Debt Consolidation Blog

Posts Tagged ‘car loan’

Many people know about refinancing their homes, but not as widely known is the option to refinance the loan terms on an automobile. The process is similar to what is encountered when first purchasing the car, however the end result is a lower interest rate and subsequently lower monthly payments on the vehicle. Refinancing can result in significant savings over the term period of the loan.

Before refinancing your car, there are a few things to take into consideration.  The first thing to note is the amount you will be refinancing on your car. If the value of your car is under $7500, it will not be worth it to most lenders to refinance. Next you will want to look at the age of your car. Make sure that your car is under at least seven years old before attempting to get a new loan on it. You can find out what your car is worth by checking the Kelly Blue book value of your car based on the current mileage and the age of your car. Your auto financed loan should not exceed the value of your car. Lastly, you will want to make sure that you are refinancing your loan within the first three to six months. This is because the majority of the interest paid on your car loan is paid up front. Waiting until you are three years into your loan will not result in a significant amount of savings for you.

Once you have verified that you are a good candidate for auto loan refinancing, you can then begin to shop around for lenders. Even if you feel that you may have an extremely good interest rate, even one point of difference can end up saving you hundreds of dollars. Compare the offers you receive from various lenders and decide on the one with the lowest interest rate and the best terms. It is relatively simple to find a lender to refinance as there are many online companies who provide this service. The process can take a few minutes to complete by filling out a simple application form online. In order to ensure a smooth application process, make sure to have all the information on your vehicle handy. You will want to have the correct 17 digit vehicle identification number (VIN.) You will also need to know the make and model of your car. Also make sure that you have the exact same spelling for the current loan holder when submitting your refinance application. An incorrect spelling may cause your loan to be rejected as the lender will not be able to find your original loan on file.  After the application has been submitted, your loan can be approved in as little as one to two days.

In addition to lowering your car payment, another hidden benefit to refinancing is that you may be able to get cash back from your new loan. If you owe 7,000 on your car and you are refinancing for $10,000 you will be left with $3000 in your pocket. You can use these funds to pay down on other debts such as credit cards with higher interest rates than that of your new car loan.

Before attempting to refinance your car loan, make sure that you are a good candidate. Check to see what the loan to value ratio of your car is and also what balance remains on your car. If your car is almost paid off, it may not be in your best interest to refinance your loan.  However if refinancing is right for you, it can result in significant savings and lower monthly payments.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice

Help With My Car Loan
The Dollar Stretcher Blog
by Gary Foreman

I recently bought a certified pre-owned vehicle at a dealership. Although I am not struggling to make my montlhy payments I would like to know what my other options are. I’m kind of having regrets buying the car. I don’t really want to pay for the car anymore. This was my first time purchasing a vehicle and the decision was based irrationally.

My loan is $28,000, 6 year, around 10% interest rate. The car is a 2007 Honda Civic Si Sedan.

My boyfriend is bugging me about adding his name to the title. He said
he would help me with the monthly payments by matching my monthly payment. By doing this we would be paying off the vehicle faster. He also says that by doing this, it would increase his credit score. Is this true? And what are some benefits to me by doing this?
Michelle

Boy, wouldn’t that be tempting? Have someone help you pay off a car that you paid too much for. But, before Michelle jumps at the offer, she might be wise to consider a few questions. Questions that could have rather severe consequences.

To begin with, Michelle was right. She paid too much for the car. Kelly Blue Book (generally considered the authority on car prices) puts the retail value of a 2007 Honda Civic Si Sedan at $20,000. Even a brand new 2009 Honda Civic EX-L has an MSRP of $24,365 and Kelly says that consumers are really paying $22,659. So, to put it bluntly, it appears that the dealer took advantage of Michelle. Thankfully, she’ll be smarter next time.

OK, so what are the questions that Michelle and her boyfriend should consider? Let’s start with the title. It’s only fair that he be added to the title. But, it’s possible that the current lien holder (i.e. the bank that loaned Michelle the money) won’t want that to happen. They made a deal with Michelle who had a good credit score – not the boyfriend who has a bad one. It’s possible that they’ll want a higher interest rate if he’s added to the title. So any attempt to add him should be checked with the bank first.

If Boyfriend is added to the title, Michelle needs to understand that there is some risk from his creditors. If he’s using this to pull up his score, it’s very likely that he has outstanding debts. And it’s also possible for those creditors to go after any of his assets (including the Civic) if he falls behind in his payments (which presumably has happened in the past otherwise he wouldn’t need to improve his score). What would Michelle do if one of his creditors put a lien on their car?

Another question they’ll need to answer is what would adding Boyfriend to the title do to the insurance rates. And, who will pay for the insurance?

With both of them owning the car, they’ll need to decide who can use it. Even if Michelle remains the primary driver, her boyfriend may want it occasionally. Who gets the car and when should be handled now, not later.

Boyfriend’s credit score should also be considered. Is this the best way to raise it. If he is added to the car loan and the payments are made on time, his score will go up. But, suppose that he borrowed $14,000 (half the car loan amount) and paid it off in a timely manner on his own. That, too, would cause his score to go up. And, it would be a much cleaner transaction.

Finally, what happens if they break up? I’m sure that they’re a very happy couple and I’m not wishing a breakup on them. But, let’s be real. Couples split up. And, if that should happen they’ll need some plan for what happens to the car and any remaining payments. Who keeps it? Is the other person entitled to any compensation for their half of the car? How much? Who makes the remaining payments? It will be much easier to come up with a plan now, when emotions are not running hot. If they do break up and don’t have a written agreement there’s a very good chance that they’ll need the court system to work out a solution.

I can’t tell Michelle and her boyfriend not to try this. There are some advantages. But, it is fraught with danger. Unless things go exactly as planned, this could be a very bad idea for them. One that has the potential to blow up their relationship and put both of them in financial peril. So Michelle should think very carefully before agreeing to this plan.
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Gary Foreman is the editor of The Dollar Stretcher.com website and various enewsletters. The Dollar Stretcher is dedicated to helping people live better on the money they already have. If you’d like more information about credit scores and how to improve your score visit The Dollar Stretcher library

(end Dollar Stretcher Blog)

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.