Car Insurance

Increasing numbers of consumers are taking advantage of today’s low-interest rates and using home equity loans and lines of credit to pay for spring remodeling, tuition, debt consolidation and virtually any other major expenses, according to the Automobile Club of Southern California.

The current low-interest rate climate has helped to boost home-equity borrowing with the volume of home equity loans at large commercial banks jumping 62 percent from $42 billion in 1990 to $68 billion in 1998, according to the Federal Reserve Board.

“One attraction of a home equity loan is the possibility that you could deduct the interest paid on the loan from income taxes,” said Barbara Wilson, Auto Club financial services product manager. “That makes home equity loans a preferable alternative to many other types of debt.”

The Auto Club’s financial services provider, AAA Financial Services, developed a series of questions and answers for consumers who are considering a home equity loan or line of credit.

1) Should I choose a home equity loan or a home equity line of

credit?

In the current low-interest climate, a home equity installment loan might be a smarter choice. A consumer can borrow the full amount at one time and get a fixed rate. As a result, the borrower can take advantage of today’s low rates and know how much to budget for monthly payments.

A home equity line of credit allows one to borrow from a revolving line of credit with variable interest rates. The money is accessed by writing a check and only the portion of credit used is paid back. However, if market rates fluctuate, monthly payments may do the same.

2) Do the loans and lines of credit place restrictions on how I

use the money borrowed?

The loan and line of credit can be used for anything including home improvements, debt consolidation, tuition, purchasing a car or medical expenses.

3) How can I find the best interest rate?

Shop around to determine the variety of rates financial services companies are offering. Also, try to find a company that doesn’t charge any application fee. Be sure to ask whether they charge a penalty for early payoff. If no penalty is charged, borrowers may be able to add some extra payments and retire the loan more quickly.

4) Should I seek a 5-10- or 15 year term?

The term of the loan depends on future financial strategy. For example, if you are planning to retire in 10 years, and don’t plan to use the loan as a possible tax deduction at that time, you may only want a 10-year loan. Remember, the longer the loan, the lower your monthly payments.

5) What are the tax advantages of home equity borrowing?

Home equity loans and lines of credit offer good tax advantages because the interest may be tax deductible. To be certain how the deductibility of interest will affect your taxes, be sure to check with your tax advisor prior to applying for the loan or line of credit.

6) How long will it take to apply and get an answer?

Increasing numbers of lending institutions are allowing customers to apply for home equity loans and lines of credit either over the phone or over the Internet. The application process can take as little as 10 minutes. Many also have sophisticated technology that can deliver conditional approvals in a few hours via phone or over the Internet. Final approval takes 5-10 days while the house you offer for collateral is being evaluated. Once your application is approved, a few institutions will send the documents and checks through the mail, so the entire process can be completed without leaving home.

The Automobile Club of Southern California, the largest affiliate of AAA, has been serving members since 1900. Today, Auto Club members benefit by the organization’s emergency road service, financial products, travel agency and trip planning services, highway and transportation safety programs, insurance products and services, automotive pricing, buying and financing programs and legislative advocacy.

Finding a bad credit auto lender is simple. When buying a new or used car, the auto dealer may offer bad credit financing, or refer you to a good lender. Even so, car buyers should consider arranging their own financing. Bad credit auto loans are tricky, and some lenders will take advantage of you. For this matter, it helps to choose a good lender and know your available options.

Check Your Personal Credit Report

Before applying for an auto loan, bad credit applicants should request a copy of their personal credit report. Review the report, and take note of your FICO score. Upon submitting your application, the auto lender will base approval on your credit score and credit history. Additionally, checking your report prior to applying reveals your credit standing. Some auto lenders classify sub prime borrowers as persons with scores below 640. On the other hand, another lender may qualify a borrower with the same score for prime rates.

Compare Different Auto Loan Rates

Making comparisons is a surefire way to get approved and find the best auto loan rate. Auto lenders qualify applicants for varying rates. If you have bad credit, failing to shop around and obtain multiple rates will cost you more money. For example, a dealer’s finance company may charge an interest rate of 10%, whereas a credit union may charge the same applicant 8.5%. The percentage difference could save you $50 - $70 a month.

The best way to compare rates is to visit an online auto loan broker site. Request a no-obligation quote, and wait for a response. Each quote received will include details such as qualifying interest rate, loan approval amount, loan term, and estimated monthly payment. Review the quotes carefully, and pick the lender that offers an affordable deal.

Make Efforts to Boost Low Credit Score

Improving your credit score doesn’t happen overnight. However, if an auto lender recognizes improved credit habits, they are more inclined to approve a bad credit loan application. Before applying for a car loan, practice submitting regular payments to creditors. Furthermore, attempt to reduce your overall debt ratio.

You’ve got your eye on that shiny new Lexus - okay, maybe it’s a Kia, but it’s perfect and you want it to be yours, all yours - as soon as possible. At the same time, you certainly don’t want to be saddled with paying nearly double the car’s value by the time you finish paying off the car loan. Here are five tips to help you get the best possible interest rate on an auto loan to put the car of your dreams in your driveway.

1. Check your credit rating.

If you don’t already know what’s in your credit report, this is a good time to find out. Before you apply for an auto loan, get a copy of your credit report to find out what surprises may be lurking in it. You may just find out that it contains erroneous information that should be corrected, or that there’s something negative on it that can be either explained away or fixed easily with a couple of phone calls or letters. Either way, it always helps to know what the credit reporting agencies are saying about you before you start shopping around for a loan.

2. If you have good to excellent credit…

…then you may qualify for special incentive financing available through the car dealer. If the car dealer is offering a low, low finance rate, check all the terms and conditions carefully BEFOREHAND online to make sure that you qualify. Most often, that 1% financing rate is reserved for those who have excellent credit and can afford to do a 12 month financing plan. If that’s you - then grab the deal. 1-2% financing is a bargain if you can handle the other terms and conditions attached.

3. If you need a longer term than 12 months or have spotty credit…

…arrange your financing yourself before setting foot on the car lot. Check with your usual bank for a new auto loan first, as they may have better interest rates for those who are already established customers, or who carry all their savings, checkings and loan accounts through one bank. It may save you a few percentage points in interest to do business with someone who already knows you.

4. Shop online for the best auto loan available.

At many online credit web sites, you can submit a request for multiple quotes from area finance agencies and lending firms. Simply submit your request for an auto loan quote through an online form, and the web site will submit it to up to four financing firms at once. A representative from each agency will contact you within a few hours to a day or two to discuss your request with you and give you a quote for an interest rate and monthly payment amount that they can offer you. Online shopping for credit makes it easy to compare and pick the best auto loan terms for you.

5. If your credit is bad but you need that car…

…one of your best and most often overlooked options is to find someone to cosign the loan for you. In most cases, when you have a cosigner, you’ll get the interest rate that THEY qualify for, which means a lower monthly payment for you.

It is just as easy to get approved for a used car loan as it is for a loan for a new car. Even if you have bad credit, there are lenders who will allow you to borrow the money you need to buy the car. With the number of lenders available online, you can compare the rates and choose the one that will give you the best deal. You don’t have to apply with every lender because the interest rates and financing charges are posted on the site. Most of them also have a calculator that you can use to see how much your monthly payment will be. You can also visit your local bank to make the application.

A used car is a higher risk for the lender so you generally have to pay a higher rate of interest when you get this type of loan. This is because there is a greater possibility of problems developing with the car and you need to have money for repairs. The cost of insurance is something that you have to consider as well because if you have a loan for a car you will need to have it fully insured as a requirement. The rate of interest that you pay will depend on your credit score.

Not all loans for used cars are the same. You do need to spend some time searching for the right deal. There are many online lenders that will offer low interest rates and give you fast service. When you apply online, you get the answer as to whether or not you are approved quite quickly. While some lenders will need to know the specifics of the car before they will approve your loan, there are some lenders that will pre-approve you so that you know how much you can spend when you go looking to buy. Just keep in mind that you do have to have the means for repaying the loan and the lender will require proof of this before giving the final stamp of approval.

Used car bankruptcy loans are available to persons who have recently filed for bankruptcy. There are many business enterprises extending bad credit used car loan programs to people who have faced bankruptcy, foreclosure, and repossessions. Car dealers themselves may provide the loan, or you can get it from other sources.

Once a person is declared bankrupt, it is vital for him to establish a new credit account before opting for a mortgage loan. The only way to improve his credit score is to maintain regular payments after bankruptcy. It is recommended to wait for at least six months before applying for another loan. This is because immediately after bankruptcy, the interest rate charged on auto loans is usually much higher than that for an average loan. This, in turn, will increase your monthly car payment. However, with a sizable down payment, it is easier for borrowers with bad credit to obtain financing for a used vehicle.

If you are taking the used car bankruptcy loan from the dealer himself, make sure to get the used car checked out by an independent mechanic. If the dealer does not encourage an appraisal of the car, it is a clear indication that the car has some problems.

Economic forecasts indicate that auto loan interest rates are likely to fall in future. To obtain an auto loan is a lot easier these days, regardless of creditworthiness. There are quite a few options available for selecting an appropriate lender for financing a car. Nowadays, not only are banks and credit unions providing used car bankruptcy loans to people with flawed credit, so are many finance companies. Applying for a used car loan through the Internet can save money and time. Many firms provide online financing assistance with used car loans for people with bad credit.