Hi,
A relatively new gimmick seems to have taken the credit world by storm: No credit, bad credit, bankruptcies all OK. We guarantee that you will get a car loan, credit card, new furniture etc., Let's look at the scenario that unfolds when a person buys a car under these terms. All "normal" avenues of exploring the best car, the best price, the most favorable interest rates and the most suitable loan term are non-existent. When the borrower approaches the car dealer, he or she is forced to choose among a small inventory of cars, and are at the mercy of the car lots financial department. One of the common ways these car lots hide their excessive interest rates and finance charges is to offer terms 24-48 months longer than conventional car loans. The borrower might believe that the car payment quoted by the dealer isn't all that bad without stopping to realize that he or she is paying an extra $300.00 a month for an additional 36-48 months longer than if he or she had a conventional loan. Another thing missing from financial departments on car lots is the ability of banks and credit unions to work with the customer in the case of problems. In general, these types of car lots have a very short fuse when it comes to repossessing a car, and will do so immediately at the first sign of a problem. Unlike established financial institutions that handle auto loans, car lots will not be concerned at realizing maximum dollars for the sale of the borrower's vehicle, leaving an excessive deficiency balance. In many instances, especially for young people, getting involved in these types of high risk car loans will result in the borrower digging such a deep hole with his or her credit scores, that he or she may not be able to recover for many, many years to come, if at all. The reason these loans are available is that even though there will be a high delinquency rate, the excessive terms on the loans, higher interest rates, finance charges and close monitoring of the loans allows the car lot to still make a nice profit. The other factor in the dealer's profit is that the used cars being sold usually have an extremely high profit margin built into the price.
Until later,
Alan
Showing posts with label car loans. Show all posts
Showing posts with label car loans. Show all posts
Thursday, July 19, 2007
Thursday, March 22, 2007
Car Loans and Car Repossessions
Hi,
Banks and financial institutions spend millions of dollars annually monitoring their auto portfolios. When a car loan becomes delinquent, the first step is generally written notification to the customer that the payment is past due. If no payment is received, the letter is followed up with a phone call. Every institution has different rules as to how far it lets a car loan become past due before it repossess the car. A general rule of thumb is that the small independent car dealer will be more apt to repossess a car more quickly than his or her larger counterparts. For a customer to recover a repossessed car, it is generally necessary for the customer to bring the account current and pay all repossession costs. It is important to note that the account will be flagged once a repossession has occurred. Flagging an account means that the creditor will not tolerate future delinquencies. If a customer chooses not to retrieve his or her repossessed car, the following will happen:
1) The car will be sold by the financial institution/car dealership.
2) The proceeds from the vehicle sale will be applied to the loan balance.
3) The customer will be responsible for any deficiency balance.
4) Deficiency balances may be collected in a variety of different ways including litigation.
No financial institution wants to repossess a car. It's a lose/lose situation for both the institution and the customer. If a customer has difficulty making a car payment he or she needs to call the company holding the car loan and make suitable arrangements.
Tomorrow I'm going to talk about how to handle other types of past due or disputed bills.
Until then,
Alan
Banks and financial institutions spend millions of dollars annually monitoring their auto portfolios. When a car loan becomes delinquent, the first step is generally written notification to the customer that the payment is past due. If no payment is received, the letter is followed up with a phone call. Every institution has different rules as to how far it lets a car loan become past due before it repossess the car. A general rule of thumb is that the small independent car dealer will be more apt to repossess a car more quickly than his or her larger counterparts. For a customer to recover a repossessed car, it is generally necessary for the customer to bring the account current and pay all repossession costs. It is important to note that the account will be flagged once a repossession has occurred. Flagging an account means that the creditor will not tolerate future delinquencies. If a customer chooses not to retrieve his or her repossessed car, the following will happen:
1) The car will be sold by the financial institution/car dealership.
2) The proceeds from the vehicle sale will be applied to the loan balance.
3) The customer will be responsible for any deficiency balance.
4) Deficiency balances may be collected in a variety of different ways including litigation.
No financial institution wants to repossess a car. It's a lose/lose situation for both the institution and the customer. If a customer has difficulty making a car payment he or she needs to call the company holding the car loan and make suitable arrangements.
Tomorrow I'm going to talk about how to handle other types of past due or disputed bills.
Until then,
Alan
Wednesday, February 21, 2007
Secured Loans
Hi,
Some of the most common secured loans we encounter at one time or another are car loans. Generally car loans are financed in one of three ways:
1) Banks or Credit Unions: the first place to investigate for a car loan. When dealing with your bank, the ideal situation is to get pre-approved for a specific amount before you go shopping for a car. This will allow you to take advantage of the most favorable credit terms and will solidify your financial history with the bank. Inquire to see if your bank carries an inventory of repossessed cars, which are usually favorably priced. Also banks sometimes have relationships with car rental companies and offer special loan rates to their customers for car rental purchases.
2)Major Dealer Financing: Dealers advertise auto loans at incredibly low interest rates that often seem lower than banks or credit unions. The reason for this is that they can inflate the cost of the vehicle. Another way they off-set the cost of their low interest rates is by giving people less for their trade-in. For higher credit risks, dealers often promise financing no matter what your credit history. Generally, they shop various finance companies until they find one that will take your loan. The interest rates on these loans are typically the highest of all car loans.
3) Independent Car Lots: These establishments will generally offer financing in any way that will seem to work to you, the consumer. They offer payment schedules by the month, by the week, and probably somewhere in the country, by the day. Their financing is generally very high risk, and they operate on the principle that with the exorbitant interest rates they charge, they can afford to have an high default rate and high repossession rate. This is not to say that independent car dealerships are not a good place to look if you are paying cash for a car.
As in dealing with all types of credit, car loans are no exception. If you are having problems paying your car loans, contact your creditors as soon as possible.
Tomorrow, I'll introduce the topic of mortgages.
Until then,
Alan
Some of the most common secured loans we encounter at one time or another are car loans. Generally car loans are financed in one of three ways:
1) Banks or Credit Unions: the first place to investigate for a car loan. When dealing with your bank, the ideal situation is to get pre-approved for a specific amount before you go shopping for a car. This will allow you to take advantage of the most favorable credit terms and will solidify your financial history with the bank. Inquire to see if your bank carries an inventory of repossessed cars, which are usually favorably priced. Also banks sometimes have relationships with car rental companies and offer special loan rates to their customers for car rental purchases.
2)Major Dealer Financing: Dealers advertise auto loans at incredibly low interest rates that often seem lower than banks or credit unions. The reason for this is that they can inflate the cost of the vehicle. Another way they off-set the cost of their low interest rates is by giving people less for their trade-in. For higher credit risks, dealers often promise financing no matter what your credit history. Generally, they shop various finance companies until they find one that will take your loan. The interest rates on these loans are typically the highest of all car loans.
3) Independent Car Lots: These establishments will generally offer financing in any way that will seem to work to you, the consumer. They offer payment schedules by the month, by the week, and probably somewhere in the country, by the day. Their financing is generally very high risk, and they operate on the principle that with the exorbitant interest rates they charge, they can afford to have an high default rate and high repossession rate. This is not to say that independent car dealerships are not a good place to look if you are paying cash for a car.
As in dealing with all types of credit, car loans are no exception. If you are having problems paying your car loans, contact your creditors as soon as possible.
Tomorrow, I'll introduce the topic of mortgages.
Until then,
Alan
Subscribe to:
Posts (Atom)
