Shopping for loans is never as much fun as it is to take a car for a test drive, but in order to afford a gently used or pre-owned car or truck you will usually need to go looking for a pre-owned loan. But there is no reason to worry in 2010, despite the doom and gloom of recent economic news. That’s because once you are equipped with some knowledge about how to get the best loans this year – and what constitutes the main difference between a bad loan, a good loan, and a really great loan – then you should have nothing to stress-out about.
Let’s start with the nuts and bolts of what you need to do in order to qualify for the best pre-owned loans on the 2010 market. Then after that we’ll touch on what to do if you aren’t in a position to meet those requirements so that you still have choices and opportunities to get pre-owned loans.
First, here’s what you need to get the premium quality loans that offer the lowest interest rates and the easiest, most user-friendly terms and conditions.
A Great Credit Score:
In today’s tight credit environment you will want to have a score in the high 600s or the 700s to get a good pre-owned car loan. If you are between 620 and 680 you’ll get a decent loan. Less than that you’ll have to pay more or you might even be denied a loan unless you go to a bad credit loan specialty company. But to get the best deals out there you should have a FICO number that is in the upper end of the scale – or above 700. Get up in the 750 range and they should roll out the red carpet and give you special loan incentives and discounted rates.
A Substantial Down Payment:
Having a nice down payment puts lenders at ease even more, because they know that you are offering them some real collateral that is worth cold cash no matter what may happen in the future. Combine your high FICO score with at least 20 percent down – or 25-30 percent if you can scrape it together – and you’ll be in fine shape to get a super loan even during these crazy and difficult economic times.
A Really Good Idea of What Vehicle You’re Buying:
Of course before a bank or lender gives you a loan they will want to know what kind of car or truck you are buying so that they can look it up in their handy blue book of used car values and figure out what it’s really worth. So bring as much detailed info as you can to the bank, including pictures and the date, model, and make of the vehicle. They may require an informal appraisal or send an expert to go look at the car, but that is just standard operating procedure for many lenders.
A Few Important Documents:
You’ll also want to have a file with you that includes copies of your latest tax return, your recent pay stubs, and recent bank account statements. Call the lender, ask them what they need to see, and then gather the papers before you go to visit them and it will make your pre-owned car loan application process go a whole lot faster.
Now if for one reason or another you aren’t in a good position to borrow, you can take steps to improve your borrowing power – like repairing your credit, saving up for a down payment, going shopping to nail down your choice of a specific used vehicle, or getting your paperwork in order.
But if your credit is seriously damaged, order a copy of your credit report and then sit down with a credit counselor or lender and come up with a practical strategy to get started raising your credit score. While you’re doing that try to set aside some cash for a bigger down payment, too, and soon you will be in a much better position to go apply for a pre-owned loan. You can also shop for your loan with a lender that specializes in loans to people with bad credit, or see if the car dealer has any special financing for people in your situation. One way or the other you will probably be able to find a loan for you and then go through with the pre-owned car purchase you’ve been planning for the New Year.
loading...
Related Links:
To help you get the best used car loan here are four tips for receiving pre-owned vehicle loans in today’s changing and challenging credit environment.
1.Think like a Banker
Even if you are convinced that the auto you have your heart set on buying is valuable your banker may be harder to persuade. After all it is not going to be the banker’s or loan officer’s driveway but in yours, and if they hand you a big pile of cash to go buy it and all you hand them is some loan paperwork and a car title, they may feel a little bit insecure about the whole arrangement. We all know that car titles have value, but they are really nothing but pieces of paper that are backed-up by a vehicle, and if the vehicle they represent is a clunker then that piece of paper is not worth all that much. But the paper money your lender gives you has pictures of historical presidents on it and is fully backed by the Treasury of the United States Government. Think like a banker, not like a car buff, and you’ll begin to understand why those lenders have such tight purse strings. Would you trade a suitcase full of cash for a car title to a pre-owned car you’ve never taken for a test drive? Now you get the picture.
2.Adjust Your Expectations
Now that you see the banker’s perspective it is easy to “get it” why they might want to charge you higher closing costs, ask for a larger down payment in order to approve your loan, or require better credit and a higher FICO score. Or they might be willing to assume what they think of as added risk – but only if you are willing to pay them more by agreeing to a high interest rate. Get ready to make some kind of compromises along the way, because nothing is going to be handed to you on a silver tray. The banker is only there to make a profit for his or her bank, and one way or another you’re going to have to contribute to that profit margin.
3.Work on Good Credit and a Hefty Down Payment to Save Money over Time
Lenders love borrowers who come in to the office armed with high credit scores and a good down payment, because those things reduce the lender’s risk and fear that you will not repay the loan they give you. Larger down payments also convey the idea that you have assets like a good job or other source of steady income and that you know how to save money and handle for finances. Add it all up and a higher than normal FICO score and an impressive down payment of 20 percent or more translates into a VIP borrower that the bank will want to keep as a customer. You’ll likely be entitled to a lower preferential interest rate and reasonable pre-owned loan terms which will add to your overall savings and financial strength over time.
4.Let Your Computer Do the Heavy Lifting
Now that you know how to think like a lender and impress the lender, start haggling with them over your loan from the strongest possible negotiating position. The best way to do that without walking your legs off is to use a computer to compare loan prices and terms from a number of competing banks or pre-owned car loan lenders. There are many websites that will give you up-to-date information and quotes from multiple lenders, so you can narrow down your choices online before you ever go to visit with a lender in person.
Make the loan work in your favor by getting a reasonably priced loan with a good rate of interest and manageable monthly payments. That gives you the keys to the car, and with a car at your disposal you might suddenly have more prestige, more fun, or more facility to get to school or work and eventually make more money. As long as you get what you want out of the pre-owned car loan arrangement it is a winning situation, so don’t lose sight of that fact and stay encouraged as you go through your loan application process.
loading...
Related Links:
Here is a list of three of the most often asked pre-owned loan questions, along with some answers intended to help make the pre-owned car buying and loan application process go easier and smoother.
1.How Does a Pre-Owned Car or Truck Loan Differ from a New Vehicle Loan?
The biggest difference between a pre-owned loan and one for a new vehicle that just rolled off the manufacturer’s truck is that lenders have an easier time with new auto loans, whereas a vehicle in pre-owned condition is not as easy to evaluate and appraise. They would usually rather lend on a new car loan because they can make more money on those since new cars need more cash to pay for them than do used cars and bigger loans mean bigger profits for lenders. They also trust new cars to have value that used cars may not, and if you are lending somebody money and keeping the title to the car for collateral in case they stop paying you back, the value of that car and car title becomes a really important deal.
Think about it from a car buyer’s point of view, since that is what you are and what you understand. If you are buying a brand new car you probably don’t have to worry as much about the mechanical condition of the car, its paint job, the tires, and the condition of the upholstery and interior gadgets like the radio, CD player, or GPS system. That pretty much goes without saying because you trust the dealership to sell a quality car, and even if you don’t trust the dealer or car maker you most likely have a warranty to back you up in case something goes wrong within the first few thousand miles.
But if you are in the market for a used or pre-owned car the situation changes dramatically because now you have to really study what you’re buying to make sure it works properly, hasn’t been in a flood or accident or other calamity, and that the owner before you took good care of the vehicle and didn’t run up the mileage on the odometer.
2.What Challenges Will I Face While Seeking Out a Pre-Owned Car Loan?
Keeping what we just discussed in mind, it is easy to appreciate the point of view of lenders and why they are little more skeptical regarding pre-owned versus brand spanking new car loans. So as you probably guessed, many conventional kinds of lenders – like banks that tend to be more conservative and traditional in their lending practices – are going to be hesitant to lend you much money if you are buying a vehicle that is already used and might even be well on its way to getting old.
One reason why they prefer to lend on new cars, for example, is because with a brand new vehicle it is easier to do an appraisal and set a realistic value on the car or truck – which helps a lender know how much it is really worth in the current buyer and seller market. High miles and lots of years or potential for abuse on a car translate into less value in the resale market. For any lender who has to repossess the car and sell it to the highest bidder to recoup their lost money, that becomes a major consideration.
3.How Long are Repayment Periods on Most Pre-Owned Car Loans?
Because of the types of issues covered above, most loans for used cars are not as long as the ones offered with new cars. While 36 or 48 month pre-owned loans are not uncommon, longer loans may not be readily available to you if you are buying a used vehicle. That’s simply because by the time you pay off a loan with an extended payback period the car or truck – which is the lender’s collateral in case you default on the loan – is too old to be of much value at a lender auction sale. The same goes for buying a used vehicle that is already several years old when you purchase it.
Going in search of a pre-owned vehicle loan always means that you will eventually wind up looking for reliable answers to perplexing questions about those loans and how they work. Consult the experts, read as much as you can about pre-owned loans, and take advantage of advice and resources like those found on consumer information sites on the Internet to get educated and then get a good deal on a pre-owned car loan.
loading...
Related Links:
Buying a pre-owned or used car or truck usually means relying upon a loan to finance the big purchase. That is going to be especially true whenever that used vehicle has retained much of its original value thanks to being well taken care of by its first owner. The higher the value of the car, the more likely it is that you’ll need to borrow some or all of the cost to buy it, and that is where pre-owned loans for cars, trucks, SUVs, and other vehicles come to the rescue.
Applying for a pre-owned vehicle loan is a common practice for car buyers across the USA, and because the demand for these particular kinds of loans is so great there are oodles of places that specialize in pre-owned loans. That market for lenders who want to do business with people buying a pre-owned or used vehicle has only grown over the years, and it virtually exploded with the revolutionary advent of the worldwide web and Internet-based banks, loan companies, and other financial services institutions.
To start shopping around for a pre-owned loan or used vehicle loan, experts recommend that you plan ahead and set aside enough time to conduct some research and really check out all of the many options that are going to be available to you. One of the fastest ways to learn about pre-owned loans is to go the Internet and visit sites of large loan brokerage companies. Many of these businesses have access to loans from a variety of different lenders. All you have to do is just plug in the basic information pertaining to your pre-owned vehicle purchase. Then their web sites can do a rapid search for lenders all over the map and give you a fast snapshot of different loan alternatives.
You’ll need to know some data such as the year, make, and model of the vehicle and the price you expect to pay for it. If you are planning to make a down payment or do a trade for your old car as a way to offset the sticker price of the pre-owned you’re buying, then provide lenders with that information, too. Once you have a fundamental idea of what kinds of loans are out there then you can go to other lenders offline – like your local bank or credit union or the finance office of the auto dealership. Compare a few of the better looking deals and soon you’ll start to figure out which of the pre-owned loans is the most attractive based on the important features like the interest rate, the length of time it takes to repay the whole loan, and the total amount of any miscellaneous fees or loan closing costs.
Those pre-owned vehicle loans that are going to be the least expensive are ones that have a lower APR or annual percentage rate – which is the interest rate charged on the outstanding balance. The longer the loan repayment schedule is, the longer it will take to pay it off – so that means you’ll continue to pay over a greater period of time. That automatically adds costs to any loan, because it extends the number of payments of interest that have to be made. So shorter loans that have smaller interest rates are always more advantageous.
Of course there are times when you don’t just want a cheap loan but you want one that is more manageable. In that case you need to consider your trade-offs in terms of the way the pre-owned loan is structured. Extend the payments out an extra year, for instance, and you’ll pay more in the long run but the upside of that equation is that you’ll also have smaller monthly installments to make which will put less pressure on your month-to-month budget and financial picture. Find out the pros and cons of three or four of the best looking loans you see, and then compare and contrast them against one another to see which one suits you and your particular financial situation and need the best.
As you will soon discover – or may have already figured out by now – shopping for a pre-owned loan is not a whole lot different from shopping for a pre-owned car or a slightly used truck You have to pick out the features you want, decide how much those features are worth to you, and then look for the seller who can offer you those things that are most important to you as a buyer.
loading...
Related Links:
Apply the info provided in this trio of top questions and answers that people are asking about new car loans and you should be well on your way to that new car smell – and the fun thrill of the new auto ownership experience.
1.Where can I get the best deal on a new car loan?
The answer to this question will depend somewhat on your own unique financial situation, because there are a variety of lenders who make new car loans but many of them cater to a particular type of borrower. If you have excellent credit, for example, you will probably qualify for preferential rates and you can most likely walk into any bank and snag a really reasonably priced and manageable new car loan.
That’s because lenders are suffering from the mistakes they made within the past few years when they lost zillions of dollars by making bad loans and even worse Wall Street investments in high-risk mortgage backed securities and other pie in the sky ventures. If you are a responsible borrower with a great credit history, a low ratio of debt to income, and you have a steady job in this unsteady economy – then bankers want to court you and win your business.
If you have terrible credit and have recently gone through a financial crisis like a bankruptcy or foreclosure, on the other hand, those same bankers will probably turn down your loan application. You may need to go to a specialty lender who primarily does business with so-called “bad credit” consumers. You’ll pay more for your new car loan – mainly in the form of much higher interest on the loan – but when you need to borrow money and don’t look so good on paper that can be the best option.
Those who are somewhere in between can find their new car loans at banks and other lenders, but the terms and conditions of the loan will depend on your FICO score, income, credit history, and the policy of the particular lender. You can also turn to the dealership where you are buying the new car for financing, although that is generally the most expensive way to buy a new car.
2.When should I start looking for my new car loan?
Most buyers look for their new car loan at the last minute, once they’ve already picked out – and fallen head over heels in love with – their new vehicle. But unfortunately many of them get a huge jolt of disappointment when the lender breaks the news to them that they have to break off the love affair with that particular dream car and go shop for something a little less sexy, a little more boring and generic, but a lot more affordable. To avoid this kind of misstep, savvy shoppers should start to look for their new car loan as soon as possible.
Those who give themselves as much as 3-4 months will be in the most advantageous position, because that will give them enough time to review their credit report, make some changes in their finances, and prepare for a successful and swift loan approval process. Even if you don’t have that much time you can still visit lenders and find out what they expect from you, what kind of criteria you will need to meet in order to get your new car loan, and how much you can expect to borrow. That way you can shop with a realistic sales price in mind and buy a car you’ll love without having to worry about the downside if your loan does not go through.
3.What is the biggest pitfall with new car loans?
The biggest pitfall to avoid is borrowing more than you can handle, even if a lender or dealership offers it to you. Consult a financial planner, accountant, or friend who is educated about personal finance and determine how much car you can really and truly afford. Then stay within that budget so that buying your new car becomes an experience of freedom and pleasure, not stress and turmoil because suddenly all of your focus is on money problems. Debt that is reasonable can be a great asset and tool, but tip the scale too far and it can become a catastrophe. Shoot for a total auto expense – including car loan payments, insurance, gasoline, and upkeep – that does not exceed 10 percent of your total income. Try for 6-8 percent, but if you find yourself spending 10 percent or more it is a warning sign.
loading...
