How to Apply for a Bad Credit Auto Loan


How to Apply for a Bad Credit Auto Loan thumbnail

Recession has made financing a new car even more difficult for consumers, but bad credit auto loans are still available. Learn where to apply for the funds you need, even if you have bad credit or not credit at all.

    ~~BEFORE APPLYING FOR A BAD CREDIT AUTO LOAN~~

    Though alternative forms of financing may get you into the car you want, they are not without significant expense to borrowers. Borrowers with bad credit can often find the car loan they need, but know that those loans often include greatly inflated interest rates and substantial fees. Beware of predatory lenders. Always read the terms of a loan before agreeing to a financial arrangement neither you nor anyone else could reasonably live with.

    ~~VISIT AUTO CREDIT EXPRESS~~

    (See the Resources section below this article for a direct link.)

    This site specializes in bad credit auto loans. In addition to accepting applications online, they also provide the criteria required for approval so you can invest your time and credit only on loans you are likely to receive. This site also offers tips and assistance for finding the right car for your credit situation.

    ~~VISIT CREDIT LOAN~~

    (See the Resources section below this article for a direct link.)

    This company provides car loans and many other types of financing for borrowers with poor credit or no credit. This site emphasizes "pre owned vehicles" and offers guidance on calculating a loan with reasonable payments that it claims borrowers can meet.

    ~~VISIT E-LOAN~~

    E~loan is another popular financing company that provides a wide variety of loan packages for borrowers of all credit backgrounds. They also provide a loan calculator to help you determine what amount you can afford to pay back comfortably.

    ~~VISIT CAR CREDIT~~

    In addition to bad credit auto loans, this site provides information on consumer borrowing, dealer recommendations, and a lot more. The site boasts instant approval (answers applications within 60 seconds).

Tips & Warnings

  • Always read the terms of a car loan and seriously consider your ability to repay the loan before accepting it.

  • Beware of predatory lenders.

  • This article is not intended to provide reliable financial guidance or advice, nor does it vouch for the lending companies included. These sites are untested by the author. It is the responsibility of the reader/borrower to conduct their own research for each loan and seek professional guidance to make a wise financial decision.

How to Do Math for Figuring Simple Interest


How to Do Math for Figuring Simple Interest thumbnail

Math for figuring simple interest can be important for many different reasons. It can be used when you are loaning someone money or when investing in bonds or other investments. The following article will use a personal loan as an example of how to use mat for figuring simple interest.

    Learn the formula. The formula is ‘I=(P*r*t)+P’. ‘I’ is the interest. ‘P’ is the principal. ‘r’ is the rate per year. ‘t’ is the term. The term can be in months, semi annual periods or years, but ultimately it is the number of times interest is calculated.

    Determine the variable data. For purposes of this example, we will start with a principal of $1000, an interest rate of 5% and a 7 year term. Here is the scenario; Tommy wants to give a personal loan $1000 to Jane at a rate of 5% under an agreement that it must be paid off in seven years.

    Multiply the Principal times the rate times the term. That is $1000 times 5% times 7 years. This comes to $350 (1000 * 5%= $50 and $50 * 7 years = $350). Jan will owe Tommy an additional $350 in interest for the personal loan on top of the money lent.

    Add the principal back to the interest to get the total loan amount including interest and principal. For this example, that comes to $1350. The total amount of money that Jane must pay Tommy in seven years for the personal loan is $1350.

    If you want to then break up the personal loan into monthly payments you can do this by determining the amount of months. This is 7 years times 12 months per year which comes to 84 months. Then you divide the total loan amount of $1350 by 84 to find out how much Jane must pay to Tommy per month in order to pay off the personal loan in 7 years. In this case the payment comes to $16.07 per month.

Tips & Warnings

  • If you are working out a term which interest is calculated more often than once a year or less often than once a year then there is additional math for calculating simple interest that must be done. Most of the time a personal loan or a bond is going to be done yearly.

The Laws on Cosigning for an Auto Loan

Co-signing an auto loan to many people means simply providing assistance for someone to get a car. Legally, the transaction can mean so much more, especially if the primary signer has difficulty paying the note or has an accident with no insurance coverage. While the primary signer has sole possession of the vehicle, the law recognizes the co-signer as an actual co-owner of the vehicle and ascribes shared liability for any negative incidents the vehicle may be involved in. The law also assigns shared liability for loan or lease in the event that the primary signer defaults.

Liability

    When someone agrees to cosign for an auto loan, they are also agreeing to accept full liability for the loan or lease, as well as the vehicle. For example, the cosigner is likely to become financially responsible for the loan or lease if the primary signer fails to make the payments. And, at the creditor’s discretion, the cosigner can even be held solely responsible if the creditor determines that the co-signer has better resources to pay the loan or lease. The creditor may actually pursue the co-signer even if the primary signer has not turned in the vehicle.
    If the primary signer on the loan does not maintain full insurance coverage on the vehicle, the co-signer becomes liable for any property damage or bodily injury, right along with the primary signer. This means that the co-signer is burdened with full responsibility for the vehicle, even without ever driving it.

Laws for creditors.


  • Creditor may sell the car.
    Creditor may sell the car.


    The creditor has legal recourse against both the primary signer and the cosigner and may seek resolution from either or both parties if the payments are missed or if the loan goes into default. If the loan goes into default, or if the primary signer files for bankruptcy protection, the creditor may pursue the cosigner for the full amount. Optionally, the creditor may also sell the property and hold the cosigner liable for any gap in the sale amount and the loan amount. There is no bankruptcy protection for cosigners.

Laws for cosigners

    Cosigners do have some rights under the law, though limited. As an actual co-owner of the vehicle, the co-signer can ask the lender to notify him or her whenever a scheduled payment has been missed or made late. If the cosigner has knowledge of a late or missed payment, the law provides the option of bringing the account current with a payment to mitigate damage to the cosigner’s credit standing.

    In extreme cases of multiple missed payments, the cosigner can actually secure possession of the vehicle. After taking possession, the cosigner may exercise the options of either taking over the payments, paying the loan in full or selling the vehicle. Funds from the sale of the vehicle can be used to pay off all or part of the loan, creating another avenue for protecting the cosigner’s credit and financial exposure.

    As a last resort, the law allows the cosigner to file a suit against the primary signer. Such legal proceedings can occur if the primary signer has allowed the loan to go into default and will not make the vehicle available to the cosigner. Filing a lawsuit can also seek to cover the gap between funds from the sale of the vehicle and the remaining financial liability to the creditor.

Are a Direct Loan & a Personal Loan the Same Thing?


Are a Direct Loan & a Personal Loan the Same Thing? thumbnail

A direct loan is not the same thing as a personal loan, but it is possible for one loan to be both a direct loan and a personal loan. The fact that many loans fall into both categories can make the distinctions hard to recognize. Whether or not a loan is “direct” refers to its structure. The term “personal loan” refers to the loan’s purpose.

Structure

    A loan can be structured in a number of ways. It can be a federal loan, a state loan, a private loan or a blend of any of these options. When a loan is “direct,” it comes straight from the lender to the borrower, without third party involvement. For example, a conventional mortgage straight from a bank is a direct loan. This is in contrast to an “indirect” loan or a loan guarantee. For example, a home loan with a guarantee from the Federal Housing Agency is not considered a direct loan.

Purpose

    Many loans are given for a specific purpose. For example, home loans and car loans are used to purchase a house or a vehicle. A personal loan is not given for a specific purpose. This type of loan can be applied to any need, including medical bills, paying off other debts or taking a vacation.

Overlap

    Most personal loans are given directly from a lender, making them direct loans. It is rare to have any third-party involvement in a personal loan’s distribution. For example, the federal government does not extend personal loans for unspecified purposes. In general, personal loans are considered high risk because the lender does not know what the funds will be used for. Since they are high risk, it is rare to find a third party lending organization that will get involved with them.

Distinctions

    While most personal loans fall into the direct loan category, the opposite is not true. There are many direct loans that are not personal loans. For example, home loans, car loans and computer loans may all be issued directly from a lender, but are not personal loans.

How to Qualify for a Loan With a 580 Credit Score

The mortgage industry continues to raise its credit standards in acceptance of loans to fund. Lenders do this to prevent foreclosures, and to keep their doors open for business. Although credit guidelines have been tightened and higher credit scores are becoming the new requirement, there are ways that you can still get financed with lower credit scores.

    Contact a mortgage broker about purchasing a home. Inform him that your credit scores are in the 580 range. He will explain that the Federal Housing Authority (FHA) is an insurer of mortgage loans which promotes affordable housing and very low down payments. FHA loans have looser guidelines than other types of loans, and a few FHA lenders will still fund a purchase loan with a lower credit score. If the broker cannot provide information, you should contact a different brokerage. Some lenders will fund borrowers with lower credit scores.

    Provide proof of income for at least two years. You–and your spouse, if you are married–will have to qualify for the loan without a co-borrower. Although the FHA allows non-occupying co-borrowers on loans to help borrowers qualify for home loans, the lender will not allow this practice when credit scores are very low.

    Complete the loan application. Provide proof that you have enough funds for a down payment, insurance, and escrow costs. The FHA requires 3.5 percent of the purchase price of the home.

    Calculate the required down payment amount. Multiply the sale price by the percent required. For example, if the home costs $200,000, then multiply $200,000 X 3.5%=$7,000. The new base loan amount would be $193,000.

    FHA has two types of mortgage insurance premiums (mip) that must be added. The first type is normally added to the loan and is calculated at $193,000+2.25%($4342.50)=$197,342.50. New loan amount would be $197,300. The odd $42.50 would be added to closing costs.

    Calculate the second type of mortgage insurance premium (mip) at $197,300X.55%=$1085.15/12=$90.43 to be added to your monthly payment each month. Now that we have a correct loan amount and monthly mip add on, we can calculate the estimated payment. $197,300 at 6% over 30 years would result in a $1182.91 monthly payment, but you must add $90.43, plus estimated yearly taxes of $1800/12=$150 and estimated yearly insurance of $1200/12=$100=$1523.34 grand total monthly payment. Now that we have a total monthly (estimated payment) we can prequalify the borrower.

    Understand that FHA allows for 31 percent of gross income for the housing payment, with no more than 43 percent of gross income for all monthly debts. Let’s say the borrowers earn $5,000 per month and the monthly payments are $400 per month. The new payment of $1523.34 divided by $5000=30.46%. The total of $1523.34 +$400=$1923.34 divided by $5,000=38.46%. These debt ratios are lower than the maximum ceilings of debt ratios for FHA, so this is acceptable.

    There may be lender restrictions with the lower scores. An example may be that the lender may limit how much a seller can contribute to closing costs. They may require that the borrower have some reserves–amount of two to three months of monthly payments–in savings after closing the loan. Your broker will give you specific details on what is required. This may vary from lender to lender.

Tips & Warnings

  • Higher credit scores are rewarded with a lower mip of 1.75 percent. Monthly MIP can range from .50 percent to .55 percent.

  • FHA does not fund loans; it only insures them. FHA sets up the guidelines for writing and insuring the loan, but it is the lenders who set up score requirements. This is why some lenders require 640 mid score for approval while others can fund an FHA loan as low at 580. Some lenders can only fund when the file has been approved (underwritten) through the DU system (automated underwriting). They may not offer “manual underwriting” which is where a file is approved by a person rather than the DU system. Scores as low as 580 would not be instantly approved through the DU system, so a manual underwriting becomes necessary.

Best Auto Loans for Individuals With Low Income and Bad Credit

Auto loans for individuals with bad credit ratings are nearly always extraordinarily expensive. The lower your income and the worse your credit rating, the more difficult it will be to get approved for an auto loan. Expect to pay high interest rates, a large down payment and be subject to many penalties and fees if you fail to make loan payments on time. To get the most affordable auto loan possible, there are a several strategies you can use to improve your chances of getting a loan.

Preparation

    Even if you have bad credit and low income, if you prepare for applying for an auto loan for at least three months, you will greatly increase your chances of winning approval for a more affordable agreement. Pay your bills on time. Make an effort to pay off the balance of all your credit cards every month leading up to the auto loan. Settle any delinquent debts before applying. If you can demonstrate an improved credit history for at least 90 days leading up to your loan application, lenders may be willing to give you more favorable terms. Saving up for a down payment during that period of time will also demonstrate your improved financial responsibility to potential lenders.

Finding the Best Bad Credit Auto Lender

    The most important element of finding a bad credit auto loan is to work with a responsible lender. Consider working with a dealer network instead of searching for individual lenders. These networks will take your financial information and market it to various lenders in your area that serve customers with bad credit. You may then choose the lender that gives you the strongest deal. Examples of such networks include Finance Firebird and Car Loans Quote Form.

    Cross-reference the companies that offer you loans with the Better Business Bureau database (see the Resources below) to ensure that you choose the best lender for your needs. When you find a lender that offers an attractive rate, explain your financial situation as clearly as possible. Work out a loan that fits your financial situation that you can be reasonably assured that you can afford with your current income.

Choosing the Right Car

    Bad credit auto lenders will usually only provide financing for a certain set of cars. Ask the lender what cars they are willing to finance and choose the one that fits your needs and is affordable. A used car will generally be much easier to finance than a new one. Bad credit auto lenders also prefer cars that are relatively stable in value so that the balance of the loan can be easily recovered in the event of repossession. If your income is low, it’s wise to choose an inexpensive, safe car that you can also afford to insure.

Down Payment

    Make a larger down payment than necessary when purchasing a car with a bad credit auto loan. You’re also more likely to be approved for an auto loan if you can make a larger initial payment. This will also reduce the size of your monthly payments and the overall interest that you pay for the car over the lifetime of the loan. On the other hand, the larger downpayment means you take on more risk if the car depreciates faster than you might have anticipated, but the savings on the monthly payments will likely make up for it.

Special Mortgages for Nurses


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A critical shortage of nurses has spawned attractive financial housing offers that include home buying programs specifically for nurses. The programs are designed to entice nurses already practicing their profession as well as students who are thinking of a career in nursing. Real estate entrepreneurs and nursing association organizations are offering special mortgages as they vie for the services of qualified nurses

National Association of Nurses

    The National Association of Nurses in 2010 is advising nurses that they can now purchase, refinance or obtain new construction financing with mortgage program offers designed specifically for nurses, and the organization adds that nurses can pursue these advantages from their homes.

    The association expresses that it offers mortgage options, such as fixed rate terms from 10 to 30 years; adjustable rate mortgages (ARMS) with three-, five-, seven- and 10-year fixed rates; interest only options and stated income and no documentation programs; a cash flow program providing four payment options; and up to 100 percent financing on many of its programs.

    National Association of Nurses

    180 E. Main St., Suite 203

    Smithtown, NY 11787

    800-252-1874

    nanonline.com/

Mortgages for Champions Benefits

    Mortgages for Champions says that its program reduces bureaucratic procedures and many of the due costs connected with residential mortgage financing programs, such as the loan application and loan processing fees, in addition to mortgage underwriting fee, mortgage commitment fee and related commitment points, which it maintains can save as much as 2 percent to 3 percent on every mortgage transaction.

    Mortgages for Champions also states that eligible medical mortgage financing includes first- and second-time home buyer programs or a streamline factor that allows you to make additions to your current home, with other possibilities that enable you to obtain financing for a two- to four-family unit, a condominium and even for a mixed usage commercial property, such as a store with apartments that can provide income, in addition to no down payment clauses and conciliatory credit standards, including first-time home buyer programs that provide a loan of up to 97.75 percent to value of the sales price and refinancing programs that are liberal in nature. The company operates more than 30 offices around the country. There is a directory of them on its website.

    Mortgage For Champions

    888-320-6133

    mortgagesforchampions.com

Florida’s Joint Venture with Fannie Mae and EdSouth

    There are some state semi-funded programs that allow nurses more favorably disposed conditions for acquiring a mortgage, accordin to the website Mortgagefornurses.com, and the article points out that Jeb Bush, during his stewardship as governor of Florida, announced a joint venture involving the state and Fannie Mae to award nurses increased low-cost mortgage loans. The state also introduced a joint venture with Educational Funding of the South, Inc., also referred to as EdSouth, to award low-interest college loans to nursing students and established nursing professionals, according to the website.

Maryland’s Planned Provision for Nurses Mortgage

    In Maryland, a bill was introduced to increase home ownership opportunities for nurses, the website Mortgagefornurses.com submits, and it adds that plans are for the Department of Housing and Community Development (DHCD) to commit funds of up to $25 million over five years to provide mortgage loans for nurses who are licensed in the state and employed by a hospital, with the requirement that nurses agree to continue working at a hospital for at least three years, as long as work is available.

    The website states that the loans would be provided at an interest rate below the normal rate for similar programs and will be available for property purchased in priority funding areas by first-time home buyers, with a clause in the funding plan dictating that the program must be developed in consultation with the Maryland Board of Nursing as well as related professional nursing associations.

How Can I Get a Home Loan With a Credit Score Lower Than 500?


How Can I Get a Home Loan With a Credit Score Lower Than 500? thumbnail

Homeownership allows you to build equity in an asset and re-build credit by making timely payments. If you have a credit score lower than 500, it will be very difficult to secure a mortgage loan. Private investors, credit unions and co-signers, however, make securing a loan a possibility. Since lenders use “risk based lending,” interest rates on these loans will be significantly higher.

    Contact a mortgage broker. Ask the broker about private investor loans for high-risk borrowers. Investors pool money to provide loans to people struggling with poor credit.

    Apply for a mortgage with credit unions. Credit unions usually make loan decisions at the branch. If you have special circumstances, such as serious medical illness or struggles with job loss, the lender may consider these circumstances. It’s important to focus on what you’ve done to turn your credit around. For example, for the past 12 months you haven’t had a late payment on any debt obligation. Or, after being unemployed for a year, you’ve been working for the past 13 months.

    Secure a co-signer. If you’re experiencing a challenge securing a mortgage, ask the lender about using a co-signer. A co-signer is a person with good credit who will also put her name on the loan. If you default on the loan, this person is on the hook for the debt obligation.

    Ask about fees. Even with poor credit, some fees are worth negotiating. For example, fees handled in-house, such as application fees or processing costs, are the most negotiable. Ask the lender to reduce or waive these fees to minimize closing costs.

    Refinance your loan to a lower interest rate product. After building a positive credit history, check on your credit score. A credit score can be obtained through an annual credit report. Ask the lender to refinance your loan to a lower interest rate product. Some lenders will do this to retain your business.

Tips & Warnings

  • If you have trouble securing a mortgage or interest rates are too high, work on improving your credit score by making timely payments on debts and paying down debt obligations. This will raise your credit score. If you can improve your credit score to 620 or higher, you will qualify for an FHA loan, which is backed by the Federal Housing Administration.

  • People with a low credit score will be subject to the highest interest rates. High interest rates drive up monthly mortgage payments. Consider working on improving your credit score before applying for a mortgage to significantly reduce the cost of financing.

How to Find Used Car Loan Value

Used car loan values are good to know if you are in the market for a quality automobile. Drivers who purchase used cars can still obtain good deals. However, it is vital to understand what other cars of the same make and model are worth on the current market so you are able to bargain with the used car dealer or person from whom you are buying.

    Perform your due diligence. Conduct research on used automobiles by referring to periodicals which cater to consumers. Look online for reviews from buyers who have bought used cars similar to the one you desire to buy. If a vehicle you want to buy has many bad reviews, consider another option.

    Go to a used car value website. Find one which specializes in providing the value of vehicles of all sizes and especially ones which focus on used cars. The Internet Auto Guide, internetautoguide.com, will give you an idea as to what a used car will be worth.

    Check the overall condition of the vehicle. Find out if the car needs any repairs. If you are not able to estimate repairs on your own, bring a trained mechanic or friend who knows a great deal about cars with you. Be sure that the business where you buy the vehicle gives you a discount if any repairs need to be made.

    Apply for a loan. Gather the information you have obtained from your research and bring it to the loan company to apply for a loan. Remember that most lenders will charge higher interest on because they see these as riskier investments.

    Calculate the amount of money you will have to pay monthly. Use an auto loan calculation tool such as the one found at edmunds.com to determine your payments. Compare the rates of various lenders you contact and choose the company which offers you the best rates and terms.

Can I File Bankruptcy on Payday Loans?


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If you opt to file for bankruptcy, you probably wish to include any outstanding payday loans you have in your bankruptcy filing. Sometimes it is possible to discharge these loans via bankruptcy, but in other cases it is not. Your ability to discharge your debt to a payday lender depends upon the decision of the judge in your bankruptcy hearing and, if that decision is in your favor, how hard the payday lender is willing to fight for its right to the funds.

The Facts

    When you apply for a payday loan, you are required to provide a postdated check for the amount borrowed plus a borrowing fee. When you get paid, you can either opt to allow the company to cash the check or choose to have your payday loan extended to your next payday–which will leave you with even more fees. The longer you extend a payday loan, the more fees you will accrue on the account. Some states have fee caps in place to prevent fees from ballooning out of control.

Bankruptcy

    Depending on the type of bankruptcy you are eligible to file, you may be able to have the majority of your debts discharged. If your assets are too high, however, the court will require you to repay your debts using a court-structured repayment plan. You can attempt to include payday loans in any type of personal bankruptcy filing. Whether they can be discharged or not, however, depends on if the payday loan company objects to the loan’s inclusion and your judge’s response to the objection.

Risks

    Because payday loans are backed by a personal check, filing for bankruptcy places you at risk for having that check immediately cashed by the payday lender in an attempt to recover as much money as possible prior to the actual bankruptcy hearing. The bankruptcy court frowns upon one creditor receiving payment before another and is very likely to demand the return of the funds. In the meantime, however, you are responsible for any overdraft fees that result from the cashed check. This can also leave you unable to make payments on debts like your mortgage that you would like to keep.

Significance

    If you file for bankruptcy and include any debts that were accrued within the last 60 days, your creditor can contest the inclusion of these debts on the grounds that you were contemplating bankruptcy when the debt was accrued. A payday loan is an unsecured loan, but it is a revolving loan. If you do not pay the loan, it will renew every 30 days. This is significant because it allows the payday lender grounds on which to contest any bankruptcy filings that include payday loans. Many bankruptcy judge’s view the renewal process solely to prevent the debtor discharging the debt as deceptive, and allow the payday loan’s inclusion.

Notable Case Law

    In 2008, Janice Meadows of Ohio attempted to discharge a $400 payday loan through bankruptcy. Her payday lender immediately cashed her original collateral check for $460. Meadows’ bankruptcy judge called for a return of the funds, yet the payday lender refused to return the funds and instead filed an appeal of the judge’s decision. The original decision was overturned in the appeal and the payday lender was allowed to keep the $460. Some judges will allow the inclusion of payday loans and some will not, just as some lenders will contest an inclusion and some will not.