Managing a Car Loan

Thursday, August 30, 2012

How to Get Auto Financing With Bad Credit

5:06 PM No comments

The impact that credit scores have on financial life can make it seem as though bad credit closes the doors to many opportunities. Bad credit is not the end of the world, but until credit is repaired, compromises are usually necessary, especially when it comes to financing a vehicle. Qualifying for auto financing with bad credit will take some work, but it is far from impossible.

Instructions

Order a copy of your credit report. Credit reports are available online from a variety of sources. While you may already know that your credit is less than perfect, a review of your credit report will let you know exactly what you are working with. This review also gives you the opportunity to look for and correct any erroneous reporting.

Understand your credit score. Credit score numbers range from 300 to 800, where 300 is poor and 800 is excellent. Scores lower than 620 are viewed as high risk, and lenders refer to scores in this bracket as subprime. Subprime auto loans almost always have higher interest rates and require a down payment, co-signer and/or trade-in vehicle to qualify.

Recruit potential co-signers. Friends or family members with good credit history may be candidates to co-sign on your auto loan. A co-signer applies for financing with you, and his good credit could help you qualify for a lower interest rate. Keep in mind that co-signers share legal responsibility for repayment of the loan, so if you go into default, the co-signer will be held liable.

Review financing options. Search online for car dealerships in your area. Some dealers have financing departments dedicated to buyers with credit problems. Independent "buy here, pay here" dealers provide in-house financing without the traditional finance qualification process, and these can be a solid option if your credit is extremely bad. You may also be able to secure your own financing online.

Assess your budget. Consider that subprime auto loans can have interest rates up to 25 percent. This can drastically increase the total price you pay for the vehicle. Bad credit leaves little room for interest rate negotiation, so plan to provide a trade-in vehicle or substantial down payment to make your monthly payments affordable.

Contact dealerships that offer programs that could meet your needs. Explain your credit situation, tell them what you can afford and what you can offer as a down payment. If you have a vehicle for trade, ask what they will offer for it. Keep notes about what each dealership can do for you.

Choose the dealership that offers a financing plan that best meets your needs. If only one offers you financing, the choice is easy. If multiple dealers can finance you, choose based on vehicle selection, interest rate, loan term and payment schedule. Bring your driver's license, down payment, trade-in vehicle, proof of insurance and co-signer to the dealership. Take your vehicle of choice on a test drive, then sign the financing contract.

Legal Rights Against Repossession of a Vehicle in Georgia

2:33 PM No comments

Repossession is the legal right of a creditor to reclaim property after a debtor has failed to pay a loan secured by that property. With respect to automobiles, if you fail to pay your car loan, the bank or other financial lender can repossess the vehicle. In Georgia, a creditor can repossess as soon as you are delinquent unless the loan contract says otherwise.

Unless the loan contract expressly says otherwise, the financial institution can repossess the vehicle as soon as you default on the loan. Typically, most lenders won't repossess immediately but rather will send a warning letter and only repossess if the default remains for an extended period of time. However, this is just a courtesy -- the dealer is not obligated to grant extra time to pay.

Although a creditor has the right to repossess your vehicle, the manner in which the creditor goes about doing it is limited. Georgia law requires creditors to repossess the car without illegal force, breaching the peace or trespassing. For example, a creditor cannot remove the vehicle from your closed garage without your consent. Additionally, if a creditor causes damage to personal property during the process of the repossession, the creditor may be liable for the damage. Creditors also do not have rights to the personal property that is inside the vehicle during the time of repossession. For example, if the car is repossessed before you have a chance to remove your belongings, the creditor must return them to you. If they are lost or damaged, Georgia law requires that creditor cover the replacement and repair costs for those items.

After the vehicle has been repossessed, Georgia law gives the debtor the absolute right to redeem the car before it is sold at auction by the lender to help satisfy the debt. To redeem the repossessed vehicle, you must become current on the balance owed, plus pay and fees associated with the repossession of the vehicle.

If debtor has paid 60 percent or more of the price of the car, the lender is required to sell the car at auction to help satisfy the debt still owed. Georgia law requires the compulsory sale take place within 90 days from repossession.

How to Owner Finance a Car

5:51 AM No comments

Any commercial transaction, including the sale of a car from one person to another, can be completed with owner financing. Owner financing--sometimes called seller financing--is when the seller of a given product extends credit to the buyer of that product and holds a promissory note for the loan. The opposite of owner financing is bank financing, where the seller receives payment in full from a bank and the borrower repays the lending institution. If you are going to owner finance your car there are some important documents you should use and some precautions you should take.

Instructions

Run a credit check. If you're going to consider extending credit to another individual you should run a credit check on them. There are a variety of credit check services available and running a credit report on someone only costs a few dollars. You should also verify current employment with a recent paystub when investigating your potential borrower.

Document your transaction with a bill of sale. All purchases need a receipt for proof that the agreed-upon transaction took place. A bill of sale is just that: a commercial transaction receipt. The bill of sale for a car should document some specifics such as the make, model, VIN number, and mileage of the car.

Get a substantial down payment. If you're going to offer owner financing, be sure that you're getting a substantial down payment. Many banks won't extend auto loans without a 15 to 20 percent down payment. Consider asking for 25 percent or more because you should be taking on less risk than a bank would when offering seller financing. You should also charge higher interest rates than a bank would for a similar auto loan to compensate yourself for the risk you're taking on.

Execute a promissory note. A promissory note is a personal loan agreement; this is the document that spells out the interest charges and terms of the loan. If the borrower defaults on the promissory note this is also the document that can be used to bring suit against the debtor and demand payment on the loan.

Transfer the title. Once you've completed the bill of sale and promissory note head to your local DMV and transfer the title of the car. The buyer will need to pay some taxes and fees to transfer the title. The seller will need to bring proof of a clean title to the DMV for the borrower to assume.

How Low Can You Negotiate for a Used Car When Paying Cash?

7:15 AM No comments

Contrary to what some buyers may believe, used car dealers don't accept a lower price for vehicles when the customer is paying cash. The form of payment makes no difference in a sale. Also, most private sellers accept cash for payment only because of the risk that check payment may present. Before negotiating a lower price for a used car, understand why dealers prefer financing over cash payments and how to get a better deal, regardless of how you pay.

If a dealership handles your financing, it receives payment as an electronic transfer within days, which is basically the same as cash. Also, a dealer makes a profit for using a certain bank, whether it is by marking up your interest rate or just choosing to use the bank for a finance application over others. Even credit unions, which don't usually allow rate increases for dealer profit, offer a dealership a flat fee. For these reasons, cash purchases do not gain a better price.

A private seller may price a used vehicle high and negotiate, and a dealer may do the same. However, discounts vary by seller and car. Dealerships often purchase inventory from customers who trade in, and then put the vehicle through a shop to repair it or perform maintenance. So the car's value to a dealer varies by vehicle. No set discount amounts exist, as sellers own each car for a different amount. Also, private sellers may need to make a certain amount on the sale, perhaps to pay off a car loan or to purchase another vehicle.

Some people may believe that a dealership can somehow hide a cash purchase or keep a portion of it instead of reporting it as income. This is not true. It is highly unlikely that you will find a sales manager who would risk losing his job to sell a car. In addition, buyers are unlikely to sign paperwork declaring they spent less for a car than they really did. This would limit a buyer's recourse if the car had problems or had to be returned.

A better way to receive a discount is to offer to purchase the vehicle immediately. If you're purchasing from a dealership and you have cash, you can offer to buy the car that day, which will give you more negotiating power. You can tell the dealer that you will leave with the vehicle if he can meet your price, and you can discuss any counteroffers before deciding. A private seller may also take less for a car if you offer to purchase it immediately.

The Advantages and Disadvantages of Buying Vs. Leasing a Vehicle

5:38 AM No comments

If you know what you want out of a vehicle, making the decision to buy or lease can be simple. If you're unsure, you can look at your pattern of use for your previous vehicle to see whether leasing or buying is the right decision for you.

If you're the type of person who likes to drive a car until it can't be driven any more, buying will likely be the best decision for you. When you purchase a vehicle, after you finish paying off the note to the bank, it is yours. You can drive it for several years, customize it and sell it when you no longer want it. Buying a car means that you can put as many miles on it as you wish -- neither the bank nor the car dealership will care if the car has 100,000 miles on it after only a year.

When you purchase a car, the value of the car goes down the minute you drive it off the lot. If you were to sell the car, you'd take a loss. As the car gets older and has more miles put on it, its value depreciates even more. By the third or fourth year of ownership, the car may begin having some mechanical difficulties and showing wear. At this point, you may decide you want a new car. Meanwhile, however, you may have two or three more years of payments left on the car.

When you choose to lease cars instead of buying them, it can feel as though you always have a relatively new car. You won't have to deal with many mechanical problems, which can bring peace of mind. Perhaps the biggest advantage to leasing a car is that you'll be able to make lower monthly payments, as you'll be paying on the depreciation of the car rather than its full value. Often, the down payment is lower as well.

If you tend to put a lot of miles on your car when commuting or traveling, you'll find that leasing can become an expensive proposition. Most leases limit you to 15,000 miles each year; exceed this mileage and you'll be charged for the extra miles once the lease is up. When the lease is up, the car must be in good condition, or you'll be charged for additional depreciation. Your daughter's clay sculpture for school that melted in the backseat will cost you. Once you turn your vehicle in, you must be prepared to lease or buy another vehicle, as you won't have any ownership in the car.

Can You Get a Car Loan If You Are Retired?

11:13 PM No comments

A lender looks at a borrower's income when deciding whether to make a loan. Even if you are retired and no longer working, you can still qualify for a loan if your income is high enough. Generally, lenders look to see if you have a good credit history and the funds available to repay the loan. Lenders also measure your level of financial responsibility by the amount of any other debts you owe.

Standard practice for lenders is to ask to see copies of paycheck stubs and income tax returns as proof of income when a person applies for a loan. However, if you are retired, a lender will ask you to provide copies of pension or other retirement income statements as verification of income. You can also show evidence of assets to qualify for a car loan. Older individuals are more likely than younger borrowers to have significant savings, high equity in a home and income-producing investments. In fact, you may be able to negotiate a lower interest rate and choose your repayment terms if you have the assets to secure a car loan with collateral.

Your age can affect your credit score and work to your advantage. On average, older individuals tend to have higher credit scores. Retired individuals usually have a long credit history --- one factor that affects your credit score. According to myFICO, length of credit history accounts for 15 percent of your FICO score. Your credit score will be higher if you've had the same credit accounts for a number of years, especially if you have an excellent repayment record. Payment history accounts for the biggest percentage of your credit rating, therefore, lenders see you as a lower risk the longer you've maintained a credit account in good standing. If you decide to open a new line of credit to buy a car, a high credit score can help you get an auto loan at a much lower rate of interest.

A 2010 Associated Press-GfK poll found that retired people and individuals age 60 and older are among the population groups that report the least amount of stress related to debt. In most cases, those people with less debt have more money. One reason for retired individuals having less debt is that many people pay off their mortgage loans by the time they retire. How much debt you owe makes up about 30 percent of your credit score, so low debt can increase your chances for getting approved for a car loan.

Ordinarily, qualifying for a car loan with a term of five years should be no problem. Depending on your age, some lenders may offer you a shorter loan repayment than the longer loan term for which a younger borrower might qualify. Although this will increase your car payment, many retired borrowers have savings enough to pay a substantial down payment, bringing down the monthly payment. If you have excellent credit, you can take out a 24- or 36-month loan term at a low rate of interest. Qualifying for a lower interest rate can save you money and reduce the number of months you need to pay off the loan.

How to Compare Car Leasing Deals

4:45 PM No comments

At first glance, just about all leasing payments look attractive. Manufacturers advertise their monthly leasing at the lowest possible price. What you see advertised for leasing is, in fact, the cheapest a lease can be for the month's incentives, meaning that if you change the mileage or years, the payment will rise. At closer glance beyond the low monthly payment, you'll see that leasing differs a great deal from one car to the next. Learn how to decipher the differences when comparing a lease so that you can find your best deal.

Instructions

Go to each manufacturer's website to view lease deals. Unless the lease is advertised on the main webpage, look for an option to click called "shopping tools" or "view current specials."

Read through the details to determine the amount of money required down and the payment for each month. Multiply your monthly payment by the term of the lease (how many months the lease will run) and add your money down.

Repeat that mathematical computation for each manufacturer and compare. In addition, compare the term and mileage. If you need more mileage than the advertised amount, you can expect your payment to rise around $10 per month for an increase to 12,000 miles-per-year and an additional $10 more for 15,000 miles-per-year.

Read the leasing details to determine the level and the options for each model you are comparing. If you're looking for an all-wheel-drive vehicle, it is likely you will see advertisements first on a front-wheel-drive model, which is cheaper and helps to keep advertised prices low to interest shoppers.

Call or email a dealership for pricing if you need to change terms. For example, some manufacturers offer a 24 month lease with only a 10,500 mile-per-year allowance. To compare leasing prices fairly, you'll have to view the same requirements.