Archive for Credit Myths

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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