Loan Value « auto loan rates

March 1, 2011

What Bad Credit Car Loan Interest Rates Are Based On

Jason Lanier asked:

Most all bad credit car loans are simple interest loans, which are best. You should avoid any offer for a front loaded loan. In front loaded loans, you pay most interest upfront.

Typically, bad credit car loan interest rates are based on:
Your credit history and score How long the loan term is, which is typically 3, 4 or 5 years The year and model of the vehicle The mileage on the vehicle Your debt to income ratio Your past car credit

Fortunately, there are flexible sources for bad credit car loans. Most new car loans are paid back over 5 years, whereas most used car loans are 4 years or less in length. The longer the length of time to pay back the loan, the higher the interest rate, in general.

The total amount financed vs the loan value of the vehicle is very important to a lender, if you have bad credit. The lender needs to have the security of being able to resell the vehicle for the amount owed, should the vehicle be repossessed. If the loan value is close to the amount financed, you are less likely to have negative equity.

There are many sources for bad credit car loans. You can use a dealership, local bank, credit union or online lender. Dealerships are a good option if you have good credit. It’s common that you’ll find the lowest interest rate, lower payments and less money required for a down payment, if you use an online lender. The reason for this is simply because there is more competition among lenders on the internet.

Whether you choose to get your loan approved through a dealership or online, it’s best to shop around for loan rates, just as you do for the car itself.

Ramon

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December 11, 2010

Lowering Interest Rates on Your Car Loan

Filed under: Finance — Tags: Amount Of Money, Benefit, Car Loan Interest, Car Loan Interest Rates, Car Loans, Credit Situation, Flow Relief, Home Loans, Interest Rate, Lenders, Loan Interest Rates, Loan Value, Mistake, Quotes, Small Changes — @ 9:51 am

Thomas Ajava asked:

Interest rates on car loans have never been so low as they are now. That being said, all indications are rates will be going up in the near future as the Federal Reserve start pumping them up in general. Now is the time to lock in low interest rates if at all possible.

Many people don’t pay particular attention to the terms on car loans when they buy for the simple reason they are fixated on the car in question. This is a rather obvious mistake because even small changes in the amount of money you pay in interest can save you a lot of money over the length of a loan. If you save $50 a month on a loan by bargaining for it, that equates to a savings of $3,000 on a five year loan. This is the kind of savings that certainly is worth the effort of making.

So, how can you lower interest rates on your car loan? Well, the first step is obvious. You should shop the loan to as many lenders as you reasonably can. Unlike home loans, you tend to get a pretty good range of quotes from different lenders. They can range by a point or more depending on your credit situation. Try it and you’ll be surprised by how different the offers are.

The second strategy is to buy down your rate. This is done by offering to pay points on the loan. A point is equal to one percent of the total loan value. If you are seeking a car loan for $25,000, a point would be $250. If you offer to pay points up front to the lender, they will lower your interest rate.

This approach has two benefits. The first is some lenders will view you as less of a risk and will thus be willing to lower the rate enough that you save significantly on interest payments over the life of the loan. The second benefit is your monthly payments should be reduced as well. While this won’t save you money per se, it will give you some cash flow relief each month.

You should always aim for a low interest rate on your credit obligations. Interest payments can add up quickly over time, so even small savings can amount to major savings. Make sure to run the numbers with a calculator to see just how much you can save.

Peter

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May 7, 2010

RV Loans vs. Home and Auto Loans

Filed under: Finance — Tags: Auto Financing, Auto Loans, Car Loans, Credit Card Payments, Debt To Income Ratio, Even Boats, Favorable Terms, Financing Home, Gross Income, Home Mortgages, Loan Approval, Loan Payments, Loan Value, Necessary Loan, Retail Value — @ 8:01 pm

Barry Wilder asked:

Most lenders who specialize in RV loans base their underwriting criteria on different factors than other loans, such as home mortgages and auto financing. Home and car loans are considered to be “necessities”, while RV loans are considered to be more of a “luxury” type loan.

Even though statistics show that RV loans have a lower default and late payment percentage; these same statistics show that most people, when strapped for cash, will pay their “necessary” loan payments first. Because of these statistics, lenders will normally implement more stringent underwriting guidelines for RVs and even boats.

The number one factor that impacts RV loan approval is Credit History. Most lenders will want a credit score of at least 640, but a score of 700 or better is more likely to obtain an approval at the best rate and most favorable terms.

The second factor considered is your Debt-to-Income ratio. This is basically your monthly revolving debt, (mortgage, auto and credit card payments) divided by your monthly gross income. Most RV and marine lenders look for a maximum debt-to-income ratio of approximately 45% or less, however some will go as high as 50% or more with excellent credit.

The third factor considered is the Loan Value of the RV. Each lender has their own formula for determining the amount they will loan on any particular RV. Most lenders will loan somewhere between wholesale and retail, depending on the previous factors listed above. Some will loan up to the RV’s retail value on refinancing. Again, the better the credit history, the more flexible the lenders are likely to be.

Other factors are considered when determining interest rate, such as the age of the RV and the total amount financed. The higher the loan amount, the lower the interest rate, with common break points commonly set at amounts such as: $25,000 – $50,000 – $100,000, etc. Also, the older the unit, the higher the interest rate, but this also varies.

Many online financing sources specialize in RV loans – and it’s your right as a consumer to find what is best for you. You should however be aware that each time you submit an application, your credit history may be pulled up from 1 to 2, or even more times. Each time a company accesses your credit report, it can result in 2, 3 or even 5 points deducted from your credit score. You should always avoid lenders or brokers who “shotgun” your application to numerous lenders.

Your online rate and lender shopping can be done by going to your favorite search engine and typing in search terms such as: “RV loans”, “motor home financing”, etc. Normally, approval takes only a day or two, with loan completion and funding in about a week. Loan documents are usually sent directly to your home or work.

The best policy is to check rates with different financing sources without enabling them to pull your credit report until you are relatively sure you have found the company you would like to work with. At that time you should submit your actual application.

Happy RV’ing.

Jesse

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