Think Long Term Before You Decide On Your Auto Loan Term

Life is a journey! And, buying a car will make your journey easier. Nevertheless, before you buy a car, selecting the right loan term is important. If you choose a short-term auto loan, you will have to repay the loan over a short period. The term varies between one to three years. On the other hand, a long-term auto loan has additional time for repayment. The term varies between three to nine years. It is good to know the pros and cons of the auto loan term before you sign the contract. Take time for making comparisons and make the decision process a little easier. It is essential because you have think about the big picture.

Short-Term Auto Loan – Pay more for a Short Period

Pay up Faster and Make Way for your Dream Car

Buying a new car is a costly purchase. You need an auto loan to pay for the price of the car. Short-term auto loans usually have a lower annual percentage rate. Remember, the shorter term the better it is for you. Short term guarantees you lower interest rates and higher monthly payments than a longer loan term. It means you will pay up the auto loan with a low rate of interest. There are several benefits of opting for a shorter loan term such as:

>>You can enjoy low interest rates.
>>You can get out of the auto loan debt in a short period.
>>The biggest benefit is that it helps in freeing up your money quickly!
>>It feels expensive at first, but with low interest rates, it will not hurt your financial situation.
>>The car will have a higher re-sale value when you pay off the auto loan quickly.
>>It can aid in improving your credit score.

As a car buyer, remember that a short-term auto loan offers you multiple advantages only when you make large monthly payments. In addition, you will have to do everything to reduce the loan amount. It will ensure that the monthly payments do not become a burden for you. Consider, making a large down payment to the lender. Also, remember to plan your expenses because auto loan payments will take an important chunk of your income and you will not be able to save money for the next couple of months.

Long-Term Auto Loan lets you buy an Expensive car

If you are thinking of buying a luxurious car, a long-term auto loan will be a good option for you. It is possible to afford the car expenses because monthly payments are low. The lenders will offer you affordable monthly payments in return of high interest rates. It means you can even buy a car outside your price range. Many car buyers opt for a long-term auto loan because:

1. It offers low monthly payments.
2. A car buyer with low income can afford a car easily.
3. It is ideal if you want to buy a luxurious car.
4. Regular monthly payments can increase your credit score.

However, you must remember that long-term auto loan stretches the monthly payments for a long time. In addition, you will have to cough up high interest rates to enjoy a longer loan term. Another problem is that you can be an upside down situation for a larger part of the term. It is a very risky situation because if the car breaks down, you will find it very difficult to buy a new one.

When in Great Confusion, Read the Conclusion!

There is no perfect auto loan term. As everyone has different income levels and repayment capacity, there is no one perfect loan term. When the lender offers you an auto loan term, do not be in a hurry. Determine the monthly payment that suits your household budget. Consider your future expenses. Think of major expenses such as a wedding, college fees, buying a house, etc. Pick the auto loan term accordingly. Remember, life is too short for making monthly payments for a very long time. Therefore, it is important to think hard before you make the right decision.

Car Buying Tips

Often while planning to purchase a car, the right model and the car manufacturing brand become the key deciding factor. Many a times, the research proves to be outdated as some car models become discontinue.

When a car manufacturer stops producing a model because of a number of reasons, it is called a discontinued car model. However, the benefits of buying a discontinued car model outweigh the risks. Buying a car model which is no longer in showrooms can mean greater savings. If you are planning to purchase a car, the following points will help you to comprehend why it makes sense to buy a discontinued car model.

1. Discounted Purchase Price

A discontinued car model will have a significantly lower price than a brand new car. One of the benefits of purchasing it is that you get a new car for the price of a used car. As a buyer, you are in a good position to get a favorable deal for a discontinued car model. The dealer needs to move inventory to create space for new cars in demand. Therefore, it becomes easy to negotiate a price that suits your wallet.

2. Shared Spare Parts

Many car buyers hesitate to purchase a discontinued car model due to the potential risk of unavailability of spare parts in the future. You can minimize the risk as many car manufacturers continue producing car parts long after they stop manufacturing a car model. Additionally, you can transfer many spare parts of current car models to the discontinued car model. While purchasing from the manufacturer can become expensive, you can find shared spare parts easily. Thus, if the car requires repairing in the future, you can mend it without any tension.

3. Wide Choice of Selection

It comes at a relatively cheaper price than a new car. The value for money received from buying a discontinued car model significantly increases due to cheap pricing. The money spent on purchasing a new car can mean compromising on a few features. However, purchasing a discontinued car model can aid you to step up your choice of selecting a better car. Therefore, you can avail a pool of upgraded features for a lower price.

4. Warranty Period

When you purchase a recently discontinued car model, chances are that you eligible for warranty. During the warranty period, the servicing and maintenance of car parts are the responsibility of the original car manufacturer. Many manufacturers produce parts in high volumes to cover the entire warranty period. Thus, you will be able to repair a discontinued car model easily, until it falls under the warranty period. And, a mechanic or an expert can attend to any defect after the warranty period is over.

Purchasing a discontinued car model may bring some risks with it. However, there are many benefits of buying such a car. It can be a lucrative deal for a car buyer looking to make an affordable purchase. So, next time when you want to buy a car, consider a discontinued car model.

Being A Cosigner All Risk And No Reward

We all might have experienced a situation where a friend or a family member asks you to become a cosigner. Before saying yes, it is best to know what you are getting into. Typically, when you consider cosigning for an auto loan, you are agreeing to repay the loan amount if the primary borrower stops making payments. While you agree to it, the risks outweigh the benefits. You may consider it as a way of improving your credit score, but do not delve into it before fully understanding the risks associated with it.

Risks associated with Cosigning an Auto Loan

1. Damaged Credit Score

Earning a good credit score requires decent effort. When you become a cosigner, any form of delay or non-payment of the auto loan will reflect on your credit report. Inability of the primary borrower to make the payments can decrease your credit score. Also, your debt-to-income ratio increases when you become a cosigner. Ideally, a debt-to-income ratio should not be higher than 36 percent. Being a cosigner increases your debt against your income. And, your credit score decreases due to increased debt amount. Therefore, if the borrower has a poor credit history, rethink your decision.

2. Enforceable Legal Judgments

When the primary borrower is unable to repay the loan, the lender may take legal action against the cosigner. Also, there is a high probability that you are sued before the primary borrower. It is because you are likely to repay the loan amount fast in order to protect your credit score. In case, the primary borrower is unable to repay the loan, a cosigner’s assets and salary can be in jeopardy as the lender can claim his assets.

3. Reduced Credit Ability

When you are a cosigner, other lenders see you as someone who has already agreed to guarantee a loan. The lenders assume that you are already making monthly payments on the loan you have cosigned for, thereby leaving little money to make payments for a new loan. Thus, a new auto loan approval might become difficult for you.

Does it make sense to become a Cosigner?

While it may not be a financially sound decision to become a cosigner, you can agree to it when you are in a position to afford the risk. If you have a good amount of surplus cash or possess substantial assets to repay the loan amount of the primary borrower, you can think about it. Also, if you will be using the car, it makes sense to say yes.

Cosigning an auto loan may look like a lucrative method to improve your credit score. However, it can mean all risk and no reward when you have to deal with a damaged credit score, enforceable legal judgments and reduced credit ability.

Cosigning an auto loan may look like an easy way to improve your credit score. But, it is not true. Before you jump at the first chance of becoming a cosigner, arm yourself on the know-hows of the risks associated with it. Learn more about how it can mean all risk and no reward if you have to deal with damaged credit score, enforceable legal judgments and reduced credit ability.

Interest Rates On Home Loans

Home Loan:-
Loan acquired from a financial institution to purchase a home. Home loans consist of and justable or fixed interest rate and payment terms. Home loans may also be referred to as mortgage loans.
Home loans, also known as mortgages, use the borrower’s home for collateral. This home can be a single-family house up to a four-unit property, as well as a condominium or cooperative unit. Lenders fund home loans, but both the lenders themselves and brokers who act on behalf of the lenders originate, or process, them.

Construction Loan:-
A short-term loan used to finance the building of some real estate project. The builders take out a construction loan in order to begin the project while they obtain long-term funding. Because there is no guarantee that the builders will be able to obtain long-term funding and a construction loan is not intended to fund an entire project, construction loans are fairly risky, and, as a result, have high interest rates.
Mortgage Loan:-
A mortgage is an agreement that allows a borrower to use property as collateral to secure a loan. In most cases, the term refers to a home loan: when you borrow to buy a house, you sign an agreement saying (among other things) that your lender has the right to take action if you don’t make your required payments on the loan.
Takeover Loan:-
A takeover occurs when an acquiring company makes a bid in an effort to assume control of a target company, often by purchasing a majority stake. If the takeover goes through, the acquiring company becomes responsible for all of the target company’s operations, holdings and debt.
Loan Against Property (LAP);-
A loan against property (LAP) is exactly what the name implies — a loan given or disbursed against the mortgage of property. The loan is given as a certain percentage of the property’s market value, usually around 40 per cent to 60 per cent.
DTCP Approve :
Directorate of Town & Country Planning. except in chennai metropolitan area where CMDA is approving the layouts of housing, institutional & industrial layouts beyond 1 hectare extents all other places in tamilnadu DTCP is the authority to approve such developments.
Site Purchase Loan :
Indian investors are traditionally inclined towards buying land either purely as an investment or for building a house. So, if you are looking to buy a plot, you may not be eligible for a home loan, but for a land loan. Home loans are available only for the property already constructed, under construction or likely to undergo construction soon. For funding the purchase of a vacant plot, you will have to go for a land loan instead. Although the terms, rates and processes related to land loans are similar to that of a home loan

4 Tips To Obtain An Auto Loan Despite Car Repossession

The situation of car repossession is a tricky scenario. It can occur due to several reasons. One of the core reasons for car repossession is performing a delinquency on an auto loan. Contact your lender to know the exact reason behind the car repossession. Once you understand the appropriate reasons, you have two options. One, you can pay the required repossession costs and the entire loan amount to reclaim your car. Two, you can decide to let go off the car in which case you will be liable to pay the deficiency balance to the lender.

No matter what option you choose, the situation will negatively impact your credit score and credit worthiness in the eyes of the lender. Despite the downsides of car repossession, the possibility of obtaining an auto loan still exists. The key to securing an auto loan requires rigorous preparation.

Car Repossession: A Setback but not a Total Loss

Despite car repossession, which points should you keep in mind when you set out to obtain an auto loan?

1) Repossession Rights

Every individual is entitled to certain car repossession rights. It is common knowledge that one major right involves buying the car back from the lender. The method of buying back the car involves repaying the full amount to the respective lender. Another right involves the safety of personal property left in the car while it was repossessed. Any item found in the car cannot be sold and the owner of the car has rights to retrieve them. Similarly, no personal property can be harmed while repossession. For instance, the lender cannot damage the garage to get hold of the car.

2) A Sizeable Down Payment

Even if car repossession occurred a year back, a lender may hesitate to grant the auto loan. Agreeing to pay a sizeable down payment is a great way to increase your credit worthiness. A good amount to put down is 20% or higher of the total cost of the car. When you make a hefty down payment, lenders will view you as a committed buyer and overlook the negative mark of repossession. Therefore, a sizeable down payment will not only reduce your monthly payments but also provide you with a higher probability of getting a loan approval.

3) Used Car over New Car

While suffering from car repossession, it is important to set realistic and achievable goals. Opting for a used car will prove more fruitful than choosing the newest car in the lot. As a used car is sold for a lesser price, the lender views low risk in giving out a loan of a smaller amount. An expensive car with expensive payments was the reason that got your car repossessed in the first place. Therefore, choosing a used car that matches your budget is ideal as you can make payments comfortably.

4) Prepare Required Documentation

Compiling documents can be tedious, but after recent car repossession, it is a good idea to prepare thoroughly. Usually, documents are provided to reassure the lender of your credit worthiness. For instance, your recent paystubs provide proof of financial stability. Primarily, the required documents include proof of employment, a valid driver’s license, current utility bill and federal income tax payments. Make sure the information is accurate as the dealer will cross check it. Once you present the required documents, the process of getting an auto loan will become easier.

Building a stellar credit score is not going to happen overnight. But, it doesn’t mean you have to shy away from applying for an auto loan. If you wish to drive a car again, consistent effort, adequate preparation and focus will help you to recover from the tragedy of car repossession.

Buying A Rent-to-own Car A Feasible Option

A poor credit score can become a lingering nightmare and affect numerous aspects of your life. If you are credit-challenged and wish to purchase a car, getting an auto loan approval may seem like a tedious task. However, rent-to-own cars have gained significant popularity amongst those with a bad credit score. Typically, a rent-to-own car means renting and using the car from a dealership whilst paying a down payment and making weekly payments. Once you have completed the weekly payments of the car, the ownership of the rent-to-own car shifts to you, the buyer. As the dealer requires no significant credit check for the purchase of the car, many credit-challenged individuals turn to rent-to-own cars. Although they may seem like a lucrative option, the disadvantages outweigh the benefits.

What are the Downsides of a Rent-to-Own Car?

1) Expensive Purchase

When the dealer lines up used cars under rent-to-own category, he marks them higher than other cars. As no interest rates are charged on rent-to-own cars, he tries to make a profit through sale of the car. Therefore, purchasing a rent-to-own car means paying more to own a used car with a lower resale value.

2) Frequent Payment Schedule

The payment schedule associated with a rent-to-own car is more frequent as compared to a used car. The dealer requires you to make weekly payments as against the regular monthly payments on a used car. Due to frequent payments, it can become difficult to keep tracks of payments, thereby, attracting the possibility of a late payment fee.

3) No Effect on Credit Score

Regardless of your timely payments, your credit score will not improve due to a rent-to-own car. With the purchase of a regular used car, the ability to increase your credit score is a possibility. However, with the purchase of a rent-to-own car, the payments do not reflect on your credit report and will not help in improving your credit score.

4) Absence of Warranties

There are no warranties on rent-to-own cars. As you use the cars, the probability of a breakdown is higher than a regular used car. Therefore, any repairs, damages and breakdowns are your responsibility as a buyer of a rent-to-own car.

Is there an Alternative Option?

If you do not wish to buy a rent-to-own car, you can still avail a bad credit auto loan to purchase a regular used car. The advantage with purchasing a regular used car is that monthly payments can help you structure your finances and warranties can shield your car from any potential future damages. Thus, purchasing a used car can provide greater benefits in the long run.

A damaged credit score does not necessarily mean that you should opt for a rent-to-own car. The downsides of purchasing the car include expensive purchases, frequent payment schedules, little or no effect on your credit score and absence of warranties. The good news is that purchasing a regular used car with a bad credit auto loan is a suitable alternative.