Using Cash-Out Auto Financing to Help Pay the Bills

Are you in need of extra cash fast to pay those bills but don’t know where you can get it? Money in back pocketThe economy is still in crisis, no matter what the experts tell us. We’re looking at another government shutdown, and hundreds of thousands of people are facing layoffs and furloughs. Since unemployment is government-funded, this means it may not be available.

Fear not! You can actually use your car to help pay out some of those bills in the short term while this all gets settled. Here is how a cash-out auto refinance can help you take care of those bills in danger of stacking up and running past due.

 

Cash-Out Refi Process

A cash-out auto refinance works much the same as taking out a new refinance loan on your home. It is, however, much easier, faster and costs less. Most lenders don’t charge application fees for this refinance and it requires only a little bit of documentation.

The first step is to get a good sense of the value of your car, including its condition, accident history and maintenance records. Make sure you’re honest with yourself so you don’t run into unpleasant surprises during an appraisal. Following this process, you seek out a lender who offers refinancing and start applying!

 

Qualifying for Cash-Out Refi

Each lender has their own terms for qualification, and these can vary wildly from one to another. In general, however, the better your credit rating is the more likely you will be to qualify. Your payment history on your existing car loan is also an important factor to take into consideration.

The one thing that is certain is that your vehicle must have equity in it. This means that you have to have at least two years left to pay on your loan. You must still owe at least $7,500. The vehicle has to be under five years old, and must be low-mileage (no more than 75,000 miles). Talk to your lender of choice to find out what other qualifications and requirements they might have.

 

Benefits

The most obvious benefit of this kind of approach is extra money in your pocket, at least in the short term. Other major benefits include better finance terms such as a lower interest rate and lower monthly payments. This frees up even more money each month to take care of bills.

Especially if your credit has improved since originally buying your car, this kind of loan can be a great option. You can see your interest rate reduced from 11 percent or higher down to 5 percent or below with the right credit score and qualifications. For those facing a layoff or furlough, lower interest means lower payments and more money saved — a definite benefit!

 

Are you facing a difficult financial situation and think that a cash-out auto refinance can help you with those problems? If so, we might be able to help. Take a look at the services we offer, and get in touch with us today for more information.

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How Much Will One Late Payment Hurt My Credit Score?

Doctor Analyzing Credit CardsMost people know that missing payments on a loan or credit card can be incredibly damaging to your ability to get credit in the future. Late payments are reported to credit agencies, which can result in dozens of points in hits to your FICO credit score. Everyone, however, runs into issues now and again: your paycheck comes in late, you have an unexpected expense or the like, and you miss one payment. Here’s a look at how much one late payment hurts your credit score.

 

Credit Reports

Missing a payment on a credit account can damage your credit score, at least on a temporary basis. If this happens, you might have a bit more difficulty gaining new credit down the line. Lenders review your credit report to determine if you are a risky borrower, and your payment history is the largest factor in this decision. Late payments can be reported to the credit reporting agencies and are listed based on how late they are.

 

Late Payments and Your Credit

Late payments have varying effects on your credit score. How severe is the late payment? How recent was it? How frequently have you paid late?

If the late payment is on a major credit account such as student loans or mortgages, it will have a more severe effect on your credit score. In addition, the more recent the missed payment was, the worse it will reflect. If you missed a single payment four years ago, for example, it may not factor into credit decisions, but if the missed payment was last month, it will have a greater effect. Finally, if you regularly miss payments, you will most definitely see your credit score plummet and have problems getting new credit.

 

The Hits Keep on Coming

Generally speaking, the longer a bill goes unpaid, the worse it looks. This is because the hits to your credit score are cumulative the longer you take to get caught up. For example, if you miss a payment but catch up next month, you’re less likely to suffer great damage than if you take three or six months to get caught up.

A 30 day delinquency can cause a drop of around 100 points on your credit score. A 90-day loss can suffer an additional 80 (or more) point loss on top of the 30 day hit. These “black marks” on your credit score can remain for up to seven years.

 

What to Do

If you miss a payment, it’s vital to get caught up as soon as you can. Call your creditor and inform them of your situation right away; they may be able to work with you to set up financial hardship arrangements and reduce or forbear your payments temporarily. This can be a saving grace for those in hard economic times. Keep an eye on your credit report and make sure that you stay on top of all of your obligations.

Are you looking to refinance your auto loan to reduce your monthly bills and avoid a late payment that can hurt your credit score? Check out our resources and get in touch to get started today!

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Top 5 Auto Refinancing Myths

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Auto refinancing is a mysterious thing. Many people don’t even realize you can refinance an auto loan. Others believe it’s a trap or a path to bad credit (hint: it’s not). There are tons of refinancing myths associated with refinancing your auto loan, and separating myth from fact is an important part of lowering your monthly payments and even improving your credit score. Here are the top five myths about this process and the truths behind them.

It’s a Bad Time to Refi

This is the most common refinancing myth that always seems to crop up. The truth is, the only time that is a bad time to refinance is one where the current prime interest rate is higher than the rate you’re currently paying. There is no way that a 5 percent interest rate is a bad time when you’re paying 11 percent on your existing loan.

I Have Bad Credit

Another refinancing myth is that if you have bad credit, you can’t refinance your car and will get automatically declined. The truth is, there are few instances where a decline is automatic. Most lenders will be willing to at least investigate your credit, and even if you have poor credit you may still be able to refinance. If you have made good faith payments on your existing loan, on time without missing payments, this can sometimes trump an overall poor credit history.

My Loan is Underwater

Your car value depreciates severely the moment it goes off the lot. That means a lot of car buyers are underwater for at least part of their loan. Many lenders will refinance used vehicles that are underwater so long as their owner has been making good faith payments. Indeed, a refinance may be in the lender’s best interest as it ensures you’ll have an even easier time paying it down!

There’s No Money in It

This is untrue as well. Even if you save only twenty bucks a month, this is still a significant savings over the course of your loan. What happens if you put that twenty bucks into a savings account every month for the life of your loan? Over the course of a six year loan, by the time you’re paid out, you’ve saved $1,440. That’s nearly enough for a short vacation!

It’s a Huge Hassle

This is entirely untrue. Anyone who tells you that your car refinance is going to require tons of paperwork, extra appraisals, justifications of wear and tear or other issues is just wrong. There are no appraisals on an auto loan and the only justification you may have to make is if you disagree with the condition of your vehicle on the Kelley Blue Book value. The truth is, a refinance loan is one of the easier types of credit for which to apply.

There are many auto refinancing myths, and most of them make it look much harder or more tedious than it really is. If you would like to explore this option for your vehicle, take a look at our auto refinancing resources, and give us a call to get started today!

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When To Refinance A Car Loan

blog_when-to-refiEven in our improving economy, interest rates remain very low. For many, this is a prime time to refinance a car loan, mortgages and so on. Refinancing can effectively save you thousands of dollars over the life of the loan, but it will also extend your payments out longer. This creates a delicate juggling act that you must carefully weigh before taking the plunge. The process, if you decide to pursue it, should be quick and easy. Here are the situations in which an auto loan refinance can be advantageous.

 

Dropping Interest Rates

If current interest rates are at least a few points lower than they were when you first purchased your car, it may be a good time to save some money. When you refinance, you will be taking out a new loan which will be considered a used car loan. This means the rate could very well be higher than on most new car loans. Make sure you check the proper rates before pulling the trigger.

 

Better Credit

If you have significantly improved your credit score, it could be a great time to refinance. A higher credit score almost always results in lower loan rates. You may have financed your original purchase at a rate as high as 18 percent if you had bad credit. Improving your score can significantly reduce that and save you a lot of money in the process.

 

Sub-Prime Rates

Even if you had good credit, you may have received an original rate that was less than prime. Many dealer loans have a higher rate because consumers don’t think to shop around first. If this is the case for you, seeking a third-party refinancer can significantly drop your rate and, as a result, get you lower payments.

 

Financial Setbacks

Have you encountered a personal financial landscape problem? If you recently lost your job or are experiencing other financial setbacks, but your credit is still strong, refinancing your loan can help to ease the burden by lowering your monthly payments in exchange for a longer term loan.

 

Buying out a Lease

You may have leased a vehicle and are looking to keep the car instead of turning it in. In this case, your lender can help you get a new loan that can result in payments around the same rate as those you have been making up to this point, or even less. To get the best rate, talk not only to the dealer but to banks and credit unions as well.

 

Average Savings

If you are eligible for an auto loan refinance, the savings can be significant. Depending on how high your original interest rate was, you can end up saving $30 or more per month on your payments, which over the life of the loan is a savings of over $2,000. However, you need to be sure you are eligible. If you owe more than the vehicle is worth, you may be refused a refinance. Likewise, if your car is old or if you owe too much you could be turned down.

 

If you think refinancing is a good option for you, we may be able to help. Check out our refinance rates page, and apply today!

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How the Type of Car Can Change Your Loan Rates

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Everyone wants a nice car that will turn heads as well as get you where you need to go, when you need to get there. When the time comes to purchase your new vehicle, however, you should be very careful to stick to what you can afford. Trying to shoot for the moon can be a bad idea, especially when considering interest rates. What you may not know is that the type of car can change your loan rate.

Newer vs. Older Cars

The model year of your car can have an effect on your loan rate, and not in the way you may think. Buying a newer car can be a bad idea — newer cars instantly depreciate in value the moment you drive them off the lot. Combined with the interest rate you pay, this can instantly have you upside down on your loan, owing more than the car is worth, by up to 20 percent of the car’s value.

Buying an older car, on the other hand, does not carry this problem. Consider a car that is perhaps two years old with lower mileage. You can get a favorable interest rate, a much lower purchase price, and won’t have to worry about being underwater on your purchase. Many dealers even offer zero percent financing during end-of-year clearance sales, if you have good credit.

 

Make and Model

It’s a pretty basic equation: higher-end cars cost more to finance. While that luxury sedan, sports car or full-sized SUV may be the car of your dreams, can you really afford to purchase it? Generally speaking, your loan rate will be higher on a more expensive vehicle because of the higher risk for theft and damage to these cars. This is similar to the reasons why it costs more to insure these cars.

When you consider the car you want, you should think about a compromise. You might be able to get a very similar vehicle that perhaps isn’t quite as high-test. A smaller engine, fewer features, even a competing brand at a lower price can all be ways to get a better loan rate.

 

Going by the Numbers

The biggest factor in determining your loan rate is going to be a combination of your credit and your finances. This is where the make, model and year of your car come into play the most. The bank will look at your finances against what you are paying for the car when determining the rate of your loan. If your debt-to-interest ratio is too high or your credit score too low, you will likely suffer with a higher rate.

What this means is that buying a newer, more expensive car will almost always garner you a higher rate unless your credit is stellar. With less-than-perfect credit, consider a few compromises. A few less features and a car that is a year or two old can make all the difference.

If you have less than perfect credit and need help securing an auto loan, check out our informational page and get in touch with us today. We can get you into the car you need.

 

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The Secret to Getting a Low-Rate Car Loan

blog_Secret-To-Low-Rate-CarHave you ever wished that you could get rid of your junker and afford a brand new vehicle at an affordable loan rate? You are not alone. Many people wonder how they can get their hands on a low-rate car loan and start driving the vehicle of their dreams. The truth is, there are basic steps you can take to make it happen, but it requires work and diligence on your part. Here’s a look at how you can get a better loan rate the next time you want to buy a new car.

Monitor Your Credit Report

A good low rate car loan is all about credit. This may seem unfortunate, and might seem an insurmountable hurdle, but it is the truth. You can get there if you work at it, though! Start by obtaining a free copy of your credit reports from all three major bureaus. By federal law you are entitled to this without cost. Examine your credit report carefully. Look for errors. You would be surprised how often mistakes crop up. Report and challenge errors with the bureaus, who have to prove the information or remove it. Closing open lines of credit that you don’t use can boost your score by improving debt-to-income ratio. Work on clearing up small black marks. The more you can clear up the better off you’ll be. Do this every year.

Pay Your Bills

This seems obvious but cannot be overstated. If you have outstanding debt, do everything you can to get rid of it. This is especially true of revolving debt like credit cards. Know the difference between “good” and “bad” debt. Mortgages, student loans and business loans are “good” debt. They show you paying into things of value. Revolving credit like credit cards is bad debt. It is best to clear this from your credit history first. If you have delinquent bills or loans, get current on them and work with your creditors to clear up your credit report. This report is, as previously stated, all-important when it comes to getting the best rate. The more you can get up to date, the better situated you’ll be for a great rate.

Get Prequalified

Shop around with different credit agencies to get prequalified for good rates. This gives you power to negotiate or walk away from unfavorable deals. Work with your bank and credit union to see what’s out there. Be careful, though, not to over-apply, because every application reflects on your credit report and can become a negative mark.

Low Term Loan

The shorter your loan term, the better off you’ll be. Applying for terms of over 60 months shows that you may be looking to buy more than you can afford and you may end up with a less favorable interest rate as a result. Never focus solely on your monthly payment. Focus on the term and total amount of the loan first. If you need a low car loan and your credit is not perfect, we can help. Drop us a line today, and let’s talk!

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Why You Shouldn’t Use All Your Savings to Buy a Car

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There is no denying that cars are fun and that having a nice car can make you feel like you are on top of the world. The reality is that no one should buy a car they cannot afford, and that includes a car that costs every cent of your savings to buy.

Tying up all of your funds in a vehicle can put you in a serious bind, leaving you vulnerable to all sorts of financial disasters that could set you back for years. Here are some of the specific dangers that can happen when you leave your savings balance at zero to get that fancy ride:

You Will Not Be Able to Afford to Drive It

Cars have thousands of moving parts, and they all need a little bit of love to keep on moving. In other words, upkeep on a car is vital to keep the car running at all.

You could also end up having car issues and not enough money to afford fixing it. The first time you encounter trouble and need a $280 fix, you will have to let the repair wait or keep driving and hope it does not turn into a $2,800 fix. Without money for gas, oil changes, regular servicing and to make necessary repairs, your vehicle just could end up sitting in the driveway more often than enjoying a life on the road.

Emergencies Will Leave You Strapped

We can never predict what could happen in the next few months. You could break an arm or your hot water heater could go kaput. Without savings to pay for these things, you will have to find some way to afford them. Sometimes, you may not even be able to afford them.

Suddenly you are forced to choose between making a mortgage/rent payment or visiting the doctor. Even if you have health insurance, you could be forced to pay $50-$100 on copays, deductibles and prescription costs. Putting these expenses on a credit card could create a debt snowball that eventually gets out of control.

Preparing for these types of unforeseen incidents is why they call some savings an “emergency fund.” Make sure yours is well-stocked to avoid taking cold showers and eating ramen for the sake of paying cash for a car.

Try a car loan calculator to see what your monthly payment would save you

Your Savings Can Often Be Better Spent

Cars are appealing and usually practical, but they are not always the best investment to make compared to other ones. Any time you had the option to spend money better on something else, it is called an “opportunity cost.”

Opportunity costs can include buying health insurance, paying off debts, investing in things like home improvements or education or even taking a few days off of work for a much-needed vacation. Spending all of your savings on a car, which can break down and lose value over time, can often leave you with little in return for your hard-earned money ten years down the road.

Car Loans Are Easy to Come By

Having savings is an awesome feeling. You may feel empowered by the idea of buying something pricey like a car with it in cash, but for the above reasons this could easily be a mistake.

Instead of potentially digging yourself a financial hole, you can take advantage of car financing loans. These loans give you a predictable and consistent way to pay off the amount you owe with more room to prepare for surprises.

You can even use a small portion of your savings to decrease the principal amount of the loan, or you could add to your monthly payments when you feel like it without committing all of your cash to one car. With enough savings, you could also qualify for a lower interest rate and friendlier repayment terms, letting you pay your car off quick without having to worry about building homemade casts or expecting ramen for dinner.

Visit our new and used auto loans page to find out more about how you can get the car you want and keep most of your savings where it is.

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Who Qualifies for Auto Refinancing?

Who qualifies for auto refinancing?In today’s economic climate, experts are constantly pushing for people to save money. Recent estimates are that to be financially viable a person should have at least three months’ worth of bills saved up. This can be problematic for those living paycheck-to-paycheck. In order to get more financially stable, many are turning towards refinancing their home and auto loans to try and save money. The question is who qualifies for auto refinancing?

Simple and Clear

The process of refinancing a car is much easier than that of refinancing a mortgage. The qualification criteria are more straightforward and there is less paperwork, time and cost throughout the process. The catch is that credit becomes an important factor.

Interest Rates

Pay attention to current interest rates. If the rate you are currently paying is much higher than the current standard rate, you may want to look at refinancing. For example, between 2008 and 2013 interest rates dropped by nearly 2.5%, a significant decrease. If you are paying 7% or higher on your current auto loan, now might be a good time to consider trying to lower those monthly payments.

Credit Score

Credit is all-important when it comes to auto loans. Still, the criteria for applying are far less than those for home loans. If your financial situation has improved over the past few years, and you are maintaining a strong payment history, you might be surprised at just how qualified you are for a new and lower interest rate on your loan.

How Long Is Your Loan?

The length of your loan is another factor you should take into account. If your loan is very long—up to eight years—it may be time to look into re-investing. A shorter loan at a lower rate may involve equivalent or slightly higher payments, but you will pay off your vehicle faster. If you can afford to do so, you might be able to save more money faster after all is said and done.

With a long loan you will pay much more in interest because of the long term. They key factor here is that it is not always about your monthly payment. Sometimes, removing the debt faster is a more ideal situation.

Things to Avoid

As attractive as refinancing may be, there are certain situations in which you should avoid doing so. If the existing finance deal includes a penalty for early payment, or there are fees that offset any savings you would gain, refinancing may be a bad idea.

Likewise, understand that refinancing can extend the life of your loan. If you are trying to reduce your repayment term, a refinance can sometimes be a bad deal. You are essentially taking out a new loan to pay off the old. Make sure that your new loan term will reduce the money you spend overall, not increase it.

If you think that refinancing your auto loan would be a good step for you, we are happy to discuss the possibility. Give us a call today 800-258-3759; we are here to help!

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What Kind of Rates Should a Car Refinance Loan Offer?

What Kind of Rates Should a Car Refinance Loan Offer?A car refinance loan rate will vary wildly depending on your credit history, your current loan status and even the time you happen to ask the lender. That being said, there are several different categories of loans given your current financial situation.

Ideal

An ideal situation for refinancing would be that your credit was good when you got the initial loan and it has improved since then. In these conditions, you may want to reduce the loan duration to pay it off earlier and with less interest. This will net you a lower financing rate.

The low end of these loans would be a 36 month loan with a credit union or similar community-based institution. Your payments could be in the high end of $600-$650 for a $20,000 loan, but your interest rates would be as low as 2.5-4 percent, and sometimes lower.

This interest rate increases when you wish to extend your loan terms to 48 or 60 months. For most institutions, you would receive a rate of 6-11 percent for a longer repayment plan such as this. You would also run the risk of your vehicle reducing its value during this time.

Recovering Credit

If you bought your vehicle with a credit score of 580 or lower, you will most likely be in a loan with an interest rate as high as 11-18 percent. Refinancing after making reliable payments will get you a better interest rate because your credit may have increased.

Assuming your credit score increased to 620 or higher, a 36 month loan in this situation can qualify for a rate of 7-11 percent. Longer loans will keep a higher rate of 10-14 percent, but this may still be better than the rate you received upon your initial vehicle purchase.

Bad to Worse Credit

If you are refinancing to avoid defaulting on your loan, your interest rate may be comparable to your initial loan but with lower monthly payments. You are most likely looking for a 48 month or 60 month loan in this situation, which can get you an interest rate of 11-18 percent or higher.

You can lower your interest rate with some lenders by putting money on deposit or getting a cosigner. In most situations, you may be stuck with a high rate because your credit score is still suffering and you are trying to extend the loan’s terms. Your best bet would be to refinance now and take steps to improve your credit. Some of these steps include:

  • Pay the full balance for unused lines of credit and close them out
  • Make vehicle payments on time
  • Avoid opening new lines of credit for the next year or so, including cash advances
  • Keep credit card balances low

With these strategies, your credit score can improve drastically within 30-40 months. Once this happens, try to get a new car refinance loan again. You will hopefully be in the middle category of “significantly improved” and have a lower interest rate.

You would also do well to save up and prepare for a shorter loan term when you get a car refinance loan. This should get you much lower interest and help you with a faster overall repayment.

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Can You Refinance Your Auto Loan with Bad Credit?

Refinance your auto with bad CreditMany consumers with bad credit end up wanting to refinance their auto loans down the road. Most people are not sure what resources are available for them.

Fortunately, many auto loan companies are more than willing to take on customers with bad credit. What you will want to keep in mind is that certain factors will improve your ability to get a loan refinance, as well as improving the terms you will receive.

Reduce Your Monthly Payments

The main reason most people want to refinance is to lower their monthly payment. A low payment can help you stay afloat and avoid defaulting. A lower payment generally means more compounded interest and an overall larger amount spent on the loan.

Make Payments on Time

Make an effort to pay off your monthly statement for your existing auto loan. Making payments on time helps increase your credit score and demonstrates financial responsibility to a lender. They can review your record and see that despite your credit score, you have begun to take part in financially responsible behavior.

If you default on payments, you may have difficulty refinancing. The lender will see this action as a risk, made worse by your unfavorable credit score. If you do manage to secure a refinance loan after defaulting on your old one, you may face harsh penalties and fees.

Interest Rate Adjustments

Your interest rate may change depending on the lender you choose, your current financial situation and the economic climate. If you have been paying your existing loan on time and have demonstrated responsibility, you may see a small reduction on your interest rate. National interest rates may also have lowered, allowing for a more favorable interest rate upon refinancing.

On the other hand, if your credit has gotten worse since your last loan and you have had trouble making payments, your interest rate could see a slight gain. You also may see a higher interest rate in exchange for an abnormally small monthly payment.

Your Car’s Condition

Another factor in refinancing is the overall state of your car. While refinancing lenders will not appraise your vehicle, they want to make sure your new loan is not covering a bad asset. In other words, your vehicle has to have a certain amount of value for them to be interested in giving you a loan.

Here are some common conditional factors; these will vary depending on the lender.

  • The vehicle was manufactured within the last 5-10 years
  • The vehicle has less than 50,000 miles on the odometer
  • The initial value is not significantly lower than the balance on your current auto loan

Other conditions may require someone with a set income level, usually higher than $2,000 a month.

A Helping Hand

No matter what your situation, you can eventually find someone who will be willing to help you refinance. Getting more favorable terms on your auto loan will free up your credit and set you on a path towards building even better credit into the future.

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