5 Tips for Getting Auto Financing with No Credit and a Low Income

You can get auto financing even if you do not have a long credit history or a high income. However, the amount of financing and the terms you receive are determined by your credit history. If your goal is to own a vehicle, then focus on this goal instead of the type of car you receive or your interest rate.

#1 Shop for a Loan First

Many people make the mistake of shopping for a car first, and then seeking a loan based on the type of car they would like. This can result in a person taking on too large of an auto loan and financial difficulties. You should always shop for a loan first if you have low income. Determine how much financing you will qualify for and how much you can afford in monthly payments. Once you know your price range, then you can purchase a car.

#2 Fulfill all Application Requirements

Your application is more important when your credit score and income are low than for someone with a more attractive financial profile. Since lenders will already be skeptical, you need to show them you are professional and can handle the burden of an auto loan. Fill out your application completely, and provide supplemental information where required.

#3 Provide Additional Collateral

If you are having difficulty securing a loan based on your financial situation alone, you may consider offering collateral in order to source the funds. Of course, your automobile will typically be one form of collateral used in your car loan. However, it is also possible to issue additional collateral in order to increase your loan limits, lower your interest rate or simply achieve a loan. You can use savings, stock and personal assets in order to gain financing.

#4 Look for Special Offers

Your car dealership may have offers that allow for low interest financing for certain groups of people. Those groups usually include students, recent graduates, teachers, military service people and other low income groups. If you have "no credit," you are usually a better candidate than someone with bad credit. This basically means you have not defaulted on a loan but simply have not taken many loans out in the past. Instead of actually being a high risk borrower, you are more along the lines of a middle risk borrower. Dealers will offer incentives to get you in your first car at a reasonable interest rate.

#5 Avoid a Cosigner

Your lenders may ask you to use a cosigner if you have no credit. You should avoid doing this, because it will rob you of the ability to build credit through the loan. While you may gain a small amount of individual credit through a cosigned loan, you will not gain nearly as much as you will if you assume the loan by yourself. It is one thing to go through the "no credit" loan process the first time around. Save yourself from having to do this again in the future by getting your first large installment loan on your own. Your future lenders will then base your loan on how you perform on this one.

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First Car Loan? How to Avoid Being Scammed

Getting your first car loan can be an exciting time in your life. The thrill of owning your first car is often an exhilarating experience. Knowing that something is all yours has a certain appeal. It is this excitement that often leads us into poor decisions when it comes to auto loans. In fact, you might be getting scammed and not even realize it. Here are a few ways to avoid being scammed on your first auto loan.

Extra Requirements

If you have no credit or questionable credit, shady car dealers love to pull this trick. They will go back and check your credit file. Then they will emerge and say that the bank is requiring that you get the extended warranty or some other type of add on. They make it sound like it makes them feel better about giving you the loan. In reality, they are just lying so that they can bump up the total sale a little bit and make more commission. Do not believe anyone that tells you this and tell them that you want what you agreed upon. Be prepared by equipping yourself with a copy of your credit report and do not let anyone persuade you that it is any different than what you have in front of you.

Not Paying Off Trade-In

While this is highly unethical, some shady car dealers still try it. When you go into the dealership to look at a car, they immediately want to know what you have to trade-in. Once you work out a deal for the car, they take the trade in and the responsibility to pay off the loan for you. However, sometimes they fail to pay off the loan for you. Then you have a car loan that no one is paying for and you no longer have your car. Then after a month or two, you get a phone call from your original lender and they want to know where their money is. This can really hurt your credit and get you in a legal battle with your new car dealership. Watch out for this common auto scam and protect yourself with legal documents securing the responsibility to the lender.

Co-signer Scam

Another common trick is getting a co-signer involved once you are rejected. If your credit is so bad that you are rejected for an auto loan, they suggest that you find someone to co-sign the loan for you. You call up your parents or someone else to co-sign with you and they come down to the dealership. However, when you get them down to the dealership, the dealer makes them the buyer of the car.

They might have you both sign some paperwork, but you later find out that your name is nowhere on the loan or the title. Your co-signer unwittingly agreed to purchase a car and they also took on all of the risk. You now have to make your payments every month in order to protect their credit. All of the risk was shifted from you to your friend without anyone knowing about it.

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5 Tips for Financing a New Car with Bad Credit

You can finance a new car with bad credit as long as you have no major installment debt defaults in your recent history. If you very recently experienced bankruptcy or a home foreclosure, you may need to lease a car for a few years as your credit recovers. If your credit is low due to previous missed payments, a short credit history or other flaws, a car loan may be just what you need to start getting your finances back on track. 

#1 Budget First, Apply Second

The first step to making this loan work for you is to set a goal early. Borrowers with bad credit need to be extremely watchful of a loan budget so they can make payments and repair their credit instead of going further into debt. Know your monthly payment goals instead of the overall price you are looking for. Monthly payments will have a bigger impact on your ability to pay than the price of the car will.

#2 Liquidate for a Down Payment

A large down payment can go a long way to making your loan application attractive. If you have savings, consider liquidating some to increase the size of a down payment. Otherwise, save for a few months prior to seeking the loan. Even a difference of $1,000 on a car loan can significantly change the cost of the loan and your ability to find new car financing.

#3 Prepare Income Verification

Even if your credit is poor, you will typically qualify for a car loan if your income is high enough. You will have to pay higher interest rates, but the income alone will be enough to get you a high enough limit to finance your car. As such, you should go into the application process with your income verification already prepared. By doing this, you will give the lender no reason to question you. Use a tax schedule or statement from your employer to provide verification.

#4 Seek Dealer Loans First

Dealers have an added incentive to source your loan: they will profit if you buy the car. As such, dealer loans are good options for high risk borrowers because they have traditionally lower interest rates to begin with. You may have to accept worse terms in the loan in order to get the funding you need at a decent rate. However, if you are willing to take high monthly payments and high fees, you will have a better chance with a dealer than you will with a bank.

#5 Look for Alternative Options

When other options fail, there are alternative lenders willing to fund high risk borrowers who have an income. You can locate these lenders through used car dealers, who have the most experience with them. Ask a used car dealer to give you a quote on any car you are considering trading in, and then ask about an independent financier the dealer would recommend. This will give you an insider's opinion on two things that will greatly impact the quality of your loan. 

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3 Reasons to Avoid Dealership Financing

Dealership financing is generally an option when you purchase a new vehicle. The financing may be provided through an auto manufacturer's financing arm, such as the Nissan Motor Acceptance Corporation or General Motors Acceptance Corporation, or through a private dealer's financial company. In either case, you will be purchasing your vehicle from the same person lending you the money for the purchase. This streamlined option is often the fastest way to get a loan and comes with low interest rates. However, there are many problems that arise with dealership financing as well.

#1 Bad Loan Terms

Dealership financing often has a shorter application process and looser loan standards than bank or traditional financiers. As a result, the dealer extends riskier loans to a wider variety of people. Not all of these borrowers repay the loans; dealerships tend to have a higher rate of default on their loans than banks do. To spread out the risk and compensate for these losses, dealers assign less favorable loan terms to borrowers. For example, there are very high prepayment fees for paying off a loan early. You may also find it more difficult to refinance or modify the loan in any way. Even adding a second person to your application or adding a second lien holder in the future can be precluded in your loan contract. Read over the terms very carefully to prevent unforeseen penalties in the future.

#2 Tied to Collateral

Most car loans use collateral as a means of securing the loan. Even if you finance through a bank, the bank will typically ask that you place the vehicle as collateral in case of default. While most lenders ask for this security, your car dealership holds a greater control over your collateral than another lender would. The dealer holds on to the car title until you pay off the loan. Dealers are notorious for simply showing up and seizing an asset without notifying you by mail or phone first. This is part of the loan terms you sign with a dealer, another reason to check the contract closely. You will generally find you have less ownership rights for your vehicle with a dealer loan than with a bank loan.

#3 Lack of Flexibility

For the reasons mentioned above, a dealer loan is generally less flexible than a bank loan. There are other reasons making these loans less flexible as well. For example, it is possible to take a personal loan from a bank to cover the cost of purchasing your vehicle. In addition to covering the purchase cost, you may seek an additional amount of funds in the same loan contract to provide for any expenses you may wish to cover through the single loan. Some individuals will use a personal loan to make both the down payment on the car and to finance the purchase of the vehicle. Others will use the extra funds to elect upgrades on the car. With a dealer, your loan is extended only in the amount that is listed on the sticker price for the vehicle.

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3 Tips for Getting a Great Deal on a Car

If you are looking for a good deal on a car you are definitely not alone. Shopping for a car is usually one of the biggest purchases that most people ever make. When you are potentially going to be spending several thousand dollars on something, you want to make sure that you get the best value that you can. Your car is something that you will use on a daily basis. You want it to work flawlessly during the time that you own it and you want it to perform. Therefore, you do not want to be taken advantage of during the sale and buy a car that is not of good quality. Here are a few tips that you can use for getting a great deal on a car that will not leave you stranded on the side of the road.

1. Negotiate

One thing that you need to keep in mind when you are searching for a car is that the price is always negotiable. The prices that the car dealers list on their cars should be merely a starting point for the negotiation. When you find a car that you would like to buy, you should never pay full price.

Some salespeople will try and tell you that a car price is not negotiable. If they tell you that after you have worked with them for a while, just get up and start to walk out. Most of the time, they will stop you in your tracks and let you know that they may be able to get you a better price. You have all of the leverage in these negotiations and you should never forget it. 

2. Shop at the End of the Month

When you go out into the market at the end of the month, you will usually be able to secure a much better deal than normal. While this might not make sense to some people, anyone that has worked in sales could confirm this fact for you. Operations that rely on sales departments to bring in the money have budgets that they work off of. When the sales department hits their budget, everything is better for them. Managers get bonuses and everyone makes more money.

When sales budgets are not hit, management starts to get in a bad mood. Therefore, if you are a customer at the end of the month when they have not hit their budget, they will most likely throw extra incentives at you to close the sale. Take advantage of their sales budgets if you can.

3. Ignore "Sales"

Sometimes, manufacturers have dealer incentives such as rebates. Other than that, most "sales" that you hear advertised are just a bunch of hype to get you in the door. Do not ever feel pressured to sign a deal just to get the "sale" price. If they can do the price for you today, they can still do it for you tomorrow in the vast majority of cases. 

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How to Renegotiate a Car Lease

Whether you renegotiate a car loan or renegotiate a car lease, the process is essentially the same. You are asking your finance company for changes to a contract. In most cases, you are asking for changes that will benefit you and not the finance company. As a result, you will need to provide accurate and reasonable information to substantiate your request. 

Hardship Renegotiation

Perhaps the easiest form of renegotiation is a hardship request. In this scenario, the leaser has come into a financial emergency that will prevent him or her from continuing payment. The finance company evaluates this situation to determine if it can adjust terms of a lease to keep the contract alive while still saving itself from loss. If you have been laid off, experienced injury or illness, gone through a divorce or otherwise altered your ability to make payments, you can use this as a way to renegotiate your car lease. The finance company may offer lower payments in exchange for a longer lease. The finance company may also offer you a trade-in for an older model car that is more affordable.

Market Adjustment

It is much harder to get a finance company to adjust a lease due to current market conditions. For example, if you leased a car right before the car market bottomed out, you may be paying for too much for your lease. Today, you could go lease the exact same model for much less. Unfortunately, the lender is thrilled with your contract when you are not. Getting the leasing agent to agree to a term adjustment will require proof that you can exit the lease, find a new car, accept any fees for doing so and still save money. In this case, the leasing agent could stand to lose your business, and the company may be willing to negotiate.

Extension of a Lease

When your lease expires, you may want to extend it another few years. In this case, you should look for a dramatic drop in the lease cost because you are actually leasing an older model with more miles on it. Compare the cost of the lease quote to extend the program to the cost of purchasing the car out right. Remember to compare the cost to that of leasing a new car altogether. Use these comparisons to negotiate for the right price on your lease extension.

Early Termination of a Lease

Getting out of a lease early is much harder than extending a lease. If you no longer desire to fulfill your lease arrangement, you will have to pay a fee to turn the car in early. This can be called a "voluntary" repossession of the vehicle. The leasing agent may report this as a repossession to your credit score. To avoid this negative consequence, ask if you can take steps such as delivering the car yourself and paying a penalty. The cost of the penalty may be much less than the ultimate cost of having a repossession on your credit report. 

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How to Take Over a Car Lease

If you are planning to lease a car, you consider whether its wise to take over a car lease first. Taking over a car lease is a relatively easy thing to do with little paper work and can lead to savings. For one, you do not have to make a down payment to the car leasing company. Next, you are not stuck with a long lease period. By taking over a car lease, you get to test drive a car for a couple of years before turning it in. This way you can try new cars all the time or more frequently than if you opt for a standard car lease.

Step 1- Check the Condition of the Car

Check if the car is in good condition. If you live far away from the car, get a third party inspector to conduct the inspection for you. Once you are satisfied that the car is in good shape, proceed to the next step.

Step 2 – Approval of Lease from a Leasing Company

The first step (after checking the condition of the car) is to obtain pre-approval of the lease from a leasing company. This process is just the same as obtaining a pre-approval for a home loan. You will be required to fill in salient details and if your credit rating is good, you will be able to get the pre-approval. Please note that it is important to have a good credit rating to obtain a lease on transfer as well.

Step 3 – Transfer Existing Car Lease

Next, you need to scout around for some one who wants to transfer an existing car lease. There are many companies and brokers that facilitate this process. View photos of cars and models you are interested in and zero in on the car that suits you the most.

Once you have a potential car for lease take over, check the remaining mileage the lease offers and see if this suits your driving habits.

Taking Over Car Lease

Get the seller of the lease to contact the car leasing company and inform them that they would like to transfer the lease to you.

The car leasing company or the dealer will then contact you and send both you and the seller copies of contracts that you have to sign.

Once that is done, the dealer will contact you again asking you to assume the lease. Once you do so, the seller will be informed of the fact and will hand over the car to you.

Before all this happens make sure you do your due diligence in detail. There is no point in ruing the deal after the transfer of the lease is through. It is before you contact the dealer that you need to verify the mileage left on the lease and the condition of the car you are planning to lease.

Unlike a normal lease that lasts for five years and requires a down payment, a lease transfer can be obtained for two years or sometimes even one year. There is no down payment either. So you save a lot of money. However, the leasing company has to agree to the transfer of the lease. This is where your credit rating comes into play. Once the leasing company agrees to let the lease be transferred, your deal is a s good as through.

Some leasing companies hold the original lease holder responsible for the payments due even after the lease has been transferred. Though this is good for the buyer of the lease, it is not such as good deal for the seller of the lease.

Some lease companies also do not let the transfer take place toward the end of the lease period or at the very beginning of the lease period. Do check these details before you ask for a transfer of the lease in your name.

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What Is the Best Way to Terminate a Car Lease Early?

Many people want to terminate a car lease earlier than they are allowed to by the contract. As long as there have been lease contracts, there have been people that want to get out of them. Therefore, it is a common problem that many people run across. Although many people come across this problem, there is really no easy solution. It is going to take some work on your part and some persistence in order to make it work. The best way to terminate a car lease early is to transfer it to someone else. If you can successfully do this, it will make the process a lot easier on you and minimize the money that you have to pay out of pocket. Here are the basics of how to transfer a car lease to someone else. 

Find a Buyer

The first thing that you need to do in order to transfer your lease is to find someone that wants to take it on. You can not transfer the lease unless you have a willing party to transfer it to. One of the first places that you should check is in your immediate circle of contacts. Many times, a friend or family member will be considering picking up a car in the near future. A short-term lease may be in their best interests depending on their financial situation. Dealing with someone close to you will make it a very simple process to go through.

If you do not have anyone in your immediate circle of contacts to transfer to, consider marketing your opportunity. You could put an ad in the classified section or on a number of websites that promote this kind of activity. There are most likely many people out there in the market that would love to get their hands on a short-term lease. Leases offer much lower than normal payments and when you can secure one for less than the normal lease term, they can be very attractive. Try marketing your lease transfer opportunity and you are bound to find someone that would be willing to deal. 

Contact the Leasing Company

Once you find a suitable transfer partner you need to contact the leasing company and alert them of your plan. You can not transfer your lease without their involvement. If you were to transfer it without their approval, you would still be on the hook if your new transfer partner stopped making the payment. 

You need to make sure that you are eligible to transfer your lease to someone else. Some companies prohibit this transaction from taking place. Once they give you permission to transfer your lease, you need to ask them what the next step is. They will most likely want you and your new lease partner to come in at the same time and handle the paperwork. You may have to pay a transfer fee depending on the company. Then the lease transfer will be complete. 

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Errors on Your Car Loan Application?

If you detect errors on your car loan application, you will have to correct those errors before the loan is funded. Some errors are relatively minor, and they can be corrected at any point without penalty. Others may affect the way the loan is sourced, and making this type of error can lead to problems with your application.

Information on a Car Loan Application

Your car loan application will have to types of information: personal information and financial information. Personal information includes anything relating to your age, residence or living situation. Basically, personal information does not have to do with money. Financial information, on the other hand, is directly related to your monetary situation. This will include your salary, loan request, credit score and financial history. Personal information is used for the lender to get an idea of who you are, how stable your life is, and how easy it will be to track you down if there is any problem. Financial information will affect the actual size and terms of your loan. As a general rule, making a mistake on any of your personal information is not as large of a problem as making a mistake on your financial information.

Steps in the Car Loan Process

The loan process entails several steps. Some lenders will move through these very quickly, but they will move through them nonetheless.

• The first step occurs when you shop around for general quotes on your loan.
• The next step occurs when you actually decide to submit an application.
• From this point, the loan process transfers to the lender. The lender processes your application by verifying the information is correct. Then, based on this information, the lender will decide whether to approve your loan and set terms.
• There will be a negotiation period before you sign the contract.
• At this point, the loan is considered funded, and the process will be complete once the funds are delivered to you.

Correcting an Error before Processing

Before the loan is processed, you can correct both personal and financial information fairly easily. If you made an error on personal information, consider submitting an addendum or simply notifying the lender in writing. Errors on financial information may require you to withdraw the application so they can be corrected appropriately. Ensure you only have to withdraw an application once; it can reflect poorly on you if there are multiple errors to be corrected.

Correcting an Error after Processing

If your loan has gone through the processing phase, meaning the lender has actually issued a contract in your direction, you will have a harder time correcting errors. However, as long as the loan is not yet singed and funded, there should not be a penalty for incorrect information. Again, incorrect financial information may require you to withdraw, resubmit, and reprocess the application. If you have signed the contract or received funds, you may be held liable for fraud if financial information was inaccurate. Since the lender made the loan based on this information, your error may be interpreted as intentional. Consult your attorney or accountant if you discover this problem before addressing the lender.

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What are Deferred Car Loans?

Deferred car loans are a type of auto loan that can make your monthly payments more affordable. Here are the basics of deferred car loans and how they work.

Deferred Payments

A deferred car loan is one that is going to allow you to defer a certain amount of money on your loan until the last payment. This is going to result in a larger balloon payment for you. For example, you could decide to defer five car payments until you reach the last payment of your loan. This is going to lower the amount of money that you have to pay on each payment up until the last one.

Considerations

Using this type of program can be a way to lower your monthly payments and save some money in your monthly budget. This provides a lot of people with a way to purchase a car that they would otherwise not be able to afford. If you are going to use this program, you will want to make sure that you are careful. Many people do not take the proper steps to plan ahead for the balloon payment. Then they are blindsided by a large payment that they cannot afford.

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How to Extend an Auto Lease

Extending an auto lease is an option most leasing agents make available. There are a number of end of lease option, in fact, which include buying the car outright or leasing a newer model. Extending the lease on your existing car makes sense if you can greatly lower the payments, have taken good care of the car and cannot afford to buy it out right. In this case, go through the following process with your leasing agent.

Get a Quote

The first thing you need to do is get a quote to extend the lease on your existing automobile. In reality, you will be taking a wholly new lease. The good news is the lease will be cheaper than it was before since the car has been used. The leasing agent may have a standard extension program. This is particularly true if you leased from a national auto company. Quotes will only change slightly in response to your credit score and other financial considerations. Unless you have very low credit, you will typically be offered a fairly standard leasing options.

Seek an Outside Quote

You can consider going to another dealer to get a quote on a similar lease. There is usually more than one leasing agent for a particular make and model in a given geographical area. You can locate a car with similar mileage to your own, and then you can ask for a quote from this other leasing agent. Even if you intend to take the first option, this gives you some bargaining power. While you are shopping around, be sure to ask for similar quotes to finance the purchase of a car.

Compare to New Car Lease

It is worth considering the cost of taking a lease on a newer model car rather than extending the lease on your existing car. This is particularly true if you know you did not take great care of the car you already leased. For example, if you allowed the oil changes or maintenance inspections to go past due, the car you were leasing may not be as reliable as a totally new model. Leasing a new car, however, will ultimately result in a higher cost. Compare this cost with the relative value of the new car versus the car you have. If you determine you would like to extend your lease instead of leasing a different vehicle or a new vehicle, then you need to return to the initial quote offered by the agent.

Negotiate Terms

Starting with this initial quote, negotiate for terms or costs that you find favorable. Consider the length of the lease in particular. Since you have already driven the car for a number of years, will it last another 5 or 7 years? You may want to opt for a shorter lease in the future, and this can be more expensive on a monthly basis than a longer lease. You should also remember you are not building equity with your lease payments. As such, it can be favorable to only lease until you can afford to purchase a car.

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4 Reasons to Get Auto Financing from a Credit Union

Many people get auto financing in all of the traditional ways. They use their auto dealer or a bank to get the financing they need. However, many people overlook a viable option that could actually be better for them. A credit union provides the same services that a bank does with a few advantages. Here are a few reasons that you should get auto financing from a credit union.

1. Cheaper Rates

The biggest thing that you are looking for when you get an auto loan is a cheaper rate. Saving money is at the forefront of your priority list. Therefore, if you can save money at a credit union, you should definitely consider it. Credit unions are set up as non-profit organizations. As such entities, they do not pay taxes of any kind to the government. This means that their operating expenses are much less than an equivalent bank. With this type of competitive advantage, they can offer you some serious discounts on your rate. They pass the savings on to their customers. With a cheaper rate, you could cut money off of your monthly payment and end up spending thousands of dollars less overall. 

2. Fewer Fees

When you finance with a credit union, you will run across fewer fees than you do at other places. Besides using their tax savings to give you cheaper interest rates, they also charge fewer fees as a result. If you have a late fee, it will most likely be less than it would somewhere else. They may have lower closing costs on the loan as well.

3. Different Atmosphere

The atmosphere around a credit union is decidedly different than that of a bank. When you borrow money from a bank, you are thought of as just another customer. The bank knows that they have to have a certain amount of you to make a certain amount of profit. With a credit union, they treat you a little differently. Their customers are actually considered owners in the bank. If you have an account with a credit union, you actually get to share in any profits that are made. They consider themselves a valuable part of the community and look at you as a neighbor. With this type of arrangement, things are a little more relaxed and friendly. It is much easier to do business with a credit union overall.

4. Modern Conveniences

When you do business with most credit unions, you will receive all of the modern conveniences that you are used to. You can typically look at your account online, pay your bill, and do a number of other things from your computer. Credit unions typically have several locations in your local area that you can do business with as well. If you want to drop your payment by a branch, you should have no trouble finding one to work with. This gives you the same convenience that a bank offers with a little better service. 

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s It Cheaper to Buy or Lease a New Car?

There are two factors to consider when you lease a new car: the monthly payment and the long term costs. If you consider only the monthly payment, a lease is typically a less expensive option for your new car. If you are concerned with how much the car will cost you over time, like the net financial value, then purchasing a car is the less expensive option.

Monthly Payments

The monthly payments on a car lease tend to be lower than payments toward a car loan. You are not paying for the whole cost of the car; instead, you are only paying to borrow it for a certain number of months. The lower monthly cost on a lease versus a loan is particularly true for those with less than perfect credit. Bad credit will make leasing a car more expensive, but it will not affect your monthly payment on a lease as much as a loan. In fact, if your income is high enough, you may be able to lease even a very pricey car you could not afford to buy. With a loan, on the other hand, the lender has more at risk. As a result, the loan interest rate will be more affected by your credit score.

Vehicle Maintenance

Leases typically cover a certain degree of wear and tear maintenance. Of course, if you wreck your car or otherwise cause damage, you will still be responsible for the repairs. However, routine oil changes and other necessities may be covered in your lease contract. Some luxury leases also include car wash and detail services. These would cost you quite a bit of money if you owned the car, and the lack of maintenance required on a leased auto significantly drives down the cost of leasing.

Down Payment

The most prominent factor making a loan more expensive to obtain is the down payment required to secure a car loan. The down payment can be as low as 3% of the car's total value. Some dealers may even offer no down payment loans, but these will have much higher interest rates and monthly payments. If you do not have the cash to put up a down payment, then a lease may be a better option for you while you save money in order to own your own vehicle.

Assets Gained

Even though it is true leases cost less day-to-day, taking out a loan to buy a car makes more sense in the long term to build a more stable financial profile. You are building equity in the vehicle with each payment instead of simply giving the money to a lender. Of course, a car's value unfortunately depreciates over time instead of appreciating. This means you will only get to keep a portion of the equity you pour into the car loan once it is paid off. A portion, though, is still bigger than nothing, which is what you will end up with at the end of your auto lease. For this reason alone, leasing is more expensive in terms of net value.

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How to Negotiate Lower Monthly Car Payments

Paying monthly car payments gives you the ability to get the car you need, without having to pay cash for the entire amount upfront. Having the option to finance a car and make payments opens up many opportunities for you. You can get a plethora of different cars at a budget that you can afford. However, if the payment that you agree to is too large, then you will end up in financial trouble. Most auto loans last for at least five years. Therefore, it is essential that you do everything that you can to get your car payment as low as possible. There are a few ways that you can help negotiate a lower car payment for yourself. Here are a few things to keep in mind when negotiating your car payment.

Focus on Total Price First

While the payment is what you will eventually have to work with, it is not the first thing that you should focus on. Most car sales people are trained to get you to focus on the payment. There is a lot of financial magic that they can work in order to manipulate the payment. However, if the total price of the car is too high, it will not help you as much as it could.

Focus on the total price of the car that you are buying first. Get them to come down on the price of the car before you ever start talking about the monthly payment. Every car dealer has an amount that they can come down on for each car. Therefore, you need to get them to give you their best price before you agree to go any further with the deal. If they do not come down on the price enough for you, get up and walk out. Another dealer will want your business enough to do it for you.

Be Firm

Once you agree on a price, let them come out with an offer on the payment for you first. Once they do, let them know that the offer is too much. Tell them that you will only be able to do this if the payment is a certain amount of money below their offer. Even if you could afford the payment they gave you, it does not hurt to ask. 

Wait for Incentives

Many times, car dealers have a lot of things that they can throw in to help close the deal. They have manufacturer rebates, dealer cash, gift cards, and a lot of other things that they can do for you. If you immediately agree to the sale, they will not throw any of these things in. Waiting for incentives can play a role in how large your monthly payment is. Therefore, you need to wait until the end to agree to the deal and get your payment as low as possible. 

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How to Get a Good Deal on a Used Car Loan with a Small Down Payment

Small down payment loans typically have higher interest rates. This happens because the loan limits must be higher, forcing a longer loan. The longer a car loan lasts, the higher the interest rates climb. Sticking with a short loan of under 5 years is always preferable for any car loan, but it is particularly advantageous in a used car loan.

Opting for a Short Loan

There are two main reasons to opt for a shorter loan. The first is to reduce the interest rate as previously discussed. The second is to protect against a large financial loss that comes as a car's value depreciates. Automobiles are a unique asset because their value drops so swiftly. Financing an auto means you will ultimately pay far more for the asset than it is worth once you fully own it. This is particularly true with a used car. The value of cars depreciate at a rapidly increasing rate each year. Basically, this means there less of a difference between a 1 and 2 year old car than there is between a 2 and 3 year old car. If you are buying a 5-year-old car with 70,000 miles, you will find it is worth far less than you purchased it for another 5 years down the line. Sticking to a short loan minimizes the total cost of financing and the total net loss on the car.

Higher Monthly Payments

The main disadvantage to a short automobile loan is the high monthly payments. This is particularly true if you have a low down payment because your loan principal will be very high. Paying off a high principal in just a few years can mean payments over $300-$500 a month depending on the expense of the car. In order to make this situation work in your favor, you should budget for the higher cost each month prior to selecting the exact car you will purchase. Start by cutting your monthly salary in half. Next, subtract all fixed payments you currently have including mortgage, rent and other debts. The remaining sum is what you can reasonably afford on your auto loan each month. Any higher, and you will be running the risk of default.

Less Favorable Loan Terms

If you are willing to lock in your loan terms at the beginning, the lender will give you a much better deal. This means agreeing to high fees if you prepay or otherwise alter the loan contract. Since the loan is going to be short-term, you are risking much less locking in terms than you would be if you were opting for a long-term loan. The lender may additionally ask for a recourse loan, which is problematic with a used car. This essentially means, if the car is repossessed and comes in under the value remaining on the loan, you will be responsible for the difference. Since used cars do depreciate in value, you will be assuming far more risk with a recourse loan. However, it may be worth the risk to secure a low interest rate despite a small down payment.

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What Happens to Your Car Loan if the Lending Bank Fails

If you received your car loan from a bank, you have a legitimate reason to wonder what would occur if that bank fails. Many borrowers wonder if they would have to repay the debt immediately, get to walk away without repaying or even lose the car all together. None of these scenarios is the case. In fact, if the bank that lent you the money fails, you will not likely notice the difference on your end.

Loans are Assets

The first point to understand is your loan is an asset to the bank. Even thought the money is currently in your hands, the fact you owe the funds in return means the loan counts in the positive asset column of the bank's financial statements. The only exception is a loan in default, which then becomes a loss. If your loan is still in good standing, it will be handled during the process of liquidating all the bank’s assets.

When the FDIC steps in to sell off the bank's assets in the liquidation proceedings, you loan will be one of the assets up for sale. Another bank may purchase the entirety of the financial holdings from your bank. Or, a private investor may purchase specific loans only. In either case, your loan will pass to a new owner. 

New Owners Contacts You

The new owner will have the opportunity to review your loan and its terms before purchasing the contract. The lender will not be permitted to change the contract upon purchasing the loan. This means the purchaser simply takes your previous lender's spot on the existing loan contract. You will be contacted by this new lender to be informed of the change. The lender will give you instructions for how to continue making your loan payments in the future.

Grace Period on Payments

Since there may be a delay in the time it takes for a new lender to buy your mortgage, you will have a grace period where you are not responsible for making any car loan payments. Typically, this period is 60 days. After that point, you will begin making payments again at the given installment amount. You will not be excused for the payments that came due during the grace period. Instead, you will have to make them at the same time you make your current payments. As such, you should be setting the money aside to make the payments immediately upon hearing from your new lender.

New Payments Begin

Once you know when and where to make the payments, you simply resume paying your loan to the new lending institution just as you used to pay your loan to the old lender. You may receive the opportunity to modify your loan with the new lender if the lender does not think the loan contract is a good deal. The lender may allow you to prepay your entire loan with no penalty, for example. Be wary of any offer to modify the loan to make sure any renegotiation is not entirely in the lender's favor. 

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What is the Payoff Amount?

he payoff amount of a loan refers to the amount of money, including any prepayment penalty, that it will take to pay a loan off in full. When you pay off a loan early, you need to request the payoff amount from the lender, because the payoff amount may change on a daily basis, depending on how the interest is compounded. For instance, a student loan may give you a 10-day payoff amount, which gives you 10 days to pay the amount before it continues to gain interest. Generally speaking, though, when a home is sold, during closing, the buyer's lender will call the seller's lender and ask for the payoff amount so the money can be sent and the lien can be removed from the title. When the lien is removed from the title, it can be transferred to the new owner, and the new owner's lender can place a lien for their amount until it is either paid off or sold.

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5 Tips to Get a New Car Loan after a Reposession

A car loan repossession is one of the most negative reports that can appear on your credit score. The repossession is recorded and a default is also recorded. In order to get to the point of default, several late notices must also have been recorded as well. The result is a very low credit score and a hard time getting a new loan. Try these tips to help secure vehicle financing in the future:

#1 Avoid or Volunteer Repossession

The first step to recover from repossession is to completely avoid it. Refinancing your auto loan before it goes into default may be the best option. If you cannot continue to make payments even after this option, consider voluntarily submitting your vehicle. Although this is still technically repossession, default will not occur and your credit score will be partially saved.

#2 File an Explanation of Hardship

You can explain a default to creditors before you even speak with them by filing an explanation with the credit bureaus. This only works if you have a good reason for your default, such as an illness or joblessness. You will also have to show this circumstance is no longer a factor in order to convince lenders you are once again creditworthy.

#3 Take a High Risk Loan

The fastest way to rebuild credit right after repossession is to take a high risk loan and pay the loan off quickly. Some borrowers may consider a high risk personal loan even if they do not specifically need the funds. The funds can simply be saved in an account to be repaid in full. Interest will be charged, but the interest may be worth the advantages of paying off the loan and getting the credit boost. 

#4 Save for a Down Payment

A down payment goes a long way to getting an affordable auto loan. The down payment will reduce the overall limits of the loan you are seeking, immediately making it lower risk and more affordable to you. Providing a large down payment also goes a long way to assure lenders you are financially capable of paying for the automobile. You should try to supply at least 20% down if you have a low credit score. Where possible, aim for a higher down payment by reducing the cost of the cars you are looking for. Opting for a less expensive car can ultimately give you the best options.

#5 Budget Well

The biggest consideration of whether you will recover from a repossession is how you handle the next loan you achieve. Having two repossessions or default on record can permanently damage your ability to achieve a good loan in the future for any purpose. You should budget for high monthly payments that will likely come with your high risk loan. This can mean saving money for several months in order to allocate more funds toward your car payments. You will also find budgeting after you have received the loan will help you continually make payments toward the principal, reducing the size of your loan and getting you back on track for good credit. 

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What Happens to Your Car Loan when the Lender Changes Ownership?

Your car loan terms should not change when your car lender changes ownership. In fact, you may not even notice the difference on your end. The debt simply transfers into new ownership, and the new owner then receives your payment. All you need to do is wait for instructions on repaying the loan under its new ownership. This can be a little confusing, but there should not ultimately be any issues.

Loans are Assets

It may be hard to think of things in these terms, but your loan is actually an asset to the lender. It is a source of income that will continue to be received for the life of the loan. As such, your lender can sell this asset for immediate liquidity. This usually happens when a lender itself is experiencing problems with debt. This can also occur if your lending bank fails, meaning it needs to sell its assets before closing its doors. In both cases, a new lender can purchase the asset and begin profiting.

Assets are Sold

There are a number of different lenders who may consider purchasing a loan. These include traditional banks, which is typically the case when a bank fails, or independent investors looking for a new revenue stream. In any case, the lender makes a bid on the loan. This sum is typically more than the initial lender paid you, but it is less than the lender would make if it kept the loan in its portfolio. When a bank sales, it may even sell a loan for a loss. The new lender just got a great deal. The lender can begin collecting your monthly payments each month and soon collect more than it spent in purchasing the loan.

Loans enter Grace Period

While the two lenders work out this deal, you may be stuck without an official lender of record. This only truly occurs when your lending bank fails. In that case, a sale can take longer. The FDIC will step in to handle the sale of all loans, and you may go a few months without an official lender. During this period of time, you do not have to make loan payments; this is called a grace period. You should be aware the payments will be due at the end of the grace period. You should save the funds you would typically send in to pay the loan.

New Lender Takes Over

Once the new lender takes over the loan, the lender has a short period of time in which to notify you of the procedure to continue with loan payment. At this point, you will send in the payments that have come due during the grace period. The loan terms will be constant since the new lender purchased the loan as is. The lender may offer you the chance to renegotiate the terms of the loan at this time. You do not have to renegotiate; if you do, be aware the lender may try to get you to agree to more expensive terms. 

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3 Tips to Payoff an Auto Loan Quickly

If you want to payoff auto loan debt quickly, you are not alone. Many people list "paying off their car" as one of their top priorities. The flexibility that comes with not having a car payment is desirable because you can do so many things with the money that you devote to a car every month. However, paying off your car requires dedication and many are not dedicated enough to put a plan into action that will help them pay off their auto loan quickly. If you would like to pay off your loan quicker than you originally planned, here are a few tips to keep in mind. 

Add to Monthly Payment

One strategy that you could use to pay off your auto loan early is to pay a little more than required each month. Putting an extra $50 or $100 will help make a big dent to the principal balance of the loan. This will not require a huge change in your monthly spending habits as it is only a few extra dollars per month. However, it can considerably cut down on the amount of time that it takes to pay off the loan. Making a small commitment every month can make a big difference in your results. 

Make an Extra Payment

Every now and then, make an extra payment when you have the money. For example, when you get your income tax refund, just write another check for the same amount as your monthly payment and send it in. You will be surprised how fast this makes a difference. If you do it twice a year, you will have your car paid off in much less time than it normally takes. This might be much harder for you to do because it requires a bigger financial commitment from you. However, it will make a huge difference in the amount of time that it takes to pay off the loan. 

Bi-Weekly Payment                                                                              

Another strategy that you could use to pay off the loan early is to use a bi-weekly payment system. This amounts to making half of your normal monthly payment every two weeks. At first glance, it might not seem like this strategy will make a difference. However, with this strategy, it is the equivalent of making an extra payment every year. It is a lot easier to budget for this type of a plan as compared to making a single lump sum payment.

Therefore, many will find this strategy easier to implement. Your auto loan company might offer this program for you or you could set it up with your bank. If you do implement this strategy, you will want to time everything right so you are not late on your monthly payments. For example, if the payment is due on the 15th, you will want the second part of the payment to be made on the 15th. This will help you avoid late fees and any other potential problems. 

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How to Avoid Auto Loan Delinquency

Allowing an auto loan to go delinquent places you at risk of compromised credit and repossession of your vehicle. It is much easier to stay current on your debt than to recover once your loan has gone delinquent. Staying current means budgeting well, and it also means knowing when there is a risk you may not be able to pay. Anytime you face this risk, it is important to be proactive to avoid negative consequences.

Budgeting Effectively

The first step to avoiding delinquency on an auto loan is budgeting for the loan. This starts before you even go car shopping. You will need to know how much you can afford to pay toward a loan each month. To find this number, keep in mind that your total debts should never exceed one half of your monthly income. So, you can add together your other debts, such as student debts, mortgage, rent or credit card bills, and determine how much wiggle room you have for a new debt. When you shop for a car, look for one that allows you to stay comfortably within this range. Picking a car first and budgeting second can lead to loan disaster.

Setting up Automatic Payments

Most banks and auto lenders offer simple solutions to pay your car loan automatically each month. Your bank may have a bill pay system. If it does, you will need to know the account number for your car loan. Then, you can use the online banking system's bill pay function to transfer funds directly to your car loan account on a certain day each month. You can alternatively put a credit card or bank account number on file with the lender. Once a month, the lender will deduct your payment automatically. Make sure you have overdraft protection so your account is not overdrawn by your car payment.

Asking for Grace Periods

If you anticipate a time period when you will not be able to pay, you should contact your lender immediately to ask for a grace period. Lenders will usually be willing to work with you if you are in a financial crisis, such as a job loss or emergency illness. In any case, you will submit a letter describing your financial hardship and asking for a grace period. If the lender approves this period, make sure you are ready to continue payments upon conclusion of the grace period. Missing a subsequent payment may be grounds for default on the loan.

Refinancing an Auto Loan

Your financial crisis may be extended beyond your grace period, and this can be a reason to refinance your loan. If your ability to pay the loan is permanently affected, your lender may even refinance with you directly. This can save you the hassle of seeking a new loan from a third party. Deciding to go to a third party can temporarily drop your credit score and result in penalties to the initial lender. However, if this is the only way to avoid delinquency on the loan in the future, it is a better option than continuing with a loan you cannot afford.

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