How Long Do You Have to Pay on a Vehicle Before You Can Refinance in Your Own Name?

A co-signer is someone who secures your loan with either his income or good credit standing. People need co-signers for various reasons, so the time it takes before you can re-apply for a car loan depends on your own credit issues. To determine when you can refinance your car loan on your own, consider why you had to use a co-signer in the first place.

Income Issues

Some buyers need to use a co-signer because of income issues. If you don't make enough money for a loan approval, your lender considers your co-signer's income along with yours. If this is the reason you needed a co-signer, you can likely refinance your vehicle after your income increases. Most lenders prefer at least two years of verifiable and steady income. If you used a co-signer for this reason and your income has increased, try to refinance your car after six months to one year of steady and provable income once your income increases.

Debt-to-Income Ratio

Lenders decide loan approvals based on a borrower's debt-to-income ratio. Based on the information obtained in your credit report and your income, a lender decides how much you can afford to pay toward your loan each month. Even if you make more money than average, you aren't guaranteed a loan if you have a high debt responsibility. For example, if you already have a car payment, a mortgage and several credit cards that require a payout of $2,000 per month and you make $2,500 per month, your debt-to-income ratio is poor. Refinance your vehicle once you pay off other debt and increase your available funds.

Poor Credit History

If you have poor credit, it can take years to improve your rating. Items listed on your credit report, such as repossession, bankruptcy, foreclosure or judgments, can substantially reduce your credit score and chances of securing credit. Most of these issues remain on your credit report for at least seven years. Pay off your debts and prove to lenders that you can make payments consistently and on time with your current car loan. The amount of time necessary to improve credit differs by person and payment history.

Budget Considerations

You may find that you can currently refinance your loan. But the terms may not be favorable. You might obtain a higher interest rate, have a large down payment requirement or term restriction, which lenders may require as a term of approval. A shortened loan term or high interest rate can increase your monthly loan payment by more than $100. To stick to a budget and save money over the term of your loan, you may want to keep your current loan co-signer because of the loan terms you've already secured.

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How Will a Home Equity Loan Affect a Car Loan?

When you apply for a car loan, an existing home equity loan could have an impact on your ability to obtain that loan. Lenders look at your existing debts and how you manage those debts before extending new credit to you. Additionally, you cannot take out a car loan unless you have sufficient income to pay both that new loan and your existing debt payments.

Credit Score

Lenders make regular reports to credit bureaus about your credit management. High balances and payments made more than 30 days late have a negative impact on your credit score. Since houses hold value better than cars, you can obtain a home equity loan with a lower score than the score needed to obtain an automobile loan. Therefore, even if you had good enough credit for an equity loan, you may not qualify for a car loan, and missed payments on your equity loan could jeopardize your chances of even getting a car loan.

Debt to Income

You only have so much money to spend each month, and lenders examine your debt-to-income (DTI) ratio to ensure that a new loan will not cause you to have more debt than you can afford. Your DTI reflects your debt payments as a percentage of your overall monthly income. Typically, lenders only allow you to obtain new credit if your DTI ratio does not exceed between 35 and 45 percent. A large home equity payment may not leave you enough spare cash to afford a car payment.

Existing Loans

When you have established your home equity loan and your car loan, how you manage one loan has no direct impact on the other. Your home equity lender cannot raise your interest rate or charge penalty fees if you miss a payment on your car loan or vice versa. As long as you keep to the terms of your loan agreement with one lender, a car repossession or home foreclosure related to another loan can have no bearing on that particular loan.

Variable Rate

Home equity loans have fixed interest rates, but many banks also offer home equity lines of credit that have variable interest rates and require interest-only payments. You may take out a car loan alongside your low rate equity line of credit and have no problem paying both of the debts. However, most equity lines have very high rate ceilings, which means that your payment could double or triple when interest rates rise. If that happens, your equity line of credit could soon have a big impact on your car loan if you cannot afford to pay both debts and must choose between protecting your home or your car.

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Do Insurance Companies Offer Car Replacement for a Totaled Car?

The auto insurance industry offers a bewildering array of insurance policies and options. The last few decades have seen the basic idea of auto liability and/or collision coverage morph into a wide variety of options. One option is comprehensive coverage, which includes loss from theft or weather-related damage, towing and/or rental car coverage while your vehicle is being repaired, as well as "gap" coverage and new vehicle replacement coverage where you receive a new car and not just the current value of your totaled vehicle.

Basic Types of Auto Insurance

The basic type of auto insurance is liability insurance, where the driver/vehicle is insured for any damage caused to others that is the driver's fault up to the liability limit. Another common type of car insurance is collision insurance, where you are essentially insured against most damage you do to your own vehicle.

New Vehicle Replacement Coverage

New vehicle replacement coverage is insurance coverage that will replace your vehicle with a new vehicle of the same make, model and factory equipment as the totaled vehicle or the cash equivalent. New vehicle replacement insurance, however, is relatively expensive and is generally only available for the first year of car ownership.

Gap Coverage

Gap insurance coverage, also called loan/lease coverage, protects the buyer of a new car from the immediate 15 to 25 percent depreciation of buying a new car. Let's say you got in an accident and totaled your $25,000 car just four months after buying it. The insurance company will only pay you the actual cash value of the vehicle, which could be as low as $20,000, and assuming a $1,000 down payment and four $300 payments, you will still owe the financing company around $2,800. Gap insurance would cover this amount. Gap insurance is relatively inexpensive and is typically chosen by those who are leasing or making small down payments on new vehicles.

Rental Car Coverage

Rental car coverage will cover the costs of a rental vehicle while your vehicle is being repaired or otherwise for some specified period of time -- usually from a week to 30 days. Rental car insurance is inexpensive and commonly packaged with emergency roadside assistance insurance as a low-cost or free additional service.

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Predatory Car Loan Lending Laws

Predatory auto loans are those that are comparatively more expensive than regular auto loans. They may exhibit variable interest rates, high fees or unusually high annual percentage rates. Those who fall victim to predatory lending tend to be the most financially vulnerable. Few federal laws are in place to regulate the practice.

Predatory Car Loans

Generally, a car loan can be considered predatory if the interest rate of the loan is considerably higher than that of others. Such loans not only target customers with low or no credit scores, but may also trick some into thinking they are unwittingly entering a superior deal when in fact they are not. Many such loan agreements tend to be equipped with what is termed "mandatory arbitration"; when an agreement is signed by a borrower, this waives her rights to sue the dealership once she has realized she entered the agreement on unfavorable terms.

Types of Predatory Car Loans

One of the basic types of predatory auto loans is that of a varying interest rate. When the buyer first takes out the loan, he is given a very low introductory rate known as the buy rate. The dealer is then able to increase the rate at his discretion. Because dealers profit from increased rates, they are very likely to increase them. Another method is to insert an assortment of fees and charges onto to the loan, which adds to the outstanding balance. This increased balance raises the amount of interest owed.

Effects

The net effect of predatory auto loans is almost always toward the benefit of the dealer at the expense of the borrower. People who had previously good credit, and who may have otherwise qualified for a loan with more favorable terms, can see their credit rating plummet. Furthermore, those who took out predatory loans because of their poor credit history find themselves in an even worse financial situation than before. According to "Predatory Lending: A New Face of Justice," predatory lending cost consumers $1 billion a year as of 2005.

Laws on Predatory Lending

Unlike the mortgage industry, which in 2010 saw some new regulation under the Dodd-Frank Wall Street Reform and Consumer Protection Act, very little legislation has been put in place to regulate auto loans. The Dodd-Frank Act did, however, introduce the establishment of the United States Consumer Financial Protection Bureau, which will oversee and promote financial awareness among the American public. The bureau will also be charged with researching and investigating any new problems in the loan market so that it can mitigate its negative effects.

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If I Have a Car Repossessed How Can I Get a Good Credit Score Again?

Having a car repossessed can be a traumatic experience resulting in additional financial hardship. On the upside, it can also be a stark reminder that it's time to get back on track with finances. It's not impossible to get a good credit score again after having a car repossessed, but it will take some time, discipline and motivation. Researching ways to improve credit scores after your car is repossessed will help you decide which course of action makes the most sense for your situation.

Repossession

Repossession happens when your secured debt is tied to an asset. Most car financing agreements permit lenders to repossess your car at any time, without notice, once you've begun defaulting on payments, according to the Federal Trade Commission. To get the car back, you may have to pay the entire balance on the loan back, plus the costs of towing and storing the car as part of the repossession process. Borrowers having problems making payments are better off selling the car and using resulting money to pay off the loan, since repossession leaves a dark mark on your credit score.

Pay Loan

If possible, pay off the balance for the car that was repossessed and any fees associated with storage or preparing the car for auction. While this won't remove the repossession event from your credit report, future lenders, landlords or other professionals viewing your credit report will see that you've taken care of the debt. Paying down debt will help you move toward a good credit score.

Additional Loans

Credit scores reflect your ability to handle credit, and one way to build up a credit score is to take out and reliably pay back another loan. Securing a loan can be tough after lenders see that your car was repossessed, but allow some time to pass as you gradually build up better credit by paying credit card bills, student loan payments and other financial obligations on time. After six months of good payment habits, your credit score may rise enough to take out another credit line to purchase another car, if desired. If you can wait two or three years, it'll be less likely that you'll need to take out a loan from a subprime lender, which comes with higher interest rates and fees.

Explain

Contact TransUnion, Equifax and Experian credit reporting agencies and add a short note to your report explaining your side of the repossession. Lenders may take your explanation into consideration when reviewing your report.

Bankruptcy

Far from being a magical bandage to resolve your financial woes, including repossession, bankruptcy is a very serious financial measure considered to be a last resort because of the lasting negative effect it can have on your credit report---up to 10 years, according to the Federal Trade Commission. While declaring bankruptcy can stop repossessions and other punitive measures, it won't help you much after a car has already been repossessed and certainly won't make it easier for you to get a good credit score.

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Tips on Knowing When to Sell or Trade in Your Car

Dealing with an old car is one of the more difficult parts of buying a new car. Buyers of a new car have to weigh the importance of getting the best possible deal on their old car against the amount of time spent selling the car. Though the decision to trade in or sell the car is a personal one, there are a number of factors that new car buyers should consider when getting rid of their old vehicles.

Determining Value

Before either selling or trading in a used car, determine the fair market value for the vehicle. There are a number of print and online price guides that a consumer can use to determine value. Some well-known examples are NADA and the "Kelly Blue Book." These guides use a vehicle's make, model, condition, mileage and other factors to determine market value. Price guides will give figures for both retail value and trade-in value for the vehicle. Consumers can also use Internet car listings to look at prices that comparable vehicles are selling for in their areas.

Trade In Advantages

The primary advantage of trading in a vehicle to the dealer is convenience. A typical trade-in consists of taking the vehicle to the dealer for inspection and receiving an offer. Consumers can negotiate the price with the dealer, but the process is relatively simple. Trading in a vehicle is also less of a hassle, as the dealers will also handle the paperwork needed to transfer the title and documentation for the vehicle.

Selling Advantages

The primary advantage of selling a car over trading it in is that a private sale will typically result in a larger financial return for the vehicle. When a car dealer buys a car, he is buying it to sell. This means he will offer less than the retail value of the car, as he needs to be able to sell it for a profit. Selling a car also allows consumers to get rid of the car when they are ready, allowing them to concentrate on buying the new car instead of preparing the old one.

Other Factors

In some cases, dealers may offer customers as much or more for a trade-in as the customer could get selling it himself. As part of the new car buying process, it is always a good idea to see what the dealer will offer for the vehicle. Certain vehicles are more in demand in some areas, and this will greatly influence the time it takes a consumer to sell the used car, as well as the price.

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What to Know Before Buying a Car

Buying a car and getting a good price and interest rate requires savvy skills. Car salesmen and dealerships want to make a certain amount of money on each purchase, and lenders base interest rates for auto loans on credit scores. For these reasons, there are several things to take into account before buying a car.

Invoice Price

The sticker price on a new automobile is what the dealer hopes to receive for a new car purchase. However, the invoice price is what they paid the manufacturer for the car, and knowing the invoice price paid by dealerships provides a price point to begin negotiating the price of the car. Find invoice prices for various automobiles with car buying guides such as Edmunds.com and Kelley Blue Book. Enter the make, model and year of the automobile to learn what dealerships paid.

Credit Score

Know your credit score and the information listed on your credit report before buying a car. Credit scores and history affect two aspects of buying a car -- approvals and the interest rate on the auto loan. MyFICO.com offers credit scores for a fee, and Annual Credit Report gives consumers access to one free report from the three credit bureaus each year. Some dealerships work with bad-credit applicants and offer sub-prime auto loans. However, a score in the upper 600s and higher makes you a candidate for a desirable interest rate and lower payment on the auto loan.

How Much Can You Afford

Know how much you can spend on a new or used auto loan before shopping for a car. Some buyers find a car first, and then submit an application for financing. Finance companies review existing debts and monthly income to determine if you can afford a particular price. Getting pre-approved for an auto loan before going to a dealership alleviates looking at cars that are out of your price range. Plus, pre-approvals let you know in advance if you're even able to qualify for a car loan.

Down Payments and Interest Rate

If getting the lowest interest rate and monthly payment are a top priority, save money for a down payment before buying a car. Auto lenders do not require down payments. However, Financial Web recommends putting a sizable down payment on the loan to help you negotiate a lower interest rate. Down payments can be as little as 10 percent of the sale price or as much as half the sale price. Plan to put a minimum of 20 percent down.

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