Pierre Money Mart Blog

CLEVELAND (AP) – The national credit crunch isn’t just squeezing the housing market, it’s also making auto loans more difficult.

Lenders are tightening their standards for car loans and that means bigger down payments and monthly installments. Some buyers looking for new mid-sized sedans are settling for used compact cars and others cannot even afford those.

CitiGroup, one of the nation’s biggest financial firms, has cut about 800 jobs in its auto lending business and says it plans to scale back the number of loans it offers.

“People with decent credit aren’t able to get the terms they think they should get,” said Michelle Primm, managing partner of the Cascade Auto Group in Cuyahoga Falls. Primm also represents women dealers in the Eastern U.S. for the National Automobile Dealers Association.

Mary Kay Bean, spokeswoman for JP Morgan Chase, said her company is requiring larger down payments than before and is limiting terms to six years for buyers with lower credit scores.

Bill Miller, a Cleveland State University student who works full-time as a mechanical engineer, said he tried to buy a car a few months ago and couldn’t get credit anywhere.

Miller’s status as a college student with a C-minus credit rating and some credit card debt told him getting a loan would be a challenge, but he didn’t think $7,000 for a used car would be out of line for him and his girlfriend.

“We were declined and declined and declined. I thought I rebuilt my credit, at least to the point of getting a car loan,” Miller said. “I guess not.”

Scott McKown, finance and insurance director for the Classic Auto Group in Mentor, said competition among lenders as recently as last year allowed dealerships to sell cars to people who typically couldn’t afford them.

“In a lot of cases, we’d say, ‘Boy, I hope the customer can pay this,”‘ McKown said. “These guys tended to specialize in that low end of the business.”

The loan squeeze could lead to lower sales in a year that has been one of the worst in a decade. As with the collapse of the mortgage business, lenders blame the tightening of auto credit terms on Wall Street.

Until this year, high-volume lenders would package their auto loans and sell them to investors, who would make their money from borrowers’ interest payments.

But with the collapse of the mortgage market, investors no longer are snapping up loans, especially those to buyers with questionable credit.

Even Ford Motor Credit, General Motors Acceptance Corp. and other lenders affiliated with automakers say they’re looking a little harder at each transaction. But those companies tend to stick to the best borrowers, so dealers said the effect of those changes has been minimal.

“When you have dealers that say they can get anybody a loan, they’re selling financing,” said Pat O’Brien, owner of Chevrolet dealerships in Medina, Willoughby and Westlake. “They’re not selling the car.”

Buying a car is an expensive thing. But, does it have to be? There are a number of things that you can do to get the car that you want for much less. Simple and a bit more complex, these tips will help you to save money in the long run. Buying a car can be affordable.

Here are five tips for saving money on your next car purchase.

1.Get your financing in order before you leave to look at cars. While many car dealerships are offering financing for vehicles, this can be one of the more costly options. Make sure you talk to online financing companies, your local bank and your credit union. You probably will save a good amount of money here.

2.Do the down payment. Even a bit of a down payment can help you to save considerably down the road. You can save a good deal of money if you invest wisely. But, adding a bit of a down payment to the purchase will help to lower the amount of principal that you actually owe on that vehicle purchase.

3.If your credit is bad, get a co signer. Having someone else that can help you to get your car is a great way to secure a vehicle for a more affordable price. This helps to lower the amount of risk that you present to the car financer. The lower the amount of risk you prove to be, the better your chances of paying less for that car.

4.Trade-ins are good too. If you have a car that you plan to trade in, you may be able to get a good price for it. To improve the amount you get, make sure that the car is as clean as possible, is running well and has been taken care of. In addition to this, make sure that you know the value of it by looking it up on the web. Know what its worth so you do not get taken. The value of the trade in will lower the amount you have to have financed on your vehicle.

5.Shop around and haggle. There is no shame in saving money. Dealers are selling cars to make a commission. How much will they make off of you? Do your homework out the type of car you are looking for and know its worth. Look at several dealerships to find the right car at the right price. Don’t forget to haggle with the dealership salesmen. But, whatever you do, do not be insulting to them. That’s the wrong way to get your price down.

Take these five ways to save on the next time you buy a car and you will walk way with the benefits that you deserve. You can save a good amount of financing and interest charges this way.

“Bad Credit Car Loans”

One of the most common methods of purchasing a car with poor credit is with a “bad credit car loan“. You can acquire these loans through auto dealerships, online lenders, and high risk lenders. Typically these loans are available for anyone with a credit score below 600. People can find themselves in this situation after a divorce, after bankruptcy, if they have little credit, or if they have made poor financial decisions. The “bad credit car loans” are designed to protect the lender. They have higher interest rates than conventional auto loans. However, it is in your best interest to shop around for a bad credit car loan

Risks of Shopping around

There is a risk of shopping around for an auto loan. Submitting loan applications to several different companies will lower your credit score even more. It is in your best interest to find an organization that will find various Bad credit car loans for you, but only check your credit report one time.

Home Equity Loan

Another way to get auto financing with poor credit is with a home equity loan. The interest rate on a home equity loan is usually lower than the interest rate on a “bad credit car loan”. Another advantage is that the interest is tax deductible on a home equity loan. The one obvious disadvantage to this type of financing is that you are using your home as collateral. If you are not able to pay your loan, then you put your home in jeopardy.

Do not lose hope if you have poor credit. There are still options available to finance your car. Bad credit car loans, and home equity loans can help you achieve your goal of purchasing a new vehicle.

1) Shop Online – Shopping for auto loan online is a great time saver. By comparing from different sites you can get the best deals. Applying also is easy and even some sites will give you information you need within minutes.

2) Know Thyself! – You must know the basic criteria for applying for an auto loan. Basic criteria includes that you must be above 18 years of age. Best if you earn at least $2000 a month. Also needed is residence and employment history.

3) Get Approved First – Don’t have make the mistake of looking for a car before being approved. Get approved first then they will give you a voucher of how much you are allowable to loan. Doing this will save you future frustration and disappointments.

4) Down Payments – This varies from lender to lender, and some don’t even require. But typically its about 10% of the price or $1000 whichever is the lower number.

5) Interest Rate – Interest rate is not fixed as most people think, and yes it can be negotiated. If you have a good credit score and good negotiating skills you can have a lower interest rate. But some factors are way out of you’re control such as the state of the economy.

There you have it. We’ll that’s not all, there’s lot of other things you need to know. But what I’ve enumerated are the vital essentials before applying for that auto loan. One thing also is ask advice from an authorized dealer or loan official. They’re there to help you. If there’s something you don’t understand, ask them now or you’ll might face lots of headaches later.

When the question of getting luxuries for you and the family arises, all our thoughts take a back seat as we are afraid of facing adverse consequences. But this happens when the decision is taken without much thought. Buying a car is one such example. But by taking up a secured car loan and buying a car, you will never repent for the decision.

With a secured car loan, the borrower can buy a new car or even a used car of his choice. The money is obtained by him very easily to buy the car. The borrower can make a decision as to what car he wants to buy, and if it is a used car then it should not be more than 5-7 years old. The car may be useful for any purpose, personal or commercial.

For taking up the loan amount, the borrower is required to pledge the car that is being bought as collateral with the lender. At the time of purchase, the title of the car is made in the name of the lender. When the borrower repays the full amount to the lender, then the title of the car is transferred to the borrower’s name.

Before taking up this loan, the borrower needs to decide the car and his next step should be to look for a suitable car dealer. After deciding on one who is giving the borrower a good deal, the borrower should then apply for the loan. This application can be made through the online mode if the borrower does not want to take any hassle and wants to speed up the process of approval. The money is transferred to his account and he can easily pay the price of the car to the dealer. This loan is also available to the borrowers with a bad credit history.

Borrowers can now easily borrow money for their car purchase through a secured car loan. Possessing a car has not remained very difficult now.

The first thing each and every individual should do before applying for an auto loan is get their own credit report. Checking credit reports for accuracy should occur once a year. If there are any mistakes that negatively affect your credit, corrections can take up to three months to fix. Staying on top of these mistakes will save you headache in the long run.

Reduce credit card balances An important factor in your FICO credit score is the ratio of owed amount to credit limit. If you have over 25% of your credit limit owed, this could lower your credit score. Try to limit the use of credit cards if this is your problem. Pay bills timelyPaying bills on time is one aspect of good credit in which most people are aware. Be sure you make timely payments on bills especially close to the time you apply for a loan. A late payment six years in the past will not affect you credit as heavily as a late payment in the present.

Pay off debt Many credit cards offer appealing balance transfer rates. Do not fall victim to these rates around loan time. If you cancel a credit card and transfer it’s balance over to another credit card, you are increasing the debt to credit limit ratio. As stated earlier, this is not a good thing. Instead of transferring debt, work on paying off that debt before applying for an auto loan.

There are many reasons why improving your credit score is so important. Saving money on auto loans is just one of the many benefits of having great credit. Improving your credit not only improves the health of your current financial situation, but sets you up for future financial success.