is taking less of a risk. The problem with this strategy is the monthly payments on your loan will be higher even though you're actually paying less over time.

Watch Out For Add-Ons

Watch out for dealership add-ons to the price of your vehicle like rustproofing and undercoating. These unnecessary items can jack up the overall price of your vehicle and raise your potential loan's interest rate. Being prepared to review all the documents regarding your vehicle's final price can help you request these items be removed.

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How to Find Car Loans for People With Poor Credit

Credit problems can make it difficult to find a dealership or car lot to purchase a car. The car dealerships may use in-house financing or have a partnership with a bank or financing company to provide loans for their vehicle purchases. The credit requirements for the financing companies may vary greatly, and knowing how to find a dealership that has options available for bad credit borrowers will save you time and money.

Instructions

1

Search for dealerships that do not do credit checks or who specialize in bad credit borrowers. These dealerships may be of a buy here, pay here variety where the dealership finances the car loan itself. Other dealerships may have deals with financing companies that offer bad credit loans in return for higher down payments or higher interest rates.

2

Call dealerships you are interested in and ask to speak with the finance managers or the financing department. While the dealership may be unable to give you a specific credit profile or score that they are looking for, the department can tell you generally whether bad credit financing is offered.

3

Secure your own financing through a credit union or a bank before going to a dealership. Talk to the loan officer in person if possible and explain the circumstances surrounding your poor credit situation. Credit unions and smaller banks may have bad credit loan products or may be willing to work with you, if you prove you can make the payments.

4

Ask a friend, family member or spouse with good credit to co-sign the loan with you. Co-signing makes that person responsible if you fail to make a payment. You benefit from a co-signer by qualifying for a loan you may otherwise be unable to do. However, it may be hard to find a co-signer since the loan affects the co-signer's credit as well.

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What Are the Options When Upside Down on a Car Loan?

When people shop for a new vehicle, there is a 40 percent chance they owe more on their old vehicle's loan than the car's fair market value, according to the financial website Bankrate.com. This is known as an "upside down" auto loan and occurs mostly because cars depreciate as much as 50 percent during the first two years of their life. Sometimes the best option is to stick with the status quo.

Keep It

Auto loan experts, such as Philip Reed, senior consumer advice editor for Edmunds.com, believe the best course of action for an upside down vehicle loan is to stay put. You cannot hand the keys over to the bank, and even if you total the vehicle in an accident, the insurance company only pays for the value of the vehicle, not the loan. Having an underwater loan does not harm your credit score as long as you keep up with your bills.

Sell It

Selling the car for as much as you can get to a private party should net you the best return, but avoid buying a new vehicle right away. Pay off the rest of the balance so you can shop for a new vehicle without the pressure of paying for a car you no longer own. Some auto loan agreements stipulate that you must pay off the loan upon sale of the car. The bank may turn the deficient balance into a personal loan if you have good credit.

Roll It Into a New Auto Loan

One of the worst options for a borrower burdened by a depreciating car is adding the upside loan to a new vehicle loan. Dealers often agree to take a vehicle and pay off the old loan as part of a deal to sell the customer a new car. This does little to alleviate your situation and usually makes it worse, because the dealer typically adds the negative equity to the price of the new car and you have another vehicle loan to pay.

Tip

The Financial Web website recommends purchasing gap coverage for your vehicle. Gap coverage pays for any deficient balance if your vehicle is in an accident. Say you have $15,000 left to pay on a vehicle worth $10,000, and the car is totaled in an accident. Gap insurance covers that extra $5,000 you owe to the bank. In the future, consider buying a used car, put as much down as possible and finance with a loan with the largest monthly payment and shortest life.

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Do They Check Your Credit When You Lease a Car?

Leasing banks check the credit reports of anyone applying for a lease. You must have good to excellent credit to lease a vehicle. Financing may prove a better option for those with poor credit. Determine your credit standing before you apply for a lease and learn which other information banks use to determine your application approval.

Check Your Credit

Obtain a copy of your credit report from the three major bureaus to determine your own credit standing. Leasing banks may review your credit information from one or all three bureaus. AnnualCreditReport.com offers one free report from each bureau per year. Check your credit report to ensure your accounts are reported accurately. To obtain a vehicle lease, expect to have minimal credit issues, if any at all. All accounts must show as current (you can't be late on payments) and your history should reflect consistent, on-time payments and several long-term accounts. You are not likely to obtain a lease approval if any judgments, bankruptcies, collection accounts or repossessions are on your credit report.

Credit Application Process

Aside from credit history, a leasing bank uses other information to determine your application approval. Expect to provide the leasing bank with your employer and income information. A leasing bank uses your income information to determine your debt-to-income ratio. Your gross annual income should be sufficient enough to cover your monthly debts, all of which are listed on your credit report. For example, someone who makes $100,000 per year may be declined for a lease if his debts exceed $80,000 per year. Mortgage payments, car loans, credit cards or other loan balances and limits are viewable on your credit report. Expect to also have at least two years of verifiable employment and address history.

Leasing Bank Risks

A leasing bank requires good credit because of the risk it assumes from leasing a car. A leased vehicle's monthly payment is lower than a comparable financed payment, so the vehicle's lease amount and actual value do not often equal out until the end of the leasing term. If a lessee defaults on her lease, the bank can lose a significant amount of money. Lessees are often billed for over-mileage and excess wear-and-tear fees after the vehicle's return, not before. If the lessee does not pay the amount due, non-payment is reported to the credit bureaus. Good to excellent credit consumers are more likely to pay their debts.

Other Options

If you've been declined for a lease, you can still use a co-signer to obtain a lease approval. Lease approvals are based upon the cosigner's credit score, history and income. If you don't have a cosigner, consider financing the vehicle instead. Auto loan providers offer more flexibility with approval; you may obtain a loan with poor credit, albeit with a higher interest rate, term restriction or a down payment requirement. New car dealers work with a variety of banks and may use a lender suitable for your credit standing.

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Can You Combine a Credit Card Into a Car Loan?

Maintaining positive debt ratios is difficult in times of economic uncertainty. Credit cards are notorious for high interest rates and fees. If you are unable to keep control over the payments, compounding interest can spiral into financial doom. To combat this problem, consumers search for refinance options and invariably wonder if their car loan can do more than pay for the shiny automobile in the garage.

Car Loan Basics

Car loans are lending agreements secured by your vehicle. In the event you default on payments, your lender has the option to take possession of your collateral and report the repossession to your credit. They are not general-purpose loans you can use for anything imaginable. This means you cannot walk into any automobile dealership and request an extra $2,000 to pay off your credit card balance. That being said, there are three ways to combine your credit cards with your car loan: rebates, refinances and title loans.

Rebate Option

Automakers offer cash incentives or rebates from time to time as a way to stimulate consumer interest in their brand and help dealers sell units. The way this works is not complicated. The maker offers the incentive on a specific model or model year. If you wish to purchase that vehicle and meet any additional stipulations they place on the sale, you take advantage of the rebate.

The most popular use of these cash incentives is applying it to the total purchase price of the car to obtain lower payments or less of a down payment. Unless the maker writes this into rules, you are under no obligation to use the rebate for the purchase. Instead, wait for the rebate check and use the proceeds to pay off or pay down your existing credit card balance.

Refinance Option

The auto loan refinance option only works if your credit history, the vehicle's age and your equity in the car all align. Lenders often require higher credit scores to refinance older vehicles. After a certain age, they will not touch the deal because the car's value continues to decline. If, however, your credit is in good shape, you owe far less than the vehicle's worth and it is not too old, you may apply for a refinance and receive cash back to apply toward your credit card balance. Requirements vary by financial institution, so always check with your lender for specifics.

Title Loan Option

In the event your car is fully paid and you hold a clean title---one free of outstanding liens---you may qualify for a title loan. For this loan, you request an amount less than or equal to your vehicle's worth using the title as collateral. Keep in mind that title loan companies can charge a higher rate of interest for this loan type than your financial institution. Although this is an option to combine credit cards with car notes, the interest rate or repayment terms can make it an undesirable option.

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What Numbers to Look at When Comparing Vehicles to Lease

No two leases are created equal. Beyond lease residuals, interest rates and cap costs, lease advertisements consist of a predetermined term, mileage allowance and down payment requirement. To compare vehicle lease deals, carefully review the advertisements offered on manufacturers' websites.

Term

Advertised lease terms are flexible; you can alter the term of a lease anywhere from 24 to 60 months. For advertising purposes, the cheapest term is already figured, so changing it will cost you more than the monthly payment you see advertised. Compare leasing term offers against the car's bumper-to-bumper warranty, which differs by manufacturer. You are responsible for all repairs while leasing a car, so ensure your warranty provides enough coverage or consider reducing the lease term to remain under factory coverage. Ideally, the lease term should match factory warranty coverage; otherwise you may have to pay to extend coverage.

Mileage Allowance

Just like the advertised leasing term, the mileage allowance also provides a best-case scenario. Advertisements usually offer 10,000 to 12,000 miles per year, but you can change your allowance up to 18,000 miles per year if necessary. When comparing leases, ensure the mileage is a good match for your driving habits. If you exceed your lease mileage, expect to pay 10 to 20 cents per mile over your allowance, depending on your leasing bank. Match the mileage to your bumper-to-bumper warranty, as well. Make sure you remain under factory coverage during the lease period.

Down Payment Requirement

Down payment requirements significantly impact a lease payment. While the lease payment may appear attractive, the money down requirement may prove expensive. Most lease advertisements exclude tax and fees, which differ by area. Note your down payment requirement when comparing and aim to minimize your down payment amount. You can always call a local same-make dealer to find out the price differences for down payment variations. If your vehicle becomes a loss during your lease, you won't recoup any of your down payment or lease payments; insurance payoff goes to your bank, not you.

Monthly Payment Comparisons

You can roughly estimate lease payments if you want to alter the advertised down payment amount. Every $1,000 you offer toward your lease reduces your monthly payment by about $30 per month. If you subtract $1,000 from your down payment amount, your monthly lease payment should raise about $30 per month. When comparing on your own, use this method to help identify a fair lease with the same down payment amount. Once you've narrowed it down, a dealer can offer you an exact monthly payment with the down payment you choose.

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