Transportation is a necessity, and obtaining a car can be an intimidating for buyers. The car loan process can seem confusing and many consumers have a hard time comparing financing offers in order to get the best rates. There are several types of car loans to choose from, and being able to make an informed decision is key to getting the best deal.
The car loan process is often not started until a buyer has chosen a vehicle and is ready to buy. To the contrary, the process should begin before ever setting foot on the car lot, getting a pre-approval and shopping around for the best deals. Going to rate comparison websites and calling around to local banks should narrow down car loan choices. However, if buying a new car, never overlook the dealership altogether in financing. They will often provide incentive purchase rates, sometimes as low as 0% for sixty months, which is better than any bank will do. If you choose to get a car loan through the dealership’s financing institution, be careful of any additional fees that they want to tack on, often in the form of extra warranties or buyer protection.
The car loan process begins with a buyer and optional co-buyer providing background information, including yearly income, social security number, and proof of identification. The social security number will be used to obtain a copy of your credit report and credit score. The credit score is the number that is used to decide on the interest rate that the buyer will pay on his or her loan. The higher the credit score, the better the interest rate will be.
Be prepared to offer a down payment. The higher the down payment is, the more likely the buyer is to be approved for a loan. Also, because car values depreciate up to seventy percent over the life of a loan, these down payments can keep the owner from becoming up-side down in the car loan. Being up-side down in a loan means that the value of the car is less than the balance on the loan, a position no buyer wants to be in.
Be careful with car loans that charge an early payoff fee. There are many financing banks and companies that will not charge an early payoff fee, and still offer competitive rates to their customers. Also, read all of the fine print in the contract. Penalties and charges can be incurred on late payments and loan defaults. These penalties can really add up, so shop around to see whose are the lowest.
Posted in Car Loans.
Tagged with car loan tips, Car Loans, car loans for people with bad credit, getting a car loan, how to get a car loan.
By Dave
– August 25, 2009
Credit is the foundation of many major economic decisions, with a good or bad credit score controlling approval rates and interest paid on loans and credit cards. Bad credit means a higher interest rate and difficult approvals for personal loans, mortgages, and even car loans. Though obtaining reliable transportation is essential to keeping a job and maintaining a family and responsibilities, car loans for people with bad credit can be hard to come by.
To find out if you have bad credit, check your credit report for delinquencies and high usage to limit ratios on revolving balances. This in combination with a poor or short credit history can lower a FICO score. Your FICO score is based on information from your credit history, and is used by lenders to see how risky it is likely to be to offer you a loan. You can see if you have bad credit by checking your own score – everyone is entitled to one free credit report per year by law, which can keep consumers from being surprised when shopping around and applying for a car loan.
If the credit is indeed poor, one should first consider a peer to peer lending program to finance a car. Taking a loan from a friend or family member can be hard, but the interest rate charged is often much lower that what could be obtained through a bank or finance company if you have bad credit through no fault of your own, getting a car loan from someone other financial institution might be your best bet. If a family member or friend is not on hand to help out, check into an online peer to peer lending website. Most of these sites have strict requirements, and often expect a certain credit rating, but it is worth trying. The benefit is that even with used cars, the terms of the contract can be chosen by the borrower, not the lender, allowing for a lower payment and greater financial flexibility. Also, there is usually no appraisal required and very few questions asked about the purpose of the loan.
In the case that a loan will be needed from a bank, find out what the credit requirements are at each bank before applying. Each application turned down will show up as an inquiry on the credit report, and in turn can hurt your chances of getting an approval elsewhere and hurt the FICO score. Be selective of where to apply, being sure to pay attention to the correlating interest rates, early payoff fees, and terms of the contract. The car loan application process will consist of supplying a driver’s license, social security number, and other information about income and liabilities. If the final interest rate and monthly payment is unusually high, be prepared to offer a down payment on the vehicle in an effort to lower the loan balance and the amount of interest that will have to be paid.
Posted in Car Loans.
Tagged with bad credit car loans, Car Loans, car loans for people with bad credit, loans with bad credit.
By Dave
– August 25, 2009
If you have bad credit, getting a car loan can be difficult – as we have already discussed. For many consumers, finding themselves in this position can make other financial strategies like saving or even investing your money a bit of a pipe dream. However without taking some kind of action, no matter how small, it is unlikely that anyone will be able to change their circumstances. Investments will not affect your credit score at all but if you are able to derive a small portion of your income from your investments, you might be able to put this to work paying down credit cards or loans and get ahead this way. But at the end of the day, you need to look realistically at how to get the best return for your money. If you have a car loan at 12% interest and you think you can only make 9% back from shares, it would be foolish to divert money away from your loan repayments.
If, however, you have an investment opportunity that allows you to reliably make back more than you would lose in interest paid on your loan, it might be worth reducing your loan repayments to the minimum. If this all sounds too complicated, don’t panic! There are some good software programs around that can help you to plan all of this out. For example, check out this review of checklist investor. This software lets you comprehensively plan and track your investments to give you a clear picture of where to put your money.
Whatever you do, try to minimize your every day living expenses by cutting down on unnecessary items like takeaway, expensive cable, etc. All the little things add up to a fair chunk of money that you can put back to work paying debts to improve your credit rating, or investing so that you will be able to get ahead in future!
Posted in Investment.
Tagged with bad credit, budgeting, interest rate, investing.
By Dave
– August 15, 2009
