What is a Car Title Loan?

When you need to borrow money for a car and you are currently insolvent, then title loans is a good tool for that. Mortgage for an automobile could cost you $175 to $2,500 and the terms of payment would be within 30 days maximum, this is according to some State laws. However, this may not be the case all the time because in some states the loans could rage up to 30% in a month. This would cost a customer a 360% of annual percentage rate, and most of the time, lenders to these loans are granted the additional origination fees.

These lenders are often in service out in storefront destinations and they also accept check cashing and pawned items.

If you have no clue what a title loan is, then here is an example: you sign a document that binds you to a state law with interest that you have to pay within 30 days. You taking this title loan of $500 mean you are relinquishing your car title for collateral. If you fail to pay the collateral then your car will be repossessed. Aside from this car title loan you are going to give, you also have to pay the company a $15 origination fee. The typical rate for the interest is at 30% that is about 150% total interest.

Usually, these kinds of loans do not allow partial payments, so if you cannot pay it in full the lender may permit you to pay off within another 30 days but you must pay additional interest charges.  This however is only allowed four times in some states.

So, how much does a loan cost? First, you have to pay a $15 origination fee and a $450 interest that is computed by the monthly interest rate in this case, $150 and the number of months you have to pay it 3 months. So the total cost will be $465 in an interest to get a hold of $500.

It will be wise to think very well whenever you have to engage in a car title loan. Not only are the interests and the fees high, but your car is also in a great risk.

Subprime Auto Lending Growing Once Again

Subprime lending is becoming popular once again, even though lenders are still staying away from subprime mortgages, which is the one of the triggers of the nation’s housing breakdown.

There has been an increase in subprime credit cards and auto loans and a few bank risk managers expect increases in the existing $600 billion US auto loan market.

Based on a recent survey of risk managers at banks and other financial institutions published in the previous week, although only 25 percent of risk managers expect a 25 percent increase in the subprime lending during the next six months, one half of those who expect an increase believe that it would fall on auto loans.

FICO, the credit analytics firm, together with Professional Risk Managers’ International Association, conducts a survey of risk managers every three months regarding their prospects for the coming six months. However, this was the first time the subprime lending was included in the questions.

In general, subprime loans are intended for borrowers with credit scores less than 680. Based on the data of Experian, 44 percent of all US auto loans in quarter one were given to borrowers with scores less than 680, which is an increase from 42 percent in the previous year.

Subprime auto loans that were packaged and sold to investors in the secondary market did favorably. Even though subprime loans are smaller than mortgages, cars are frequently considered as important to households. In fact, Andrew Jennings, chief analytics officer at Fair Isaac Corp., said that the public is struggling to pay back their auto loans more than they do in paying back their mortgages.

The increase in the subprime auto lending has been a surprise to Guy Cecala, publisher of Inside Mortgage Finance. Cecala believes that it was brought about by securitization. People have higher security about subprime auto loans compared to subprime mortgages.

Borrowers With Poor Scores Get Auto Loans

For the first quarter of the year, Experian Automotive released a report about the status of automotive financing. This is good news especially for those who want to buy a new car.

According to the report, more buyers with lower scores are getting approved for auto loans. In financing a new car, the average credit score decreased six points to 760. In contrast, in financing a used car, average credit score decreased four points to 659.

Moreover, more loans are being offered by lenders. Loans to car buyers with nonprime to deep subprime credit score were up by 11.4 percent.

In addition, buyers are taking on loans of larger amounts. For a new car, average loan amount increased to $25,995, more or less $589 more than last year. However, for a used car, the average loan amount increased by $411 to $17,050.

Finally, lower monthly payments are being offered by lenders. According to Melinda Zabritski, director of automotive credit at Experian Automotive, monthly payments can be less expensive due to longer loan terms and lower interest rates. Average interest rate for new cars is 4.56 percent and 9.02 percent for used cars.

Experts said that all these good news were because there has been an increase in consumers paying back their loans. The reports adds that the number of loan payments that were overdue for 30 days declined by 7.6 percent and those that were overdue for 60 days declined by 12.1 percent. Also, there was a decline in vehicle repossession by 37.1 percent.

Zabritski added that lenders are able to offer more loans and charge lower interest rates because there are lower losses. However, more loans and lower interest rates will not guarantee borrowers approval for auto loans.

Whether you want a brand new car or a used one, experts advise taking into consideration the reliability of the car, the cost of financing and your ability to repay the loan.

How to Get an Auto Loan Despite Bad Credit

It may be difficult to get approved for Auto loans when you have a splendid FICO score, but imagine just how much more difficult it would be when you have bad credit.

So if you want to get a car loan despite bad credit, here’s what you should do: first, find a dealer. For some credit challenged customers, it is difficult to find a dealer who is willing to offer the right loan for them. This is because despite the number of car that sellers have to sell, they also have to offer toting their records in their note loans.

These kinds of dealers can provide you with a car, but your FICO score will not change in anyway because these transactions are not reported to the bureaus. This also means that the next time you need a car; you will be finding yourself in the same dilemma you were before your present car.

Furthermore, these buy here pay here car dealers do not provide new car franchises; most of the cars in their garage are high-mileage cars that are often not very reliable. However, most new car dealers still will not engage on subprime loans or high-risk lenders.

The second option for someone who has bad credit is to search an automobile deal online. There are plenty of sites in the internet that would cater the needs of customers and help them in finding the right dealers who offer just the right amount and several lending provisions to the customers.

These dealers would be able to provide clients with the choice to choose from more vehicles, lenders that have reasonable mileage for their new or used cars, and they even provide loans and payment information that are reported to the bureaus, so your credit score improves and you can reestablish your car credit.

How to Get a Car Loan While Filing for Bankruptcy

It may seem almost impossible to get approved for a loan if you have bad credit, most especially if you have recently file bankruptcy. However, applications for automobile loans even after you have filed bankruptcy is quite common these days, but if you are in dire need of a car loan in the middle of your filing then the process may vary depending on which personal bankruptcy you chose: Chapter 7 or Chapter 13.

The Chapter 7 bankruptcy would settle a person’s assets and evaluate how much will be given to his unsecured creditors. It would only take a few months to finish the process of this personal bankruptcy, and it could only be file once after 8 years.

Chapter 13 however takes about three to five years to complete. This form of personal bankruptcy would involve getting a payment schedule that must be adhered to and completed by the one who filed it.

Of course, since Chapter 7 would be faster to complete compared to Chapter 13, automobile loans would vary too.

If you have filed a Chapter 7 bankruptcy, then this is what you should do: first, you must make sure you are eligible for it. If you are, then you should have a 341 meeting with the creditors and a judicial hearing would be in charge of evaluating your assets and the truthfulness of the personal information you have placed in your debt schedule.The time of the meeting you set with a 341 creditor is important since only some of them would check an applicant’s file after the meeting.

Meanwhile, if you have filed a Chapter 13 bankruptcy, it is important that you send your request to a trustee so that you can ask the court for a petition to prevent you from acquiring more debt. If you are granted the petition, you will have the privilege to get a loan and you can get the maximum interest rate and dictate the terms of the amount of the loan. But if you are declined the privilege, then you cannot apply for any loan.