Tag: vehicle finance

A Motorcycle Loan to Help Get You On the Open Road

Posted on | by Blaine Koehn

Two Wheels, One Engine

If I weren’t doing what I’m doing today… I’d be traveling around the world on the back of a motorcycle. (Donna Karan, Fashion Designer and founder of DKNY Clothing)

As someone once observed, there are two kinds of people in the world – those who ride motorcycles, and those who wish they could.
I’m not sure that’s entirely true, but neither is it completely without merit. For those of you who love their hog, chopper, cheese-burner, bike, beast, bagger, or bar-hopper, there’s simply nothing like hitting the open road with your machine.

A motorcycle can be practical, of course. They’re generally more affordable than automobiles, and they use way less gas. As long as you’re not trying to bring home too many groceries or pick up a half-dozen kids from their activities, there’s a certain appeal to just strapping on that helmet and getting where you need to go.

Still, the practical stuff is almost secondary, isn’t it? That’s not why we ride – at least not mostly. It’s possible there are a few out there who choose their vehicle primarily to get from one point to another, but…

That’s weird, right?

Most motorcycle enthusiasts insist that there’s something about the ride itself that makes it unlike any other form of transportation. The closest comparison is probably the relationship cowboys used to have with a good horse. It’s a tool – it’s there to work for you, essentially – and yet, it’s almost a companion. An object of affection. Some would say a work of art.

That may be going a bit far, in my humble opinion, but then… it’s not my horse. Er… motorcycle.

Financing Motorcycles – A Beginner’s Guide

Driving a motorcycle is like flying. All your senses are alive. When I ride through Beverly Hills in the early morning, and all the sprinklers have turned off, the scents that wash over me are just heavenly. (Hugh Laurie, Actor)

The procedures and considerations for a motorcycle loan are in many ways similar to any other sort of vehicle finance. Be aware, however, that not all auto lenders do motorcycle loans, and dealer financing at a motorcycle dealer may be handled a little differently than at your local car lot.

Dealership Financing

Like auto dealers, name brand dealerships may sometimes offer amazing rates or zero-interest deals in order to move inventory or spark interest. If you’re looking at a motorcycle loan, see what the dealer can do.

Other times, however, dealerships use financing to cushion the low-profit margins of the internet age. It’s great that we’ve reduced all the haggling and secrecy and suffering of your father’s vehicle-buying experience, but dealers still have to make a few bucks to keep the doors open and all those colorful balloon-men inflated. That can mean pushing add-on packages you may not need or partnering with outside financial institutions to milk a little extra out of the small print.

They may want you to be happy with the bike, but that doesn’t mean they’re automatically your best source for a motorcycle loan. At the very least, do some loan shopping BEFORE you get serious about selecting a motorcycle, or even a dealer. Know your options so you can discern whether or not what they’re offering works best for YOU.

Banks / Credit Unions

There’s nothing wrong with checking out your local options for a motorcycle loan. Credit unions usually offer better terms than banks, but you must be a member to qualify. How difficult this is varies with the credit union. Some are very particular, and unless you work in a specific industry or meet their exact requirements, you’re out of luck.

Others will pretty much take any excuse to let you join. My local credit union targets educators, but if you’ve ever worked in a public or private school in any context, have kids in school, or have ever been to school yourself, you qualify. That means there are maybe a dozen people in the entire U.S. who couldn’t open a savings account with them. The only way to really know is to ask.

Online Lenders

You’ve probably already figured out that we’re partial to this option around here. Online options generally mean convenient logistics, competitive rates, and flexible lenders, for a motorcycle loan or anything else.

Many online lenders are happy to work with you if you have limited credit or less-than-perfect credit history. They’ll still look at your credit score, and if you’re applying for a motorcycle loan, they’ll pay particular attention to your track record with vehicle payments. A lower credit score means higher interest rates and sometimes additional upfront costs because you’re technically a higher risk for the loan.

But just because your credit rating matters, for better or worse, wherever you apply, that doesn’t mean all loans are the same or that all lenders will handle it the same way. Online lenders are nimble by design, and some specialize in higher risk loans and developing long-term relationships with customers who need to build their credit history just as much as they need to take home that two-wheeler. They’ll look at your job history, your debt-to-income ratio, and whatever else might make you an acceptable credit risk. In short, they’re looking for ways to say YES.

I’d tell you that this is where Loanry comes in, but I suspect you know this by now. Yes, we’re very good at connecting people with reputable lenders. No, we don’t charge you for any of it. We help you connect; you decide whether or not to move forward with whatever offers are made thereafter. Of course, we hope you end up with a great online motorcycle loan – but that’s mostly just because we like you.

You do not need a therapist if you own a motorcycle, any kind of motorcycle! (Dan Aykroyd, Actor and Comedian)

Types of Loans

Generally, you want to finance your purchase with a loan specifically designed for whatever you’re buying. There are, however, other sorts of credit which could conceivably be used in place of a traditional motorcycle loan.

Credit Cards

If you have a high enough credit limit or choose an affordable enough bike, you could simply charge your purchase on a credit card. It’s certainly convenient since you don’t have to qualify for anything new – you already have the card and an approved limit. This also avoids adding another bill to keep track of. Your required monthly payments will go up as you increase your balance, but it’s not a separate obligation you’ve added on – just more of something you’re already paying.

On the other hand, unless you have a particularly good interest rate on your current credit card, you’ll end up paying more in interest this way. Credit cards are also difficult to pay down if you make the minimum required monthly payment, while a traditional loan has a set term and the same payment required each month.

Line of Credit

A line of credit, sometimes called “revolving credit,” is in some ways similar to a credit card. You’re approved for a maximum amount, but only take out what you need as you need it. This means you’re only paying interest on money you’ve actually used.

A line of credit is generally more practical for ongoing expenses, such as those associated with a small business, but there’s nothing that says it can’t be used in place of a motorcycle loan. It is difficult to imagine the circumstances in which this is your best plan, however.

Family or Friends

The pros and cons of personal loans which are this, well… personal depend entirely on the individuals involved. You may get great terms from Uncle Gustav and the flexibility to skip a month here and there if he knows you’re in a rough patch. On the other hand, it might mean some very uncomfortable holiday dinners or unnecessary family drama.

Money and relationships don’t usually mix well. That doesn’t mean they never work out– but be honest with yourself. I want you to get that bike, but in the end, people are more important, right?

Um… right?

What Factors Influence My Motorcycle Loan?

We’ve already talked about the importance of your credit rating and credit history. Those aren’t the only factors in what sort of motorcycle loan you can reasonably expect. Here are a few of the most common…

Purchase Price

This one’s a bit obvious, but there’s more to it than you might immediately recognize. The difference between a $5,000 motorcycle and an $8,000 motorcycle isn’t $3,000 – it’s $3,000 plus the additional interest on the loan. If the higher price means you stretch the terms out for 6, 12, or 18 months longer than you would have otherwise, the total cost over the life of the loan will be even higher.

I’m not saying don’t get the machine you want; just realize that when you finance, it’s about more than the purchase price.

Down Payments and Interest Rates

Motorcycles, in general, aren’t as expensive as cars or trucks, but it’s easy to spend $10,000 or more on a decent bike. Let’s use round numbers and assume you buy one for exactly that amount. You’ve been saving up, and manage to pay $1,000 down, leaving $9,000 to finance.
You work out a motorcycle loan at 4.5% interest to be paid back over 36 months, making your payments around $267. Assuming you stick to the schedule, by the time the bike is paid off you’ll have paid $638 in interest. Fair enough.

Let’s finance that same amount at 4.9%. It doesn’t sound that much higher, does it? We’ll also assume you’ve decided not to use your savings as a down payment (I’m sure you’re doing something responsible with it and not blowing it on scratch-off tickets and overpriced coffee). If you stick with 36 months, interest over the life of the loan will cost you about $773. Your monthly payments will now be $299. This may not sound like a dramatic difference until you think about what $30/month can actually do.

Just one more. Hoping to keep your payments down, you stretch that same loan of $10,000 at 4.9 over 48 months instead of 36. It works, sort of – now your monthly payments are around $229. Over the life of the loan, however, you’ll end up paying over $1,023 in interest – a substantial difference for such a short time frame.

New vs. Used Motorcycles

Buying a used motorcycle can mean big savings on your motorcycle loan. Prices are typically much lower than new machines, so you’re financing less and hopefully setting up a shorter term for paying it off. Used motorcycles depreciate more slowly than new, so you’re less likely to find yourself “upside down” on your loan.

On the other hand, used motorcycle loans, like used auto loans, tend to carry a higher interest rate than when you buy new, making your monthly payments a bit higher and meaning you pay more in the long run for the money you borrow.

I really love to ride my motorcycle. When I just want to get away and be by myself and clear my head, that’s what I do. (Kyle Chandler, Actor)

Preparing for a Motorcycle Loan

Whether you’re applying at a local bank or credit union or exploring online options, there are a few things you can do to maximize your time and effort and make the process as painless and efficient as possible for yourself. It’s all about information and preparation.

Revisit Your Budget

Just because you can get approved for a certain motorcycle loan amount doesn’t mean you should spend your maximum. Hopefully, you already have a household budget to assist in making these sorts of decisions; if not, it’s time to put one together.

Obviously you want to purchase a bike you’ll be happy with. Keep in mind, however, that whatever loan arrangements you make won’t go away just because you’re roaring down the road feeling awesome. Let’s remember the less exciting but no less significant feeling that comes from being able to successfully cover your monthly expenses when you get home.

“Keep my motor running – head out on the highway. Looking for my checkbook and whatever I should pay… Like a true, mature adult, I was born, born to be pragmatic. Don’t want my debt so high that I can never afford to die… Born to be… solvent…” (No? I’ll try again.)

“Here I go again on my loan… paying down the only bike I’ve ever owed…” (Still not doing it for you? Maybe just one more.)

“All I wanted was to be free, and that’s the way it turned out to be. Flow credit, flow, let your waters wash down – keep me on this road to pay everything off in a timely and responsible manner…”

Clearly I’m in no danger of becoming the Weird Al of financial wisdom. Perhaps we should move on…

Check Your Credit Report

You don’t want to find out there’s an issue with your credit history or a problem with your credit score while you’re in the middle of applying for a motorcycle loan. It’s easy to check your credit ahead of time for free, so there’s really no excuse.

If you discover an error on your credit report, it may take a few days (or longer) to resolve it. Don’t wait until the last minute to do this part. In fact, it might not hurt to save your place and check your scores now.

Don’t worry, I’ll wait.

Comparison Shop

You may have a pretty good idea of what sort of motorcycle you want to get. That doesn’t mean you shouldn’t explore your options, however. Knowing what else is out there – features, costs, etc. – arms you with information. Besides, you never know when you’ll fall in love with something you didn’t even know existed.

The same is true of your motorcycle loan as well. Comparison shopping is essential to getting the best deal available to you. It’s not just about interest rates – it’s about terms, other charges or fees, and making sure you’re comfortable with your lender (you’re going to be dealing with them for a while). Arm yourself with information. Keep an ongoing list of questions you want to ask and important details you wish to compare.

A motorcycle is a long-term commitment; so is a motorcycle loan.

To Thine Own Self Be True

In the end, no one else can tell you what to buy or the best way to finance it. Every situation is different and you know yourself better than anyone else. But go in as informed as you can and as prepared as possible. I’m not trying to take the fun out of buying that bike; I’m trying to make sure it’s still fun a few months later when the “new” has worn off but your obligations remain.

See you on the road!

Drive Away Lease Buyout Auto Loans Explained

Posted on | by Kevin Strauss

If you have leased your car and have fallen in love with it then buying the car at the end of the lease can seem like a good option. Lease buyout auto loans can give you the financing you need. There are some things you want to consider before you get a loan. Depending on the current fair market value of your vehicle at the end of the term, the agreed-upon price in your lease agreement, and the interest rate you could be approved a loan, these loans may be an expensive option.

The lease car will serve as collateral for the loan and this type of auto finance, which makes lease buyout auto loans secured loans. The amount of the secured loan will cover the lease balance, plus any applicable taxes or fees. Even though the loan is secured, there will still be requirements that you must meet to get the most affordable rate.

Why Lease a Car in the First Place?

Many people choose a lease in the first place because it’s cheaper than buying a car. Sometimes people are chronic leasers. They like to have the greatest and latest car as soon as it hits the market. So leasing can provide a degree of flexibility. And lease buyout auto loans can help people with the process if they want to purchase the car after leasing.

Leases usually have shorter-term loan agreements and run from three to five years. Many small businesses with limited capital can also choose to lease vehicles for the company. Lease buyout auto loans are also available for businesses that want to buy a car after the lease period ends.

There are a number of pros to leasing a car, including:

Lower Monthly Payments: If your monthly bill is a concern then leases give you savings in the short term. You may pay more interest but you will pay less monthly.

A New Car Every Few Years: Many people love the feeling of driving away in a brand new vehicle, and if this is you then leasing can be the way to go.

Worry-Free Maintenance: With new cars, you have a warranty that lasts three years. When you take out a three-year lease then it is likely that you will not have to pay for the repairs additionally.

Maximize Tax Deductions: If you are using your car for business purposes then a lease will give you more tax write-offs than a loan. This is because the IRS will allow you to deduct the financing costs and depreciation that are part of each monthly payment.

No Resale Worries: If you are the type of person who hates to haggle then you don’t have to worry about this with a lease.

Pros and cons of leasing a car

How Do Lease Buyout Auto Loans Work?

When your lease is up, you have a few options when deciding what to do with your car before figuring out lease buyout auto loans. You can extend the lease, return the vehicle, re-lease the car, or purchase it. You will need to check your paperwork to confirm your options because not all agreements will actually allow you to buy the car after your term ends. If yours does and you do want to buy the car but don’t have the money for it on hand then you need to secure auto financing with a lease buyout loan. You need to get the loan before the lease officially ends.

Before you apply for this type of loan, it’s important to read your lease agreement to learn what you need to do in order to buy the car. You need to let the leasing company know what your plans are ahead of time. Some banks, online lenders, credit unions, and financing companies offer lease buyout auto loans. These loans are similar to other types of car loans. Just like with every other loan, it’s important that you shop around for different options for lease buyout auto loans in order to make sure you are getting the best one for your needs.

Qualifying for Lease Buyout Auto Loans

Qualifying for lease buyout auto loans will be similar to other used vehicle finance options. However, there will be some unique requirements.

Good Payment History: Payment history is important in your current lease agreement. Until the account is brought current, you can’t get lease buyout auto loans and pay off or refinance any residual amount on the contract.

Good Credit: In order to be qualified for this loan, you need a prime credit score. This is usually a FICO credit score of 650 or higher. If the dealership submits your application and the lender declines you due to your credit score, you may have the option to find a co-signer.

Your Lease Terms: You may have to wait until the end of the lease before you can purchase the vehicle. If you do so earlier, you will need to get financing for the remaining payments and then you are financing more than the fair market value of the vehicle, which can lead to a higher interest rate.

Down Payment: You may need a down payment if the residual value of the vehicle is much higher than the fair market share. There will be very few lenders that will allow you to finance more than 100% of the retail value. With a down payment, you can bring this closer to the threshold where financing is allowed.

Titles: For titling purposes, you need to have it be titled under the same name for which it was leased. In some states, this can be changed with a release from the lessor or power of attorney.

Documentation: There needs to be documentation that is standard in all vehicle transactions. Including an insurance card, signed bill of sale, odometer statement, credit statement, and driver’s license.

There may not be any flexibility in the residual value and buyout amount. This was set at the original contract completion and was set high to allow for such low lease payments. While you may be able to negotiate, plan on financing this amount when you visit the dealership.

Determining the Market Value for Your Car

For lease buyout auto loans, one of the most important things is determining the market value of your car. The current retail price should indicate whether or not you should buy the leased car or instead purchase a different option. Determining the market value is actually a pretty simple process because there is so much information available online. You can use sites such as Kelley Blue Book, Edmunds, Cars.com, or AutoSite. Note that the price will vary from site to site so visit different sites in order to get a thorough idea of the car’s value.

If your leased car is popular on the market then the residual cost is likely lower than the retail price to buy a different car. In this case, buying out the lease makes more sense than purchasing a different one. The reality for many people is that the quote for lease payoff will be higher than the typical retail price. Many financing companies increase the residual price. So they can offer lower monthly payments for the people who leased the cars. The price of a used car has also gone down in recent times, which means that buying a different car can usually be the most affordable option.

How to Get a Lease Buyout Auto Loan

Leased cars will be considered used cars, which means that you will need to secure auto financing for a used vehicle. Typically, a used car loan will have a higher interest rate than a new car loan. Lease buyout auto loans may even have higher interest rates than used car loans as well.

Contact Your Leasing Company: Your leasing company may begin to get in touch with you at the end of your lease term. This way, you can discuss options and check your contract. Ask your leasing company any questions you may have about the end of lease cost, the car’s residual value, and fees associated with a buyout.

Shop Around: Some lenders for this loan offer preapproval. If you do get preapproved, the lender will let you know what you are able to borrow and what your loan terms and APR may be. Preapproval doesn’t mean that you automatically get the loan and it just gives you an idea of the terms. When applying for preapproval, know that you’ll need to share some personal financial information.

Preapproval can lead to a hard inquiry on your credit, which then lowers your score by a few points. You should be careful with timing since you don’t want to get a loan quote and have it expire. Most loan offers are only good for a month. Don’t apply for a loan too late. If you keep the car for a few days after the lease expires and you don’t buy it then you could face financial penalties.

Once Approved, Close on the Loan: If you have been preapproved then it’s time to finalize the paperwork and transfer the title. Talk to the lender, as well as your state’s motor vehicle department, in order to find out the next steps for transferring the title. Usually, the title will be in the name of the lender until you pay off the loan.


What to Consider with Lease Buyout Auto Loans

There are some things you should know before you apply for lease buyout auto loans.

Not All Lenders Offer These Loans: Whether you plan to borrow from a finance company, bank, or credit union, remember that not every type of loan will be available and the terms and rates very by lender. When you are shopping around, the first step you should take is to determine if the potential lender offers this loan because not everyone will.

You Could End Up Upside Down on the Loan: Knowing the current market value of your leased vehicle is important. You can get an estimate of what the car is worth with free online tools. If the car’s current market value is higher than its residual value then you may have equity in the vehicle. And it can make more sense to buy it. But if the situation is reversed then a lease buyout loan can put you at risk for being upside down on the loan. If you don’t make a down payment and end up financing the entire cost of the loan buyout then you could be borrowing more than the car is worth.

Interest Rates Can Be Higher: Leased cars are considered used cars so the loan interest rates are typically higher.

Calculating Lease Buyout Rates

Lease buyout rates will vary depending on what you will do with the buyout. If you have completed the lease and made the required payments on time then the residual value agreed upon at the beginning of the lease will be the amount due if you want to buy out the lease. When buying out a lease early, things are a bit different. In many cases, you need to make the remaining lease payments and then pay off the residual.

Statistic: Interest rates on auto loans in the United States from September 2017 to September 2019 | Statista

When Should You Buy Your Leased Car?

The buyout option on your lease may be an attractive option or it may be a way to control damage. The leasing company sets the purchase price at the beginning of your contract. If you are anticipating some extra penalties and fees then buying out the car can cut your losses. If market conditions have changed since you signed the lease then you can turn the hidden value in your car into some real savings. There are some instances where it makes sense to buy the car.

You Are Way Over or Under the Mileage Requirements: Most contracts are for 36,000 miles and three years. If you are over the mileage, you will owe money but if you are under then you are leaving money on the table. Why pay mileage penalties and have nothing to show for it? Buying the car can also save the disposition fee. This is the fee that is charged in order to prepare the car for resale. When you return a car that only has 10,000 miles on it and you paid for 36,000, it’s almost like handing the dealer money. Instead, buy the car and use the value you have paid for already.

The Car Matches Your Lifestyle: Sometimes, you need a different car at different points in your life. For example, if your kids are off at college, you likely don’t need to stay in a minivan. If your leased car still fits your lifestyle and you still like it, what’s the point of making a change and getting something new?

The Car Has Excess Wear and Tear: The car has a number of scrapes, bumps, etc. So, you could have extra penalties. However, if you buy the car then you don’t have to pay for the damage. And you can fix the issues on your own if you want.

You Can Negotiate a Reduced Buyout Price: When you buy your car, it saves the leasing company the cost of having to pay for auction and shipping fees. In some cases, this means you can negotiate a lower buyout price than what was originally specified in the contract. However, be careful since this negotiation may not be the best price. Because you are likely getting it at retail instead of wholesale. In order to negotiate a cheaper buyout price, you need to speak to the manager at your leasing company. He or she has the authority to approve the lower prices. It’s really a case by case basis and leased vehicles that are electric can sometimes have reduced buyout costs because of the low resale values those vehicles get.

Your Friend Will Want to Buy Your Leased Vehicle: If you buy the car and then you sell it to your friend, you have to pay sales tax. However, ask to see if the finance manager at the local dealership will do a lease pass through, which will match the leaseholder with a car shopper who is looking to take over the lease. In this process, the dealer buys the vehicle from you and then sells it to your friend. You aren’t charged any sales tax and the dealer also makes some money off the deal.

You Like the Car: If you like the car then check the buyout price when compared to the retail price. If it’s a fair deal then you can skip the dealership and send the leasing company a check. However, keep in mind you don’t have the bumper-to-bumper warranty protection. The powertrain warranty that covers major parts, such as the transmission and engine, may still be in effect.

When Should You Not Buy Your Leased Vehicle?

There are plenty of times it makes sense to get a lease buyout auto loan. But there are also times when it may not make sense.

The Car No Longer Matches Your Needs: Maybe you have moved and now you need a vehicle that is better for snow. Maybe you just had a kid and now you need more room for a car seat. If your leased car is no longer matching your lifestyle and needs then there is no reason to keep it. You can now move on to something that fits better in your current stage of life.

It’s Not Affordable: It may not be in your budget or affordable to buy your leased car. If your credit score went down, it could make the APR on your car that isn’t even new pretty high. You may be better off turning in the car and then buying an older used car.

If It’s Damaged: If the car was damaged due to a storm or an accident then it is considered that it is worth less than a car that is not damaged, even if was repaired. In a lease, you don’t own the car so the negative impact on this would be if you bought it so you shouldn’t buy in this case.

If the Vehicle Is Worth Less than What Your Contract Says: When you sign the lease then the car’s buyout value is set. Which means even if the car is worth less than predicted, you still have to pay the agreed-upon price. You would end up paying more than what the car is worth, which isn’t a great deal.

Higher APR: The APR you got when you leased your vehicle was partial because the car was new. When you buy the leased car, it’s now used. The APR can be too high for the car. And you may be better off getting a lower APR on a different vehicle.

Benefits of Buying Your Leased Vehicle

There are a number of benefits to buying your leased vehicle and having to get one of the options for lease buyout auto loans.

You Know the Vehicle. It’s okay to admit that you are in love with your car. After all, you drive it and you know whether or not it’s a good fit for you. When you buy your leased vehicle it means that you can continue driving the car you know and love.

It Can Be a Good Deal. This will be based on a case-by-case basis and it may not be a good deal for everyone. Be sure to do the math to make sure you are getting the best deal.

You Can Skip Fees. Buying your car outright allows you to avoid any penalties the dealer would charge. So you can bring back your leased car into sellable condition.

Your Car Is Still in Great Shape. If you have been meticulous about keeping your car looking like new and haven’t driven over the mileage allowance then buying the car can be a wise choice. Mint condition, low mileage cars are hard to find, even at the three-year point. Keeping the one you have can be a way to reward yourself for the upkeep you have done.

There Isn’t Any Haggling. While you do have the option to negotiate and haggle, you don’t have to. The price to purchase is already in the contract and, for the most part, that is a set option. If you want, you can close the deal without having to deal with any negotiation.

Take Advantage of Improved Credit. You have made your lease payments on time then. And if you decide to finance your purchase, you could be in for a good surprise. You may be able to get a better interest rate than what you had on your lease. And it can make the purchase more attractive.

Lease End Versus Early Buyout

Many people will wait to the end of the lease in order to buy the vehicle. However, depending on your contract, it could be possible to get one of the options for lease buyout auto loans and buy early. There are some disadvantages to an early buyout though.

Early Termination Fees: In many cases, there will be fees if you decide to end the lease early. These fees could be high depending on your contract. If you wait until the lease is up to buy the car then you won’t need to deal with these fees.

Higher Payments: Some people like leasing because the payments are more affordable. And it can get them in a new or better car they may not be able to afford otherwise. After a buyout, the payments can be higher. So waiting until the lease is over can keep the lower payments going for longer.

Taxes: When you first lease the vehicle, you have to pay the license and registration fees and taxes. Even though the car isn’t registered or titled in your name. When you buy your leased vehicle the license, title, and registration are changing. You have to pay for that all over again. The longer you can wait, the less the car is worth, which means all the fees will be less.

One of the reasons to do an early buyout is because of the penalties. The lease penalties can include going over the mileage allowance, damage to the car, and not maintaining the car properly.

Paying for Your Car with a Lease Buyout Loan

If you pick the lender that is the same one that leased the car to you then you shouldn’t have much to do. If it’s not the same then the new lender will send a check to the old leasing company. Or send you the check and you give it to them.

Leasing a car can give you a lot of benefits. With lease buyout auto loans, you can get the financing you need to purchase the car after the lease. There are some instances where it makes sense to buy your leased car. And other instances where it may not make sense. You want to make sure you shop around for the best deal, just like with any other loan. There may be different requirements for lease buyout auto loans. And you need to make sure that the lender you choose actually offers this option. While the option to buy the car in the middle of the lease may be available to you, it’s usually not a good financial option.

A Simple Overview of How Auto Loan Interest is Calculated

Posted on | by Brandy Woodfolk


Buying a car is exciting and challenging, and it can be quite overwhelming. It is, however, something that the average American will face numerous times throughout their lives.  Regardless of if you need a two door car or a car for your family, you have to think things through and have a strategy when you are car shopping. It is best to have as much planned as possible before you even begin your search, especially when it comes to your method of payment.

Very few of us ever have enough cash to just walk in and plop down on the counter to buy a car outright. Instead, most of us have to get an auto loan to purchase a car, and that means dealing with auto loan interest. The loans and interest rates are often the most complicated part of the process, so let’s try to make them a little easier to understand.

Different Ways to Buy a Car

When you decide to purchase a new car, there are a couple of ways to go about it. The first is by paying cash outright. Like I said above, we do not all have it like that, so this can usually only happen if you have your eyes set on a lower priced used car. There is no reason to avoid used cars as a whole, but you should be sure you check out the seller and the car to make sure they are worth what you are paying.

The second way to purchase a car is through vehicle finance. It simply means that you borrow the money to pay for the car, then repay like you would any other loan. The differences come in with the availability of the loans, the interest rates, the repayment terms, and, of course, the amount you can borrow.

Types of Auto Loans

There are two basic types of auto loans that can greatly affect your auto loan interest rate:

Dealership

Most dealerships, both used and new, offer financing. Used dealerships usually provide their own financing, which just means that the owner of the used car lot is letting you make payments to him. New dealerships offer financing through institutions, usually one bank or lender that they have a deal with though sometimes they have connections with two or more.

Financial Institution

You also have the option to get the financing from an external institution. For instance, if you have good credit with your bank, you might be able to get a better auto loan interest rate through it than you would through the dealership’s lender. Also, if you take cash to a used car lot, you can often get an even better deal on the used car. It may be better for you to go to a lender yourself, get a personal installment loan, and go find a used car within the amount you borrow.

Calculating Auto Loan Interest

Auto loan interest can seem a bit complicated but it does not really have to be. The interest will most likely be calculated upfront and fixed into your monthly payments. This ratio of interest to principle might mean any of the following depending on the lender:

  • You might find yourself paying all of the auto loan interest long before you even touch the principle. This means that if you owe a total of $3000 in interest and your monthly payments are $500, you will make the first six payments to nothing but interest. After that, however, you start paying strictly on the principle.
  • Another option is that the auto loan interest gets paid by fixed percentage. For instance, perhaps 20% goes to interest while the other 80% goes to the principle every month.
  • You might also get charged auto loan interest that is calculated according to the balance each month. This would mean that if the interest is 20%, then- just like a credit card- 20% is charged on the balance you owe every month.

The way you are charged auto loan interest and the way that auto loan interest is applied to your loan should be disclosed upfront. If there is any confusion about it, be sure you ask for clarification before you sign any paperwork. It is important to understand all the terms of your loan.

It is also very important that you shop car loan rates. Call around to different lenders to find the best possible auto loan interest rate. It is also important to know that your credit score will affect the type of loan and auto loan interest rate you are able to get.

Using an Estimator

If you are looking for a way to determine what your payment will be, you can use an auto loan estimator before you even begin your search. With this estimator, you can input things like your credit score, the price of the car (if you don’t know it yet for certain, just estimate), interest rate, number of payments, and down payment or trade in amount.

These factors can give you a good idea of what your monthly payments will look like. What I really love about these estimators is that you can actually play with them to figure out your perfect conditions- well, as close to perfect as you can get. Let’s say you know that you can only afford a $300 monthly payment. You can hop onto an auto loan estimator and change all of the factors until you get to that $300 monthly payment.

This will tell you the amount you can afford to borrow for a car, the number of payments you should aim for, how much you should come up with for a down payment, and the interest rate that you need to look for. Though you may not be able to control every single factor, using an estimator for auto loans to figure out the best conditions for you and your wallet puts you in the most control you can be in. Try one out for yourself to see just how helpful they can be.

Making Payments

It is very important to make every single payment on an auto loan. If you do not, it can destroy your credit. If you miss too many payments, you might also lose the vehicle that you have worked so hard to obtain. With that, you will lose any money you have paid into it up to that point. Then you will have to start over. Make every payment you can on time.

If you will be late, talk to your lender. Often, they will attempt to work with you as opposed to going through the trouble of taking the car back. You should also keep in mind that, unless you pay your payments on time, you will end up paying more interest than you signed on for. In order to make timely payments, you have to prioritize them in your budget- which means adding them to your budget in the first place.

If you are like many Americans, that means either squeezing another bill into the tight space in between other bills or replacing some things you currently spend money on with the new bill. Below I share some ways to make some extra cash, but here are some ways to make space in your budget:

  • Replace cable with Netflix and Hulu subscriptions or simply decrease the amount of channels you get
  • Replace Starbucks with coffee from home at least a couple of times a week
  • Skip fast food as much as possible
  • Brown bag your lunch and snacks
  • Find ways to cut down on the power and water usage in your home
  • Check for a cheaper cell phone plan
  • Try carpooling, if it is possible
  • Workout at home instead of paying for a gym membership
  • Find creative ways to cut down on your grocery budget, including using apps like Ibotta
  • Fill out surveys on the side for gift cards that you can use at places you regularly shop
  • Find a cheaper place to stay
  • Try date night at home at least half of the time, or make it a game to come up with free dates
  • Learn how to make homemade pizza instead of ordering- it’s more fun and usually a lot more tasty
  • Learn how to make homemade cleaners instead of buying them all the time- natural ones are more healthy anyway
  • If you wash your clothes with hot water, turn it down to warm. When I did this, I made a huge drop in my power bill.

Deciding on the Repayment Term

Most often, you will find that three repayment terms will be offered, though you may run across more. The most common ones are 48 months, 60 months, and 72 months. How do you decide which to choose?

You have to understand what this means. You will most likely find that the higher the repayment term, the lower the monthly payment. Sure, it is tempting to take those lower payments- trust me, I know. The trouble is that the longer the repayment term, the more you pay in total overall thanks to the interest.

Choose the shortest repayment term with the monthly payments you can afford without giving up necessities. But avoid taking the longest repayment term just because you do not want to pay a higher monthly payment. This will save you a lot of money down the line.

Can I Pay It Off Early?

In almost every case, yes, you can. Occasionally, you will run across lenders who do not want you to. They can get the full amount of interest. So they will charge a prepayment penalty if you try. This is not with every lender, though, and more often than not, that penalty will not be anywhere near the amount of interest you will save.

Every single extra penny you pay on your car payment will help you pay it off quicker, but there are a couple of ways to really expedite the process:

  • Increase your monthly payment. If it is the least bit possible, double your monthly payment, even if you can only do it once. If you cannot double it, try just paying an extra $50, $100, or any other extra amount you can.
  • Separate your monthly payment. If your car payment is $500 per month, do not pay it all at once. Instead, pay $250 twice each month. Why? This actually adds up to one full extra payment each year. Think about it: monthly = 12 payments, twice a month= 26 payments. This means that you are paying an entire extra payment without really doing anything extra.

Refinancing an Auto Loan

Many times, people will realize that they cannot afford their car payments with the high auto loan interest that they first agreed to. If you find yourself in this situation, it is an excellent time to refinance your auto loan, but what exactly does that mean and how can it help?

Refinancing your auto loan very simply means taking out another loan to pay off your first one. How does a new loan help anything? Well, because the new loan should have a lower auto loan interest rate than the first one. Often, after you have been paying your first loan on time, you can get a much lower interest rate.

How to Decrease the Amount of the Loan

Paying auto loan interest can increase the length of time you pay on an auto loan, so it is a good step to decrease the amount of the loan you have to get. There are a few ways to go about this:

Car Shop

It is never a good idea to go with the very first car you find without at least looking at some other ones. Shop around for different vehicle makes and models. There is a chance that the fifth car you look at will be much better than the first one. Also, if you find one car model you love, look for the same one on other car lots. You might find that dream car somewhere else that is running some type of special at the moment or just has a lower price tag. Always shop around.

Consider Used Cars

I mentioned before that there is no reason to totally avoid used cars. That is true. In fact, used cars can save you a ton of money. Even purchasing a car one to two years old can save you thousands of dollars. Cars depreciate as soon as you drive them off the lot, so taking a look at older cars can get you one that is just as good- basically- as a new one, if you know how to shop used.

Talk to Rental Car Companies

Rental car companies like Enterprise usually replace their cars pretty often, enough so that the cars they rent are not more than a year or two old, though this can vary. Talk to these companies about purchasing when they are getting rid of cars. The good thing about buying from these types of places is that those cars have been cared for. Oil changes are completed regularly, problems are taken care of by mechanics quickly, and so on.

Talk to Dealerships

A lot of dealerships have used options, as well. There are three dealerships within two miles of my house. When I called around to check about the process to buy through the dealership, each of them asked me if I wanted new or used.

Get a Report on the Car

If you have heard of Car Fax, you know that you can get reports on specific vehicles. I personally have never used Car Fax, but I know some people who have. I hear good reports about finding out all that they needed to make a good purchasing decision.

Look for Bank Repos

Often, people will get a loan for a vehicle through banks and be unwilling or unable to make the payments, so the bank repos those vehicles. Some of them are still very new and in excellent shape. Finding a bank repo can be a great step towards purchasing a good used vehicle. Just call around to the banks in your area and ask if they have anything available.

Save As Much As You Can

Another way to decrease the loan amount is to save up as much money as you can to pay down on the car. If your auto loan interest is 20%, then every $100 you can pay out of pocket is $20 in interest you do not have to pay. That may not seem like too much, but it does add up. Also, the more you borrow, the higher the likelihood of a long repayment term. That, of course, can lead to even greater interest.

So how do you save up for a down payment? With some hard work and creativity. Here is a lesson that I Iearned a long time ago and teach my kids often: It is very rare that things will just be handed to you, so you have two choices to make. You can work hard now or work hard later, and more often than not, it takes less hard work when you do it upfront. In other words, it will be easier to work harder to save up some money now than it will to have to work hard to pay off a car payment. If you are willing to put in the work, here are my go-tos for extra cash:

Extra shifts

This is the tried and true method. Picking up some extra shifts at your job will always bring in some extra cash. This is even more true when you get paid extra on your hourly rate. Many jobs frown upon having to pay overtime pay, but some are happy to do it if it means getting things done that need to be done. Check with your boss about whether or not you can get some overtime pay.

Start a side hustle

It does not have to be anything elaborate or even permanent. Are you a gifted baker? Bake birthday and wedding cakes for people in your community for three or four months. Are you good at organizing? Advertise your skills as a home organizer around your neighborhood. Clean houses, fix lawnmowers, cut grass, babysit or pet sit, paint a house or room. Do some sewing, manage a social media account for a local business, or anything else that you can pull off. You will have better success if you can combine the cash from a few avenues.

Sell some stuff

Have your grandpa’s old records in the attic that you have no clue what to do with? Try selling them on eBay. Have a pair of shoes or jeans that no longer fit? Put them for sale on Facebook or Craigslist. Or carry it all out to your front yard and have a yard sale.

Trade ins

Many car lots will take your old car as a down payment on your new one. Not every lot will do this, but it is worth looking into. And if your old car is not in good shape, that does not necessarily mean you cannot trade it in. In fact, there is a car lot in my area that advertises you can trade anything “you can push, pull, or drag” to their lot.

The fact is that even cars in horrible shape are worth something. Even if it is just scrap metal or for extra parts. If you cannot move the car from your yard, there are people who will come around to pick up old cars and give you some cash for it. These are people who know how to either fix these cars. Or take them apart for the maximum amount of money. These steps could make you anywhere from a few hundred to a couple thousand. Both of which can help out tremendously when it comes to saving on auto loan interest.

A few years ago, we had an old car just taking up space in the drive. But we had absolutely no way to move it or even any idea what to do with it. It just sat there, rusting away and getting soaked on the inside because a window had been busted out for years.

Out of nowhere, we had a knock on our door. Some guy had a tow truck and offered us $400 for the car. I explained that it was in awful shape. And he explained that he could double or triple the money he paid us just by taking it apart. He sold it for scrap metal and a few parts that were still in working order. Even when a car seems worthless, it is still worth something.

Conclusion

When it is time to purchase a new car, you need to be sure that you have a plan in mind. It should consist of how much you can afford to pay and how long you are willing to make payments. If you go to a dealership, either used or new, do not jump on their financing option until you look into external options as well. Be sure you try out an auto loan estimator to get a good idea of what you can afford. Dealerships may not offer you the loan rates and terms you need, so always look into your own bank and other personal installment loan companies for the best deal. Loanry can get you offers from online lenders instantly. And we do mean instantly, right now.

The Car Loan Process that Moves Fast

Posted on | by Jennifer McKnight

A record seven million Americans are at least three months behind on their auto loan payments. While Americans have been borrowing to buy cars for decades, auto debt has increased considerably since the financial crisis. A good number of consumers find it challenging to make their loan payments on time as a result of going for the wrong loan product. This is why it is necessary to get to know the car laon process. And compare the different options available before taking out a loan. In the end, you will be sure that the loan you go for is right for your needs.

Buying a car makes for a huge investment. Whether you are planning to buy a brand new or used vehicle, it is important to do due diligence before making the purchase. If you are contemplating financing options, you will need to understand the car loan process. This means familiarizing yourself with issues such as interest, prepayment penalties, other charges as well as the consequences of defaulting on these loans. It is also important to educate yourself on ways of ensuring the loan process moves fast. Below is part of the information you need to know about how to get an auto loan.

What Is a Car Loan?

Purchasing a car is a big and important financial decision, making it important to plan ahead. One of the factors you will have to think about is how you will finance the purchase. Considering the high price tags with which cars come today, a significant number of prospective car owners turn to vehicle finance. However, before entering any financial commitment, it is essential that consumers understand what these loans are and how they can affect their financial health.

Simply put, a car loan is a type of personal loan whose proceeds are used to purchase an automobile. In other words, a lender gives the borrower the money they need to purchase a vehicle. The borrower, in return, agrees to repay the loan amount plus accrued interests in equal monthly installments until such a time that the amount owed is paid off in full. While most personal loans are usually unsecured and are issued on the basis of the borrower’s trustworthiness, car loans are a bit different. These loans are almost always secured, with the vehicle to be bought serving as collateral. This means that the lender can repossess and sell the vehicle to pay off the loan debt in the event that the borrower fails to make their payments.

There is a lot that you need to know about the car loan process when considering it as an option to finance your vehicle purchase. This information will go a long way in helping you compare different lenders based on their terms. In the end, shopping for auto loans will help you make the best choice.

Ways to Increase Your Chances of Getting Approved

After preparing to apply for vehicle finance, it can be very frustrating if your application is rejected. Similarly, the excitement that comes with the prospect of owning a car means that you will want to see the car loan process moving fast. Below are some of the ways to increase your chances of getting approved for a car loan.

Borrow What You Will Afford to Pay

Generally, lenders are likely to offer you the amount you need if they establish that you will be in a position to afford to repay. Taking out an amount that you will pay back comfortably will also help you maintain your financial health. It is important to consider your income level, debt-to-income ratio, and the monthly repayments.

Raise Your Income

With the important role that income plays in determining whether you qualify for a loan, you should consider working on ways to increase your income. These include doing a second part-time job, engaging in a freelance business, or getting a side hustle. This will go a long way in ensuring that you can afford the loan you want to apply for.

Put Up Collateral

One of the common reasons why lenders will decline your application is because they see you as a risky borrower. Putting up some form of collateral as security for the loan will offer security for the loan. Since almost every car loan process uses the vehicle as collateral, you should find out if you can include another asset in order to get approved.

Make a Down Payment

You can also consider exploring the option of making a down payment. A down payment will reduce the amount of money you borrow, a factor that will ensure you repay the loan without additional pressure on your wallet.

Request a Meeting with the Loan Officer

A face-to-face meeting with the loan officer will give you a chance to show important personal information that is not captured in your credit report. Knowing how the car loan process works will also help increase your chances of getting approved. It is essential to apply for loans that you know you qualify for.

Paperwork to Bring With You

Bringing accurate and complete documentation to your meeting with the loan officer will help to make the car loan process fast. While your credit score will show your repayment of credit card debt and other loans, it does not include your bills, monthly mortgage or rent or payment of private loans. You will need to prove that you have a source of regular income on a regular time cycle. This is why you should carry with you paychecks from all the jobs you maintain.

Evidence of your other income streams will demonstrate your ability to repay the loan in the unfortunate event that your employer reduces your hours or terminates your employment. You should remember to carry statements from your checking account, stocks and bonds, certificate of deposits, savings account, and retirement fund. In case you receive supplementary income such as alimony, veteran’s benefits, or child support, you should include documentation to show that.

The best way to know how to get an auto loan is to do your research. The information you gather in this way will make it easy for you to know what to expect and how to prepare for the process. You will also understand the different documents that are required by your lender of choice. Today, there are numerous lenders in the market, each offering different interest rates on their auto loans. When you are shopping car loan rates, you can work with a third-party that is not in the loan business. We make it easy for you to find a lender that will help you meet your financial needs.

Advantages of Auto Loans

A car loan, just like any other lending product, can have a positive impact on your life if managed well. However, mishandling can result in financial and emotional stress. This is why it is important to not only understand the car loan process but also know the pros and cons of these loans. Here are some of the advantages of car loans.

Flexibility

One of the advantages of auto loans is that they offer consumers flexibility; allowing you to buy a vehicle now and pay for it over a period of time. This is important for buyers who cannot pay for the car upfront but will afford to repay a loan in monthly installments.

Future Savings

Financing a new car helps you avoid the problems associated with purchasing a used car just to avoid having to take out a loan. A new car is likely to offer better fuel efficiency and fewer repairs, helping you not only save money but also enjoy peace of mind.

No Collateral Needed

Generally, you will not need collateral to get a car loan. In most cases, the car you want to buy will serve as the collateral for the loan. In case you fail to pay the outstanding balance, the lender can seize the car and sell it to repay the loan.

Improved Budgeting

Depending on the agreement you reach with the lender, you will have a chance to decide how much you will be paying every month. This ensures that you do not overspend or have to make adjustments in other areas of your life.

Build Your Credit Profile

A car loan, just like other types of loans, gives you an opportunity to improve your credit score. However, you must ensure that you make all the payments on time. In order to do this comfortably, you need to shop car loan rates to find a loan that you will afford.

Disadvantages of Auto Loans

There are a number of short-term and long-term problems that vehicle financing can pose. It is necessary to know about these problems and identify ways of avoiding them.

Paying Interest

A car loan will require you to pay interest on top of the principal amount you borrowed. Although your interest will depend on several factors, it will push up the total cost of the car. In case you have poor credit, you will end up paying even more in total cost, a factor that could have an impact on your budget.

Financial Implications

When it comes to car financing, there is always the temptation to bite off more than you can chew. Once you are at the dealer’s showroom, you can be tempted to buy a car that is more expensive than what you can afford. While you can make a few adjustments to your budget, this may hurt your long-term financial outlook.

Insurance Considerations

Most of the people who finance a car go for relatively high-value vehicles. This means that auto insurance premiums are bound to be higher. The lender may also require that you carry higher liability and physical damage coverage to ensure the vehicle and their interests are protected.

Possible Repossession

A simple understanding of the car loan process will reveal that the lender will have the right to repossess the vehicle if you default on payments. This will not only force you to find a new way of moving around but will also have a negative impact on your credit history, making it more difficult for you to access funding for a considerable number of years.

Factors to Consider before Taking Out a Car Loan

It is normal to be excited at the prospect of buying a new car, especially if you are about to buy your first car. However, it is important to keep a level head to ensure that you make sound decisions. Beyond being familiar with the car loan process, here are a few things you should keep in mind before taking out a car loan.

Car Loan Rate

This is a critical aspect to consider since the interest rate will affect the amount of the loan as well as your monthly repayments. Make sure you do your research and read the fine print before committing to a contract.

Credit Score

Most lenders will look at your credit score to determine your risk profile. While a high score can help you enjoy lower interest rates, a low score might get you rejected. It is important to work on improving your credit score if you are to increase your chances of being approved for a loan.

Fees and Charges

Apart from the interest, there are other fees and charges that affect the cost of borrowing. You should find out about fees such as discharge fees, establishment fees, and late payment fees. Since these fees vary from lender to lender, you should do due diligence before taking out a car loan.

Loan Term

As a borrower, you have the capacity to choose how long you want to repay the car loan. However, you should remember that a longer loan term will see you paying more in interest despite offering cheaper monthly repayments. This applies to any car loan process.

Car Loan Repayments

Another critical factor to consider is the amount you will be expected to pay back every month. This will help you determine whether you will be able to afford the loan. You will need to input the value of the vehicle, loan term, interest rate, deposit, and balloon payment in a car loan calculator to arrive at this figure.

Balloon Payment

A balloon payment is a lump sum that is paid to the financial lender at the end of the loan term. This ensures that the monthly repayments are lower, helping to make the loan affordable during that period. However, you will have to pay the loan in full once the loan term ends.

What to Know When Financing a Car

When you apply for a car loan, you will be getting the car itself and the loan for the new vehicle. The key to ensuring that your experience is rewarding is knowledge. As such, you should know all the important issues about the car loan process.

Determine Your Budget

The first step would be to create a budget. Once you know the type of car you want and how much it costs, you will be in a position to determine the loan amount you need. This will go a long way in helping you plan properly for your needs and the monthly repayments.

Choose Between Used and New

Although this may seem like a no-brainer, it is one of the most commonly overlooked issues. The choice you make will have a huge impact on the purchase price, repair costs, the cost of maintenance, depreciation, and the condition of the vehicle.

You Can Negotiate a Lower Interest Rate

What most people do not know about the car loan process is that borrowers can negotiate for a lower interest rate. A good number of dealers who offer in-house financing will be willing to offer you a lower rate depending on your credit score and down payment. Negotiating a lower interest rate will help you save a significant amount of money.

There Are Other Ways to Pay for a Car

Apart from car loans, there are other ways to pay for the car you want. Even as youare shopping for auto loans, you should take time to consider other options. Using your savings, borrowing from a credit union, or borrowing from family are some of them.

Direct Lending Versus Dealership Financing

There are two options available to lenders seeking vehicle financing. While direct lending involves getting a loan directly from the bank, dealership financing entails getting a loan through the dealership.

Car Loan with Bad Credit

During the car loan process, a borrowers’ credit score will have an impact on how much they qualify for as well as the interest rates they pay on the loan. As such, you should work on improving your credit score before taking out a car loan. However, if you have poor credit but do not have time to improve it, you can apply for car loan with bad credit. The good news is that there are several steps that you can take to ensure you get a car loan with bad credit.

Look Over the Credit Report

There is a chance that your low credit score is as a result of errors and oversights in your credit report. Before applying for loans for people with bad credit, you should look over the report to establish whether there are any errors. In case of errors, you should get them rectified to increase the loan opportunities you can enjoy.

Get a Co-signer

If you have poor credit, you can consider getting a co-signer. This should be someone with a better credit score than you. The co-signer will repay the loan in case you default. Lenders see this as security for the loan. So it’s a factor that can help you get a car loan faster.

Look at the Overall Loan Terms

Rather than simply focusing on the monthly payments you will be required to make, borrowers should look at the loan terms in their entirety. The loan term and interest rates will also have a significant effect on your finances.

Do Your Research

Today, there are lenders who offer bad credit loans to people who cannot be approved by traditional lenders. A little research will help you find lenders who can assist when you have poor credit. However, just with other types of loans, you should look into different rates to ensure you get a favorable deal. Make sure you are connecting only with reputable lenders.

Dealing with Future Car Issues

Beyond knowing how to get an auto loan, you should also be aware of the car issues you are likely to deal with in the future. Whether you buy a new or used car, there are several expenses that come with ownership. In order to be safe, you should take the necessary steps to minimize car trouble and reduce the impact it has on your life and finances.

Regular Maintenance

If you are a first-time car owner, it is important to familiarize yourself with the various maintenance issues you will have to deal with from time to time. Ignoring basic and regular maintenance can cause a lot of trouble, leading to inconveniences and higher expenses. It is advisable to have an emergency fund. This will allow you to take care of any unexpected issues that may come up.

Maintain Insurance

Most of the lenders who offer car loans will require that you purchase the types of insurance coverage that will protect their interest in case of damage to the vehicle. You will also need to buy insurance that covers some of your car issues. Since you will have to make sure that your insurance is paid and up to date, you should shop around for the best rates before choosing an insurance provider.

Carry a Few Essentials

Once you have bought your car, there are a few essentials that you will need to be carrying with you. Some of the most important items include a spare tire and a portable battery charger.

Final Thoughts

Even as you think of ways to ensure a successful car loan process, you should be ready for the challenges associated with car ownership. In case you really needed the car, there is a good chance you will get value for your money.

One of the important things to do before applying for a loan to purchase a vehicle is to learn about the car loan process. However, once you have gone through it, obtained the money you need, and purchased your car, you should remember to make all loan payments on time. You can do this by setting up auto-pay, putting it on your calendar. Or controlling spending, and going for debt consolidation if you have trouble making the monthly payments consistently. We make it easy for consumers to find a lender. This helps to save you time and offer you the convenience you need. The next time you are looking for a car loan, kindly consider working with us for a hassle-free borrowing experience.

5 Things to Know When Financing a Car

Posted on | by Cole Lehman | Leave a Comment on 5 Things to Know When Financing a Car

The number of Americans borrowing money to purchase cars and trucks is on the rise, with 27 million new auto loans originated in 2018. The reality in the modern world is that most people need a car. But buying a vehicle makes for a considerable investment. Today, a good number of people cannot afford to pay for the car or truck they need upfront, a factor that forces them to turn to vehicle finance. There are some important things to know when financing a car. The loans allow consumers to make such big purchases and repay over a period of time. But they can result in financial troubles if not handled properly.  This is why it is important for consumers to familiarize themselves with this type of personal loan. So they can make informed decisions and wise choices.

One of the most important decisions that consumers have to make when looking for a car loan relates to the lender they should work with. With the numerous auto finance options available, the process can be confusing and overwhelming. The good news is that prospective car owners can work with a third party that is not in the loan business to find a lender. We make it easy for consumers to identify and find lenders so they can enjoy a hassle-free borrowing experience. In addition, we strive to ensure that you have the information you need to help you make the right decisions. In order to ensure proper financial management, here are a few things to know when financing a car.

What is an Auto Loan?

There is no doubt that purchasing a car is a big and important financial decision. So it requires a little planning ahead. During the process, understanding what is financing a car is just as important as shopping around for financing. Simply put, an auto loan is a type of loan that an individual takes out in order to purchase a motor vehicle.

There are two main types of auto finance: direct lending and dealership financing. Direct lending refers to a situation where an individual takes out a loan with their local bank, credit union, or an auto lender of their choice. This presents a chance for the consumer to shop ahead of time and compare the interest rates and terms offered by various lenders. On the other hand, dealership finance is done through the dealership. While some dealerships will have their own finance departments, others work with external finance companies. One of the advantages of dealership financing is that the consumer enjoys the convenience of choosing the car they want before setting up the loan.

Borrowers who familiarize themselves with what an auto loan is are in a better position to understand the different things to know when financing a car. Below is part of the information that can be invaluable when looking to purchase a motor vehicle.

5 Things to Know When Financing a Car

The prospect of buying a new car can be exciting. But it is important for consumers to prepare themselves before heading to the dealership. This will help them save both money and time. Also, they will avoid the frustrations that come with a stressful car buying process. Adequate preparation means putting finances in order as well as familiarizing themselves with the important things to know when financing a car. Here is part of the information that can be of help when it comes to vehicle finance.

1. The Rate You Are Approved for

One of the decisions prospective car buyers have to make has a lot to do with how they will finance the car. To ensure a seamless process, consumers should consider doing this in good time. That is before they select the car they wish to buy. When exploring financing options, borrowers should be aware of the loan terms offered by different lenders. This means looking at the financial institution that offers, among others, the lowest interest rate. Although the rate you are approved for is one of the most crucial things to know when financing a car, borrowers should also be aware of factors that affect the interest rate.

Just as with other types of loans, the better the credit history, the better the interest rate that borrowers are likely to get on their auto loan. Another point to remember is that although an annual percentage rate of zero percent may be enticing, the terms of the loan could translate to higher monthly payments.

2. Factors That Impact Your Payment

Before taking out a loan, borrowers should always determine how much they will be paying monthly as well as the cost of the loan. These two factors are necessary for helping to establish whether the individual will afford the loan. However, borrowers should go further to understand the inputs that will influence their payment.

Taking a large loan amount will mean high interest in the long run. This may also be accompanied by high monthly installment payments. The down payment made will also have an impact on how much the borrower pays back. Generally, borrowers will have lower monthly payments when they make a higher down payment. Borrowers should remember that while longer loan terms will lower monthly payments, they will end up paying more over the life of the loan.

Since some borrowers may find these factors to be confusing, they should consider seeking the advice and guidance of financial experts. The professional can help consumers make the right choices and manage their debt better.

3. Determine Whether New or Used is Right for You

This is one of the most commonly overlooked but essential things to know when financing a car. A good number of people tend to make their decision based mainly on cost. But there are several other factors to take into account. Some of the issues you may have to think about include repair costs, the condition of the vehicle, the cost of maintenance, and depreciation.

In most cases, new vehicles will attract lower interest rates on auto loans. The vehicles are also associated with lower repair and maintenance costs. This is particularly critical to bear in mind. Because the borrower will be repaying their loan while at the same time running the car. Failure to calculate these costs may result in huge expenses. They could affect the borrower’s ability to repay the auto loan.

There is no right answer when it comes to making the decision between new and used. This will depend on the purpose for which you wish to buy the motor vehicle as well as your budget.

4. Accurate and Complete Documentation

Apart from credit score, there is a set of documentation that needs to be completed and submitted for verification. Making the process seamless will require that consumers ensure the information is accurate. Being aware of the documentation required will help to fulfill the approval for the auto loan. Since requirements vary depending on the lender, borrowers can consider talking to a financing officer from their lender of choice. This enables them to prepare the documents prior to shopping for a car. This will hasten the process of buying the car. It will also provide leverage when it comes to negotiating with the car dealership. Some of the other documents that the lender may require include proof of income, identification proof, proof of residence, bank statements, and vehicle information.

5. EMI, Processing Fees and Foreclosure Charges

Some of the auto loans available in the market come with numerous charges and conditions. This is why it’s necessary for borrowers to go through the details. In addition to the above factors, borrowers should have a clear understanding of what they are getting themselves into when they decide to take out an auto loan. Calculating the equal monthly installment, commonly known as EMI, will help them plan their payments. Financial experts also recommend looking at processing fees to determine the total cost of borrowing. In the event that the borrower cannot pay back the loan, they should know of the kind of foreclosure charges they will be required to pay. Knowledge of all these important factors will enable the consumer to play their finances in such a way that they will meet their obligations as required.

There are many more things to know when financing a car. For instance, borrowers should look out for any hidden extras in the bill of the vehicle they intend to purchase. In addition to shopping around for the best interest rates and checking their creditworthiness, consumers have to consider choosing their loan tenure wisely and scrutinize for offers.

The Impact of Credit Score

Just like with other types of loans, one of the essential things to know when financing a car is the impact of credit score. The borrower’s credit score plays a major role in determining whether they qualify for financing as well as the terms they will enjoy.

Credit scores affect many aspects of consumers’ lives. Apart from impacting loan eligibility, the credit score also influences how much the borrower will pay in interest charges. This means that a lower credit score will see the borrower pay more in interest. It is critical for consumers to obtain relevant information regarding their credit score to enable them to protect their credit score and obtain good auto loans.

The credit score is displayed on an individual’s credit report, a detailed listing that also shows how much debt they have and how they used the money. The credit report also shows the payment history and the loans the borrower may have defaulted on. In order for borrowers to increase their chances of qualifying for an auto loan and enjoying lower interest rates, they should consider building their creditworthiness.

Personal Loans versus Credit Card

When it comes to auto finance, there are numerous options that consumers can explore. However, before making a decision, the individual must understand what works for them. This will make it easier to settle on the option that will not only meet their needs but also ensure they repay the loan without much straining. Even as you seek to learn the important things to know when financing a car, you should also take time to compare personal loans and credit cards.

With personal loans, borrowers have many options open to them. In case a borrower can get a loan at a low-interest rate, they will enjoy significant savings and pay less money per month. Similarly, it is easier for borrowers to find a personal loan that fits their budget. Personal loans have fixed monthly installments, allowing borrowers to plan properly. At the same time, taking out a personal loan does not impact the balances on the borrower’s credit card, allowing them to use the card for emergency purposes and other uses.

Consumers can also consider using their credit card to purchase a car. One of the advantages associated with this decision is that the user will pay back only the amount that they used. Credit cards also have revolving credit, meaning that credit will be available to the user once they pay what they used. Choosing the best credit card and using it responsibly may also see the consumer enjoying the reward programs and special promotions offered by most of these cards.

Ways to Increase Your Chances of Getting Approved

Once a borrower knows what is financing a car, they should work on increasing their chances of getting approved. Although improving the credit score is important, there are several other ways through which consumers can ensure lenders will be willing to finance.

  • Borrow what you will afford to repay. Borrowers who apply for loan amounts that they can comfortably pay back have a higher chance of being approved for financing. This is why it is necessary to consider the income level as well as current debts before making the financial commitment.
  • Put up collateral. Another way to increase the likelihood of being approved is to put up collateral. This will serve as a guarantee to the bank that the borrower will pay back the loan. Collateral should be a tangible asset that can cover the loan amount.
  • Raise income. Almost every lender will look at the borrower’s income to determine whether they are eligible and how much they qualify for. Raising income by asking for a raise, doing a part-time job or a freelance business will give lenders the assurance that the loan will be repaid.
  • Request a loan officer meeting. A one-on-one meeting with the loan officer will give the borrower an opportunity to show important personal and financial information that is not captured in the credit report.

Once a borrower is familiar with the things to know when financing a car, it will be easier for them to secure the funding they need and manage their debt better.

Where to Shop for a Car Loan

Shopping around for a car loan gives borrowers the opportunity to choose the most suitable auto finance option for their needs. As such, consumers should know where and how to shop for a car loan so that they can make great choices.

In the past, most people would check with their bank or credit union when looking to take out a car loan. Although consumers can still use this method to shop for loans, things have changed remarkably, with new ways of shopping being introduced. Today, there are numerous lenders that offer these types of loans, making it critical to invest both time and effort to identify reliable lenders.

Borrowers can ask for recommendations from trusted friends and family members. Going through online reviews from previous customers could also help to choose the right lender to work with. This is because the borrower will get to know what the experience of these customers was.

However, with the advent of technology, among the most important things to know when financing a car is that the internet can help borrowers find reputable auto lenders. While the internet is a magical place, borrowers should be careful when relying on search engine results. Every individual should ensure that they do not fall victim to online scams.

Factors to Consider Before Taking out an Auto Loan

Choosing vehicle finance means huge financial commitment and responsibility. This is why prospective car owners should consider the option carefully before taking out the loans. Below are a few things to know when financing a car.

  • The need for a car. If one cannot afford a car at the time, they should carefully think about whether they actually need to buy one. Consumers can also consider alternative options such as walking to work, cycling, or carpooling. This will not only help them avoid paying interest on the loan but will also be good for their health.
  • How much is required to buy a car. Most lenders will offer borrowers more than they actually need. While the numbers may look good on paper, borrowers should only go for what they can afford. It is important to ensure that the loan amount is such that they will comfortably make all payments on time.
  • Comparing different options. The need to compare the different options available cannot be emphasized enough. Loan terms and interest rates vary widely from one lender to the other. Getting the best deal will require that borrowers compare these options.
  • Choose a car that meets your needs. When going through the things to know when financing a car, borrowers should ensure that the car they buy will meet their needs. This is particularly important when they choose dealership financing.

Getting a Car Loan with Bad Credit

loan or credit card for car infographic

Although credit scores impact loan eligibility, it is still possible to access vehicle finance with bad credit. There is no down that a good number of lenders will turn down applications from people with bad credit. The good news is that are a number of steps that such borrowers can take to increase their odds when it comes to obtaining car loans for bad credit.

  • Make a down payment.
    Saving money, whether to pay for a car in full or make a down payment, is not easy. However, it will make a huge interest in terms of interest rates, monthly payments, and the willingness of lenders to give you the money you need.
  • Get a co-signer.
    Getting someone with a stronger credit score to be a co-signer can also help borrowers with low credit scores to get a loan. In the event that the borrower repays the loan as scheduled, their credit score will improve without changing that of the co-signer.
  • Look over the credit report.
    It is important to check whether there are any errors and oversights on the credit score that could lower the credit score and limit the finance opportunities available.
  • Do not be fixated on monthly payments.
    Rather than focusing only on the monthly payments, borrowers should look at the overall loan terms. Other factors to consider include the duration of the loan and interest rates.

In addition to these things to know when financing a car, borrowers should consider researching financing options before shopping for the vehicle. This will entail using online calculators to understand the factors that affect loan payments.

What do Car Dealerships Prefer?

Depending on an individual’s capacity, they can choose to purchase a motor vehicle either through auto finance or paying cash. It is necessary to understand what car dealerships prefer and for what reasons. But they won’t force consumers to take any option.

Generally, auto dealers prefer financing. It provides them with extra finance charges and interest in addition to the profit they make. Even in cases where they sell the loan to an outside lender, the car dealer will still make extra money when a customer finances through them. However, the fact that dealerships prefer financing does not mean that consumers have to go that route. They can still choose their preferred lender. Or pay the full amount to avoid committing on a repayment plan.

Every dealer knows that consumers have different options that they can choose from. Car buyers do not have to do everything as suggested by the dealer. But the dealer will ask whether the consumer intends to choose to finance, pay cash, or trade anything in, car buyers do not have to do everything as suggested by the dealer. In any case, what is important for consumers is going for the option that works best for them. This is one of the most invaluable things to know when financing a car or paying the full amount upfront.

How to ensure you make payments on time

The borrower has a duty to pay back the loan once they have received it. Failure to do that will not only have a negative impact on the individual’s credit score but could also result in additional charges and interest. Here are some tips to ensure that you make all payments on time.

  • Set up auto-pay – borrowers who are paid regularly from their jobs can consider setting up auto-pay. This will minimize the chances of falling behind on payments, especially when they are busy or out of town.
  • Put it on the calendar – life in the modern equals busy schedules. Similarly, there are other bills that one has to pay every month. To ensure that you do not forget to make the monthly payments, you can rely on calendars and planners to remind you of the event.
  • Control spending – buying a car through a loan comes with a serious financial commitment. If a consumer is to ensure that they make payments on time, they should not only control payments but also prioritize purchases. This will include making the most important payments before spending on other things.
  • Debt consolidation – there may be times when a borrower will have trouble paying their bills consistently. Consolidating or restructuring debt can help to lower the amount that is repaid monthly. In that way the loan is paid back comfortably.

An understanding of the things to know when financing a car will go a long way in helping consumers to manage both their finances and debt. Prospective car owners should try to ensure that the decisions they make will not lead to financial stress and troubles. Creating a budget is a must whenever you take out any loans, simply because this is the best way to organize your finances.

Conclusion

Financial education and literacy can help consumers to understand the things to know when financing a car. Such consumers will also have the skills and knowledge required to handle money in a better way. They can also manage debt in a manner that will help them reduce it over time. However, prospective car owners should not forget the importance of shopping around when looking for auto finance.

Doing a little research enables consumers to know the various options available and understand what each option means for them. Today, third parties make it easier for consumers to find lenders through online platforms. This simplifies the process of borrowing and minimizes the hassles that consumers experience. The next time you are looking to buy a car, kindly consider working with us to find a lender.

Should You Use a Personal Loan to Buy a Used Car?

Posted on | by Julia Peoples | Leave a Comment on Should You Use a Personal Loan to Buy a Used Car?

Most of us live in places where we need a car to live. There are some cities, like New York City, where the public transportation system is amazing and the best mode of transit. It gets you where you want to go much faster than a car. Unfortunately, not all cities follow their lead. I live in a city where the public transportation system is seriously lacking. If I did not have a car, I would not be able to go anywhere. Most of us cannot afford to pay for a car in cash, so that means we need auto finance, usually in the form of a personal loan. Let’s dig a little deeper into what it means to get vehicle finance and if you really should.

What Is A Personal Loan?

A personal loan is when a lender of some type allows you to borrow a certain amount of money. You promise to repay the money in regular monthly increments for a set length of time. A personal loan has interest attached to it. Interest is what the lender charges you to borrow the money from them. The amount of interest is based on your credit score and other factors like income. A personal loan can be used for any purpose that you would like. There are some loans called out for special purposes, but in reality, you can use it as you choose.

Can I Use A Personal Loan to Buy A Car?

Yes, you get use a personal loan for just about any use. There are some personal loans specifically for purchasing cars. There is a major difference between a personal loan and an auto loan. An auto loan requires the borrower to use the vehicle as collateral. If you default on the loan, the lender can take possession of the car. A personal loan is an unsecured loan. That means, if you use a personal loan to buy a used car, the lender does not use the car as collateral. When you are buying a car from an individual, it makes sense to use a personal loan. If you do not want full coverage car insurance, you should get a personal loan instead of an auto loan. When using a loan to auto finance using a traditional auto dealer financing, the lender makes you have full coverage insurance.

Personal Loan Shopping

Should I Buy A Car?

Obtaining a personal loan to buy a used car, or even a new car is a big deal. Cars are expensive and the cost only continues to rise. It is also expensive to maintain an older car that needs constant repair work. When considering if you should buy a car, there are some questions you should answer. Why do you want to purchase a car? Can you afford to purchase a car? I am going to focus on the first question here. We will talk about the second one further in the post.

In some cases, you need a car no matter what. Other times, maybe you just want something new, or you are tired of fixing your current car. The costs of car repair can easily creep into the thousands. Your current car may not even be worth the cost of the repairs. You really need to weigh the cost of the repair against the value, monetary and emotional, of the car. You should consider how often are you repairing the car. Is this a once every couple of years cost? Or are you sinking hundreds to thousands of dollars into it every few months? Only you can determine the best course of action but answering those questions can provide guidance.

What Are The Advantages To Getting A Loan to Pay For A Car?

There are some advantages to obtaining a personal loan to buy a used car. If you live in a place where public transportation is limited, you need a car. A loan can help you purchase a car when you do not have the cash. Let’s face it, few of us have the cash to pay for a car. If we did not take out a loan, we would not be able to afford a car. If you obtain a personal loan to pay for a car, you are not subjected to the same parameters as when you get an auto loan. When you get credit for a used car, the lender wants you to have full coverage auto insurance. You also must use the car you are purchasing as collateral.

What Are The Disadvantages To Getting A Loan to Pay For A Car?

So, let’s be honest here. The major disadvantage of a personal loan to buy a used car is more debt. Americans are drowning in auto and other debt and it continues to rise each year. The reality of a car is that as soon as you drive it off the car lot, the value goes down. With a few exceptions, cars do not retain value and will never be worth what you pay for them again. As mentioned above, they are expensive. Your loan payment could be anywhere from $300 to over $1000. That is a large chunk out of your budget. It may not be one you can afford. You may find yourself in a position of just buying the cheapest car you can afford. You may get stuck paying hundreds of dollars per month for a car you do not even like.

If I Do Not Pay Back My Loan, Can I Lose My Car?

When you use a personal loan to buy a used car, it is an unsecured loan. That means that you do not have to use your car as collateral. If you do not pay a personal loan, the lender will find ways to collect on the loan. However, they will not take your car as a result. If you obtain an auto loan, the car you purchase becomes collateral. That means, if you do not pay the loan, the lender had the right to take you a car. Believe me, they will. Lenders do not mess around when it comes to getting their money.

If you do not pay your bill, they will repossess your car. Often times, it happens in the middle of the night. If you know you are not able to pay the loan, the best thing to do is contact the lender and try to work with them to make different payment arrangements.

Does My Budget Really Matter?

Yes, your budget is one of the major factors in deciding on a personal loan to buy a used car. You need to be able to fit a personal loan into your budget before you decide to use one for anything. You should take a hard look at your budget to make sure a car payment fits. Considering to buy a car is not a decision that should be made lightly. If you cannot afford to pay the car payments each month, you are setting yourself up for failure.

You could lose the car. You could impact your credit. You may not be able to get another loan. That is a situation you do not want. The first thing you should do is use a budget app to determine how your finances look. Determine how much money you bring home each month and how much you pay out in expenses. The amount that is left is what you might be able to pay for a car payment.

How Can I Budget For A Car?

Once you see your monthly expenses listed, you can begin to make adjustments. Often times, we do not even realize how much money we spend in a month until we write it down. Begin to eliminate unnecessary expenses, such as that gym membership that you are not using. You can also see some habits that you might be able to cut down. For example, do you eat out often? It can be expensive and when it is listed for you, you can see just how expensive. Perhaps, you decide to eat out only two nights instead of five. That could be a significant savings for you each month, without much impact. Look for other ways to reduce spending to hit your budget for a car. These savings could add up to the money to pay for a personal loan to buy a used car.

What Does My Credit Have To Do With It?

Your credit score has everything to do with it. Ultimately, it will decide how much you pay per month for a personal loan to buy a used car. Your credit score is an indicator to lenders about your credit worthiness. It also gives them insight as to whether or not you will pay back your loan. The lower your credit score is, the higher your interest will be. Interest is what a lender charges you to borrow money. When your credit is low, the lender feels it is risky to lend you money. They charge you a higher interest because they are taking a risk by lending you money.

Can I Improve My Credit?

It is possible to improve your credit score. It takes consistent and hard work. The first thing you need to do is make all of your payments in full and on time. Late or missed payments are the leading cause of bad credit. Start by making all payments on time. Then you need to begin to decrease the amount of debt you have. When you have a high amount of debt, it also decreases your credit score. You have a debt to income ratio. The higher your debt is by comparison to your income negatively impacts your credit score. Therefore, the more you are able to decrease your debt, the more positively it impacts your credit.

How Do I Know Which Loan Is Right For Me?

When you decide you want a personal loan to buy a used car, you should find the best one for you. To do that, you need to know how to shop for a car loan. It is helpful if you have some understanding of how a loan works to find the one for you. All lenders attach interest to any loan they give you. The interest rate changes from lender to lender, so you can look for the best interest rate for your needs. You can also look online for a loan. Online loans have an easier and faster application process. Often times, online lenders do tend to have a higher interest rate.

Are There Other Options Besides A Personal Loan?

There are some options available to you besides obtaining a personal loan to buy a used car. You have the option to save the money to buy a car before you actually buy it. This allows you to have the money you need to buy the car without adding additional debt. You do not have to worry about making a monthly payment. This also means that you do not have to worry about not having the money to pay the loan. You could borrow money from family or friends. They may be able to loan you the money without having interest added. They may be able to offer you better loan terms which makes it easier to pay back.

Auto Loan Basics Spelled Out: Lending 101

Conclusion

The real question here is, should you buy a car? You are the only one who can answer that question. You need to understand that cars are expensive. No matter what route you go, you are going to put out a significant amount of money. However, most of us need cars to get through everyday life. We need transportation to get to work, school, appointments, and attending to basic needs like grocery shopping.

You may currently have a car that is sucking money in repair costs. That may not be the best way to spend that money. You may be able to get a car payment that is less than paying for constant repairs. You have to be smart with your car and loan shopping. Loans with high interest will cost you more in the long run, too. You need to take a look at your budget and make sure you can afford a car payment.

Taking on a car payment that you cannot afford sets you up for failure. You can hurt your credit. You can lose your car. You will lose a lot of money. Be honest with yourself and what you can afford before taking on another loan payment.