Get A Copy Of Your Credit Score And Report
Before you start looking for a loan, check your credit score and credit report.
You can get your credit score free from several online sites. The score may not be the exact same score a lender uses, but it will be close.
Each of the three are required to provide one free credit report each year.
Look for any errors, outdated or false information, and dispute them. A quick way to improve your credit score and get a better interest rate on a car loan is to lower your credit utilization. That is the ratio of your credit card balance to your available credit. The less available credit you use, the better your score, so be sure to keep credit utilization below 30%. One quick and easy fix is to pay off your credit cards twice a month instead of at the end of your billing cycle.
Lets see how your credit score affects the interest rate youll be charged. Lets assume youre buying a $20,000 car with a 20% down payment, so you need a $16,000 loan over four years.
Here is what the average car loan interest rate by credit score looks like:
The graph demonstrates the impact your FICO Score, the most widely used credit score, has on your interest rate, monthly payment and total cost. The exact same car can cost thousands of dollars more depending on your credit score.
Auto Loan Consolidation Vs Auto Loan Refinance
Auto loan consolidation effectively combines two or more auto loans into one different type of loan but that new type of loan might not be the best fit. Maybe you dont have home equity to tap or dont want to. Unsecured loans are another option, but their APRs may be high, making them a more expensive choice.
Refinancing your auto loans could offer a lower APR without shopping around for a new lender. Though not all lenders allow it, some refinance their own loans. The downside, of course, is having to refinance each vehicle separately, which would leave you with multiple car payments at the end of the process. This takes consolidation off the table, but it might save you money or offer a different type of flexibility.
Refinance The Car Loan
If the issue with monthly payments is affordability you may want to look at refinancing your car loan. Qualifying for a new loan with a lower interest rate could save you money and potentially reduce your monthly payment.
It’s important to consider the new loan term, however. If you refinance into a longer loan term, your monthly payments may be lower. But you could still end up paying more in interest versus choosing a shorter car loan. Be sure to check the best car loan rates before going this route.
You May Like: Can My Car Be Towed Without Warning
Are Two Title Loans At The Same Time Legal
One of the biggest benefits of using having a car title loan in place is that you have a way to pay off the urgent expense while at the same time being able to drive the car around. This is certainly better compared to pawning off your car, which will require leaving the vehicle at the shop and only being able to claim it once you have returned the full amount of the loan. Car title loans are absolutely worth the risk.
If you have a title loan on one of your cars, but want to get a second title loan on another car you own, you may be able to do so. You can have more than one car title loan at a time with different cars.
Getting a second title loan works very similar to when you get your first title loan. The entire process is the same from start to finish. Applying for your second title loan could be a lot easier than your first one since you know what to do.
Payment Methods During A Personal Sale
You should ask for either cash or a certified cashier’s check from a financial institution when you are agreeing upon payment. Personal checks, bank transfers, and other methods are easily manipulated, and often used in scams.
If you need to purchase a car, the best option is to pay entirely in cash. With cash, you are usually able to negotiate even lower prices with dealers because they know they are going to receive the entire amount. Unfortunately for most people, this is not realistic given the price of most cars.
You might find your own method of financing a car. Most dealerships have partnerships with banks, allowing them to create auto loans at the time of sale. While convenient, there are dealerships who will not have the best loan rates or are predatory with certain age groups or consumers.
Once you have a pre-approval, you have an amount you can spend and budget to stick to. This will relieve some of the hassles of dealing with car salespeople. Be sure to not mention how much you have available to a car salesmanthat will become the price they are looking to settle on.
Choose a price below the pre-approved amount, so that you will be able to cover the cost of taxes, tags, and title with the rest of your loan. These three costs can be significant as well, so you could reduce initial costs by paying for them with your loan.
Also Check: Where Is Elon Musk’s Car
Are Second Title Loans Safe
Are you trying to get another car title loan but are concerned about your financial safety? Dont cause yourself stress by sitting around and wondering are second title loans safe. When youre struggling with your finances, the last thing you need to stress about is your financial security. When you get a second title loan, your finances and your information is safe and secure.
Who Offers Car Loan Consolidation
Not all financial institutions offer consolidation services specifically aimed at combining auto loans. Car dealers are barred from combining different auto loans into one consolidated loan due to lender agreements, said Chris Sondesky, executive director at CF Search Marketing. However, banks and credit unions might be able to provide essentially the same service under the umbrella term of loan consolidation.
Other lenders also provide auto loan consolidation services: LightStream, a division of SunTrust Bank, allows you to combine multiple vehicles under one loan application if you qualify for an unsecured loan. RoadLoans.com offers cash-out auto refinancing so you can consolidate loans into a new loan and borrow up to $5,000 extra cash. And Camino Federal Credit Union can consolidate two auto loans, depending on the value of the car.
Wells Fargo does not offer the option to combine two auto loans into a new, consolidated loan however, it does offer auto equity loans. Using equity in your car, Wells Fargo allows you to consolidate part or all of your debt, which can lead to lower monthly payments. Wells Fargo offers two types of auto equity loans.
- Auto Refinance+: Get a new auto loan to pay off an existing loan and receive funds that you can use for pay for other debt and expenses.
- Auto Equity: Use equity from a car thats been paid off to receive funds in the form of an auto equity loan.
Recommended Reading: What To Do If In A Car Accident
Improving Your Standing To Be Accepted For Finance On A Second Vehicle
You can enhance your chances of success in securing further finance in a number of ways – one of which is to set aside a sum of money for a deposit before making your application. This reduces the size of your monthly payments, improving your affordability, and this looks better to lenders.
Always stagger your applications. Finance companies frown upon multiple attempts at applying for credit.
If your credit rating is poor, dont apply for finance until youve rebuilt it. If you can, pay off any outstanding debts in full or set up payment plans to pay back any defaults, no matter how small the repayments are. Arrange direct debits for your household utility bills to make certain you always pay on time, proving you can act responsibly where payments are concerned.
Cons Of Auto Loan Consolidation: Limited Availability And Bigger Payments
The main reason to combine two or more car loans into one new loan is to secure a better APR than that of the existing loans. But a new, lower interest rate is not guaranteed when you attempt auto loan consolidation. If you havent significantly improved your credit between the time of the original loan and the new, consolidated loan, you might not get better auto loan rates.
Here are some other disadvantages to auto loan consolidation:
- Limited availability: Only a limited number of lenders provide auto loan consolidation.
- Bigger monthly payments: Depending on the terms of your consolidated loan, you might have to spend more on monthly payments with the new loan than you did on the original loans.
- Risk: Cash-out options for auto loan consolidation can be risky because they increase your debt.
Recommended Reading: How Many People Die In Car Accidents In The Us
Can You Return A Financed Car Back To The Dealer
When you can’t afford the payments, returning the vehicle may be a necessity. But before returning it, you may want to talk to the dealer to see what help they might offer. For example, if your financial troubles are only temporary, the dealer may allow you to skip a payment or two and have it added on to the end of your loan term.
If you financed a vehicle purchase through a dealership, it’s possible that you may be able to return it. But this will depend on the dealership’s return policy and rules. Similar to lemon laws, there may be a time limit on how long you have to return a financed car back to the dealer.
In some instances, a dealer may accept the return of a financed vehicle if it’s necessary to avoid repossession. What’s important to keep in mind here is that a vehicle’s value depreciates quickly. Even after just a few months of ownership, you may owe more on the car than it’s currently worth. This could mean handing over cash to get out of the vehicle and the loan.
If your car has depreciated to $20,000 and you still owe $25,000 on it, for example, you will have to pay the difference of $5,000âeven if your dealer agrees to the return. So that’s something to consider when weighing whether returning a car is the best option.
Suggestions For Speeding It Up
If you are really looking forward to making another car title loan or foresee a sizable expense in the near future, the best thing you can do is to shorten your payment period. While you and your loan officer agreed on a set monthly payment scheme for x number of months, there is no harm in making advanced payments and shortening the loan term. This will effectively shorten your waiting time for reapplying for another loan. In fact, it will also shave off some of the interest rates. If you advance your payment by even a mere three months then thats three months worth of interest fees that you saved on!
Thus, heed the following suggestions on how you can make bigger payments to shorten your overall payment period:
Don’t Miss: How To Deal With Car Dealers
Getting A Car Loan With More Than One Job
You can get a car loan with multiple incomes, but lenders only look at the highest-grossing one to determine if you qualify. Generally, lenders require you to have aminimum gross income of $1,500 to $2,000 a month from a single source.
From this, lenders will calculate your debt to income and payment to income ratios. Note that when you have more than one job, the lender may incorporate the incomes from them as well to calculate your DTI and PTI ratios.
DTI is important when determining how much car you can afford. Its easy to calculate, too. Just add up all of your monthly bills such as rent, credit cards, and loan payments and divide that amount by what you get paid each month before taxes are taken out . Your DTI should be no more than 50 percent any higher and you run the risk of being turned down. As for your PTI, take your total expected monthly car and insurance payment and divide that by your gross monthly income. Lenders want to see a payment to income ratio of no more than 20 percent.
For an easy online tool, ourCar Loan Estimator is a great place to start. This calculator gives you an idea of what you can expect to be paying for your next car loan.
Things To Consider Before Financing A Car
If its not already obvious, there is a lot to consider before financing a car. If you have poor credit, the list gets even longer and the options fewer.
Before making the decision to finance, consider all the factors and how they work for you. Important things to consider include interest rates, loan terms, credit pulls, rate shopping, gap insurance, taxes and fees.
Factors to consider:
- Interest rate. This depends on the term of the loan, type of car and your credit score.
- Loan terms. It can range from 24 to 84 months.
- Rate shopping. Apply for pre-approval from several lenders to see the rate options.
- Some lenders only work with specific dealerships.
- Down payment. Money you put toward buying the car that you dont finance. The bigger down payment, the less you have to borrow.
- Gap insurance. Insurance you buy from a dealer or bank that closed the gap between what you owe on the car and what the primary insurer thinks its worth.
- Funding: An offer for the maximum loan you can get at the best interest rate. It can go right into your bank account or be a certificate that goes to the dealer.
No matter what your financial situation, the goal should be to pay the lowest amount possible over the term of the loan. One common mantra is that a car isnt an investment. Keep that in mind. An investment makes you money. A car costs you money. You want to be in the best position possible, particularly if youre on a tight budget.
Recommended Reading: How Long Do Car Batteries Usually Last
Choose A New Loan And Pay Off The Old Ones
After you compare loan options, choose one by contacting the lender and finalizing the paperwork. The lender may transfer funds to the other lenders directly, or send you a check for you to use and pay off your auto loans. Dont forget to set up payments on your new, consolidated loan. If you dont choose automatic payments, calendar reminders can jog your memory before the due date.
Loans Arranged Through A Dealer
Most dealers will make loan arrangements for you with a lender. You can apply for and receive a loan directly in the dealership.
When you visit a dealership, dealers can arrange financing for you with:
- a financing division of the manufacturer
- a financial institution, such as a bank or credit union
- an independent finance company, such as one that specializes in providing car financing
Recommended Reading: How Long To Recharge Car Battery
Three: Sign Your Contract & Collect Your Money
Once youve finished sending in your documents, youll have the chance to sign your contract with your finalized terms, loan amount, and interest rate. After youve finished that step, youll be able to collect your money!
Once you sign your contract, youll have three different options to receive your money:
What Are Typical Car Loan Terms
Usually, car loans are available in 12-month increments with loan periods between two and eight years. The most common car loan terms are 24, 36, 48, 60, 72, and 84 months. However, the longer the auto loans term is the more the interest rate will be. So a long-term auto loan will cost you more money than a short-term auto loan.
Don’t Miss: How To Register A Car In Arizona
Whose Credit Score Is Used On A Joint Auto Loan
If you want to take out a car loan and share the responsibility that is, the monthly payments, to qualify, and ownership rights with someone else, you will both apply for a joint loan as co-borrowers.
How you decide to split the payment is up to you as long as the full monthly payment is made on time. All payment history is reported on both parties every month.
If you take out a joint loan and want to sell the car, youll need to split any proceeds. A joint loan is common for married couples, life partners, or businesses with more than one owner. However, anytime two parties have an equal interest in the ownership of a car, a joint loan is the best solution.