Category Archives: financing

Can I trade my car for a cheaper car?

Can I lower my payments by trading for a less expensive car?

trade for cheapere carYes — maybe.

But whether it’s a good thing to do will depend on your particular circumstances. Let’s take a look.

If you want to trade your car for a cheaper car, it probably means you are finding it difficult to afford payments on the car you now have. Or you simply want to trade down to have a little extra money each month by lowering your payments.

Let’s look at the two different possible situations, one of which will probably match your own situation.

Situation #1

You are “upside down” on your current loan. That is, you currently owe more on your loan than your car is worth as a trade-in vehicle. You can determine how upside down you are by first asking your bank or loan company to give you your loan payoff balance. Then compare that amount to the actual trade-in value of your car (see www.kbb.com and www.nadaguides.com). The difference in the two amounts will tell you how much you are behind in your loan (“negative equity”).

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Can I get a car loan?

Will I be able to get approved for a car loan?

approval for car loanThis question typically comes up if the potential car buyer 1) has never had an auto loan before and doesn’t know how the process works, or 2) has credit or income issues that might prevent them from being approved.

For those who are new to the car loan process, let’s briefly review how it works.

First, in order to get a car loan, you must be at least 18 years old (to legally sign contracts), have good credit, and have a good steady income.

Many young people, such as college students, who have never had a loan before may have no credit history and have little or no income. For them, if they can’t pay cash, getting someone to be a co-signer on the loan is the only remaining option.

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Can I afford this car? What car can I afford?

How much car can I afford to buy?

afford carBased on my monthly income, can I afford the car I want?

This is a common question but doesn’t have a set answer.

The answer depends on the following factors, assuming you will use an auto loan to pay for your vehicle:

  • price of the vehicle, including tax and other costs
  • cost of full-coverage insurance, as required by your lender
  • your monthly income, after taxes
  • your monthly expenses
  • your credit score (affects the amount you can borrow)
  • the amount of down payment you can afford

Some experts say that your car payments shouldn’t be more than 20% of your take-home pay. Others are more conservative and say 10%.

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Trading Car With Bad Credit – Explained

Can I trade my car if I have bad credit?

trade car bad creditIt’s like the answer to a lot of other questions, it depends.

It depends on how bad your credit is, what dealer you want to use, where you’ll look for financing, and the status of the existing loan on your trade vehicle.

Let’s take a look at how it might work.

Scenario

I need a new car,  and have a car to trade, but my credit is not good. How does it work?

In this case, it’s good that you have a  vehicle to trade because it can be used as a down payment on a new vehicle loan — assuming you are not “upside down” and have some equity to use as trade credit.

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Can I Refinance My Car Loan? Answers

Is it possible to lower my car payments?

refinancing a carMaybe.

Let’s explain.

It is natural to consider refinancing as a possible way to reduce monthly car payments but it may not always work as expected.

Under the right conditions, you can lower your payments as well as reduce your total finance charges.

Under other conditions, refinancing may not make sense.

In some cases it might not even be possible.

Let’s explain.

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How to Buy Car With No Down Payment

 Understanding Down Payment on Car Loan

no down paymentWe often hear the questions, “How can I buy a car with zero down payment?”, ” Is it possible to get a car with no money down?”, or “How much down payment will I have to make for this car?”

There are a number of ways to acquire a new or used car without making a down payment, or making a minimal down payment. Let’s take a look.

New car without down payment

Most new-car purchases require a down payment but here are four cases where it is possible to escape that requirement:

1. You get a highly discounted purchase price such that the loan-to-value (LTV) ratio is 100% or less — that is, the loan you need is equal to, or less than, the value of the vehicle. Most loan companies set a new car’s value at sticker price. So, when you negotiate a lower price, you reduce the requirement for a down payment — assuming your credit score, income, and income-to-debt ratio are acceptable.

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Bad Credit Car Loan – Options

Buying a car with bad creditHaving bad credit can cause difficulties when buying a new or used car if you need a loan.

However, most people with a low credit score have options that will allow them to get the car they want.

About your credit history and why it is important

Just to be clear, anyone who has ever had a loan, mortgage, or credit card has a credit history file. That file is a detailed report of every loan or account a person has had. It shows account details, credit amount, current status and balance, and payment history. If there have been late payments, missed payments, repossessions, bankruptcies, or foreclosures, those are also in the file. Negative information in the file can remain there for up to 10 years.

When you apply for an auto loan, the lender (dealer, finance company, bank, or credit union) will check your credit history to determine your credit worthiness — which is a measure of how likely, or unlikely, you are to keep your promise to repay your loan — based on your past performance.

However, car dealers and finance institutions don’t take the trouble to read your detailed credit report. Instead, they look at your credit score, which is a numerical rating that summarizes your entire credit history.

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Buying a Car – No Credit

buy car with no creditIs it possible to get a car loan with no credit?

Yes, it’s possible and, depending on your particular circumstances, you may have several options available to you.

With no credit history, you may still have a credit score, although it isn’t likely to be very high, but enough to get you in the door with a car loan.

Since there are no hard-and-fast rules for how banks, credit unions, and auto finance companies handle no-credit situations, we’ll offer a number of suggestions, but the real secret to getting approved is to try, try, and try again at different dealers and lenders to maximize your chances.

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How Does Car Financing Work?

Car Financing Explained

car financing explainedIf you can’t pay cash when you buy your new or used car, you will need a loan, commonly known as “financing.”

Auto financing can come from a number of sources — banks, credit unions, online loan companies, finance companies associated with car manufacturers, or even from certain types of used-car dealers.

f you are buying a brand new car from a new-car dealer, he arranges your loan for you (if you haven’t already arranged one for yourself) with his “captive” finance company. A “captive” finance company is one that is owned by a car manufacturer and used by dealers who sell that manufacturer’s vehicles. Examples would be Ford Credit, Honda Financial Services, and Porsche Financial Services.

If you car buying a used car from a dealer, he may have a number of finance sources that he works with to arrange customer car loans. These may include local banks, large national banks, or national finance companies.

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Car Loans and Financing Explained

How and where to get a used-car loan

how to get car financing and loansThere are a number of options available to used-car buyers in need of financing:

Dealer Loan – If you buy your car from a dealer, he will arrange your financing with a bank or loan company that he works with. Dealers don’t provide loans and financing themselves, it’s always done through a bank or finance company — except for “buy-here-pay-here” dealers that we’ll discuss below. See our article, How Does Car Financing Work.

Bank or Credit Union Loan – You can arrange your own auto financing with your own bank, credit union, or an online loan company. If you are buying your car from an individual (“private-party”), this is the way you will get a loan. It’s best to make application to your financing source before you buy so that you’ll know exactly how much money you are able to borrow.

Online Auto Loan – You can also finance your car purchase – from dealer or individual – with a loan from an online auto loan company such as Auto Credit Express.

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