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Terms Used With Car Finance and Bad Credit Car Loans

The terms used with car finance and bad credit car loans can be confusing, so here are some of these and an explanation of what they mean. After reading this, terms such as balloons, auto equity and debt to income ratio will never confuse you again. Learn their language so you can speak to them on equal terms.

APR

The Annual Percentage Rate, or the true interest rate charged for a loan over a year – whether regular car finance or a bad credit loan.

Auto Equity Loan

When you purchase a car you normally get the papers or title to the vehicle. However, with many bad credit car loans, the lender gets the title in return for the cash to enable you to pay for it. You get the title once you have repaid the loan. This way, if you default on your payments, the lender keeps the car and can sell it to use the equity on the car to repay the loan. If there is any cash left after the sale, then you might be given this.

Balloon Payment

If you believe that you will have more money available close to the end of the loan period, you can arrange a balloon payment. Your monthly repayments will be less, and you make the final lump sum payment when it is due. Balloon payments are useful when you have an insurance maturing at the end of the period, or expect to have been able to save up a lump sum to make the final payment.

Debt to Income Ratio (DTI)

This is the ratio of a borrower’s total debt as a percentage of their total income. Some lenders set a maximum DTI above which you cannot borrow any more money – 36% is an average figure. Include all other debts you have, not just your car loan.

Depreciation

The depreciation is the amount by which your vehicle loses value with age, wear and tear. The same term applies to the value of money, and while the value of your car depreciates, the value of your dollar can also depreciate. Fundamentally, the resale value of your car will depreciate every calendar year, most depreciation taking place between being completely new and having been used.

Equal Credit Opportunity Act (ECOA)

This is a federal act by which all creditors must make credit equally available to all buyers irrespective of race, color, religion, national origin, gender or age. However, lenders are not obliged to offer credit if they believe it may not be repaid, so not everybody is entitled to bad credit car loans – or even to car finance of any kind if the lender has valid reasons not to offer it.

Equity

Equity is the difference between the resale value of a property (e.g. your car) and what you still owe on it. So if your car has a resale value of $5,000 and you still owe $3,000 to the lender, your equity is $2,000. This is known as positive equity. Negative equity is as this example but you still owe $5,001!

Gross Monthly Income

Your total monthly income before any deductions. Deductions include tax, child support, insurance, etc. Net monthly income is your income left after such deductions.

Lease

An alternative to buying a vehicle. If you lease a car, you fundamentally rent it, while the owner retains title to it. A lease is generally taken over a much longer period than a rental – many leases run for years.

Loan-To-Value Ratio

Also known as LTV, this ratio is the percentage of difference between a loan amount and a vehicles value. If your car finance is for $5,000 and the value of the car is $10,000, then the LTV is 50%. The loan is 50% of the value of the vehicle.

Monroney Sticker

This is a price sticker required on all new vehicles by federal law. The sticker lists all the options connected with the car together with the manufacturer’s suggested retail price (MRSP.) The MRSP can change if options are different between models or offers.

Payment to Income Ratio

The PTI is a figure stated by a lender that defines the maximum car loan the lender is prepared to offer based on the applicant’s income. This helps to avoid borrowers overextending themselves and being unable to make the monthly repayments. Current averages range from 10% to 15%.

Pink Slip

The Pink Slip is the title for the vehicle, and should be provided to each buyer of that vehicle down the line – just like the title deed for real estate property.

Term

This is the period of the loan from beginning to end, from the time the loan has been granted until it is due to be paid off in full.

Title Loan

Like the Auto Equity Loan, the car is the security for the loan, and the lender keeps the title for the vehicle until the loan has been repaid. This is a common arrangement for bad credit car loans.

Truth-in-Lending

This is a federal law that requires every lender to state the correct annual percentage rate (APR) to borrowers when purchasing a vehicle, whether this is a regular or bad credit car loan.

There are others, although these are the more important of the common terms you will come across when seeking car finance – whether regular car finance or bad credit car loans.

How Blank Check Auto Loans Can Make Your Car Loan Process Easy?

Buying a car is a dream of all. It is the next best expensive purchase after a house. It needs a lot of money and not many people have huge amount of cash with them. So, the easiest way to get a car is a car loan. Lenders easily offer affordable car loan options for buying a car. Blank check auto loan is one of such loan and it has definite advantage over others.

A blank check auto loan is easy to understand. When you apply for a car loan with a lender, he will study your car loan application. If he perceives you to be a less risky borrower, then he will offer you blank check auto financing. It means he will give you a blank check with a specific spending limit. When you find the car of your choice, you can fill the amount and buy it.

Benefits of a Blank Check Auto Loan

Keeps You In Budget
The blank check auto financing is approved by the bank or the financial institution before you visit the dealer. The major benefit is that you know the accurate amount of money that you can spend. This helps in choosing an affordable car. Also, the lender provides you exact rate of interest and the term of loan for paying it off. Therefore, it will help you to make a proper budget.

Helps You Avoid Unaffordable Auto Loan Options
This kind of auto loan helps you avoid situations in which you are forced to get an unaffordable loan. When you have a blank check in your hand, car sales persons will stay away from offering you high interest car loan deals. Also, there will be no question of rejection of auto loan application after the things have been finalized with the dealer.

Negotiation Power
It gives you the power to negotiate. You will be in a position to choose the car of your choice without the worry of financing. It will also give you the power to negotiate money and other car loan terms and conditions with the dealer.

What Car Details Are Required By The Lender?

The lender is giving you a blank check auto loan. But, that doesn’t mean he won’t ask for car details. A car is used as collateral and he may repossess it if you miss out on payments. So, it is important that he knows all about it. He will ask all car related information like the car make and model, its VIN or Vehicle Identification Number, year of its manufacture, odometer reading, car title, etc. So, whenever you set out to buy a car, don’t forget to know everything about it.

How to Get Instant Approval for a Blank Check Auto Loan?

Credit Scores
Credit history is an important factor when it comes to blank check car loan approval. If you want a loan at a lower rate of interest, you must have a good credit score. Delayed payments on your credit report won’t be good for you. So, it is better to improve your credit score before applying for blank check auto loans. Make on-time payments for at least six months before filing a car loan application. This will help you improve the score.

Search and Negotiation
When you choose a such loan program, it is important that you look for different lenders who can provide various car loan quotes. It helps in comparing and choosing the correct program and also to stay within the budget. Don’t forget to negotiate with the lenders so that you get the best deal.

So, that’s how you can get a blank check auto loan for your next car purchase. If you can secure such a loan, it will provide you great ease in completing the entire car loan process.

So, don’t wait anymore! It’s time to make your car loan stress free!

Great Tips to Choose a Car Loan

Every car is much more than a four-wheeled automobile. It’s owner’s glory, passion and a source of great admiration. Yes, a car is not just a means of transportation. It’s America’s pride and its ultimate ecstasy.

When one sets out to buy a car, several things are to be considered. Most people have an idea of what car to buy. But, there is confusion and dilemma when the topic of car loans comes up. This article will give you a detailed understanding of the many auto financing options available with you.

>> Money Before Everything Else <<

It is so true. You cannot venture out for buying a car when you have no idea about your finances. If you think car loans are going to do everything for you, think again. You will have to manage down payment and also ensure regular payments. Car loans are just to provide ease in buying.

Finding that perfect car loan requires you to carefully put together all your income and expenses and then preparing your budget. You will have to consider your savings and choose something that will not give you financial trouble.

>> A Plenitude Of Options <<

Everything depends on getting the information that suits your situation. So, don’t settle for the first financing option you get. Don’t just stroll into your local dealer’s office or your neighborhood bank. You must first do a complete research and analyze your condition and needs.

To help you make a good choice, here’s all the information about car loan types. Check out all the advantages and disadvantages of every option. It will help you make a wise decision.

>> Dealership Financing <<

A car loan with a car from the same yard- seems too alluring to ignore!

Most Americans choose dealership financing because it offers a one-stop solution. Dealers offer loans for new as well as used cars. You must know that most dealers are link between you and the lender. Such dealers won’t themselves lend you money, instead will sell you loan application to lenders.

This option is convenient but make sure that dealer is not charging a high interest rate. For that, you must research and be wary of any red flags. Also, don’t opt for any add-on if you don’t feel their need. It will help you reduce the cost.

>> Personal Loans <<

Banks and financial institutions offer loans for almost any purpose like buying a personal item or even a holiday trip. You can avail personal loans for buying your dream car. Now, this type of financing is useful when you need a loan for a smaller amount like $15,000.

>> Car Leasing <<

This is another option for you. When you lease a car, you only pay for the cost of using it. The biggest advantage with leasing is that your monthly payments will be significantly lower than the usual car loan payments.

You don’t have to worry about down payment and the lease agreement will get over in two-three years. You always have the option of buying the car at the end of lease agreement.

When you go for lease financing, don’t forget to negotiate the car price. Most buyers think that one must pay the full sticker price which is wrong.

>> Equity Loans <<

If you are one of those few lucky people who have sizable assets like a house, you can go for equity loans. You can avail a home equity loan by using your home as collateral.

Although the rates are lower and the interest is tax-deductible, there is the risk of losing your home.

>> Credit Cards <<

Though it may sound unusual, but there are many who opt for this method. A credit card can help you buy a car for a smaller amount like $10,000. You must have a low-interest credit card. With large competition, getting a low-cost card won’t be a trouble for you.

The only thing is that you will have to restrict other purchases on your card. Also, most credit card companies charge a 3% processing fees. If you are sure of paying this charge to the dealer, go for it.

>> Car Loans <<

This is as popular as dealership financing, if not more. In this type of loan, your car is used as collateral against monthly payments.

It is very good option if you make regular payments. The only thing that you need to keep in mind is that you won’t be able to finance a car older than six/seven years.

>> Online Car Loans <<

This type is just the blend of car loans and the internet. With technological advancements, you can get everything on the net and car loans are no different. Online lending companies have a large network of lenders and dealers who bid for your application. All you need to do is fill a simple online application form.

As there is a wide network, getting a loan is relatively easy. Also, the convenience of availing a loan without moving out of the house is very tempting.

You should only be concerned about the company’s reliability. You can check the website’s safety by going through their security certificate. Don’t go for a company that charges for loan quotes because there are many reputable sites that offer free quotes.

How To Choose That Perfect Car Loan?

Just go over with a fine-tooth comb.

Once you decide on the type of car loan and apply, it’s time to scrutinize the loan quotes. Loan payments are important but it shouldn’t be the soul of your decision. There are several factors which are equally important. Before you rush to your decision, take a look at these variables.

Loan Term

Your loan term will have a huge impact on your loan. A longer loan term will mean that your monthly payments are smaller, but you may eventually be paying more interest rate. It is advisable that your term should be in accordance with the useful life of the car. Your loan should get over before the life of car to avoid the risk of an upside-down loan.

Interest Rates

Interest depends on factors like the loan amount, loan term, credit score, financial condition, etc. One important tip to lower loan rates is by making a substantial down payment. This will reduce your loan amount and also instill a sense of faith in the lender.

APR

The Annual Percentage Ratio will tell you about the total cost of the loan including all fees and charges. Most borrowers consider just monthly payments. But, it is impossible to compare different loan quotes with different loan terms. When you compare two loan quotes with the help of APR, you are taking into consideration all the variables.

Clauses

You must compare loan quotes on the basis of the clauses in the loan agreements. Few lenders prohibit you from refinancing your car loan for the first few months. Some lenders also offer zero percent financing for the first few months only and then charge a floating interest rate. So, check for such clauses which may cause problem in the future.

Charges And Penalties

Check the loan contract for origination fees, annual charges, prepayment penalty and penalty for missing out on a payment. Choose a lender that has lesser fees and doesn’t charge you for making early re-payment. The latter will be useful if you decide to refinance your loan.

Payments

It is important to know whether you are supposed to make payments weekly or monthly. If you can afford monthly payment, don’t consider any other option. This is so because it will give you the choice of making regular payments without any undue financial restraints.

Once you compare quotes on these factors, you will definitely get a winner. Choosing your car loan by this method may take time but what matter is the ease in making payments. Every factor is important in making your life simpler and your car buying experience more pleasurable. So, memorize these important tips.

Owing a car is a dream for many, but one who takes a wise decision can fulfill it in true sense. Car loans won’t be a trouble if you consider your needs and financial condition. Remember a good decision comes with a thorough research process.

All the best for choosing the best!