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Options for Car Loan Sources

Posted on Sep 22, 2011 by Thalia Green
Sep 22

Car loan sourcesAre you aware of your options for car loan sources? Here is a short list of places to consider if you need a car loan.

 

Car Dealers
The most common place that people get a car loan from is onsite with a dealer. Nearly all dealers have a finance department where people can get a car loan for the vehicle they have just selected. In some cases, going through the dealer is the most logical choice. This is especially true if you are purchasing a new car. Dealers have extra leeway because the loan is financed directly through the manufacturer. As such, the manufacturer can offer perks such as zero percent interest. However, you may find that by going through a dealer you end up paying more for the vehicle.

 

Banks
All banks offer options for auto loans. If you have a good relationship with your bank, it's definitely worthwhile to find out what kind of terms they can offer you on the car you are considering. If you choose to finance your car through a bank, it's usually best to visit the bank before visiting the car lot. Do some research on the type of car you are considering, so you'll have an idea as to how much you'll need for the loan. If your credit is good the bank may be willing to offer you a "blank check" loan. This means you are approved for a loan up to a certain amount, with the terms previously negotiated. You can then visit the dealer and negotiate terms for the car as a cash customer, which will almost always get you a lower price on the vehicle.

 

Credit Unions
Though similar to banks in their operation, credit unions are different from other financial institutions in that they are non-profit. Most often credit unions are set up through large employers, or through a group of employers. Their main function is to serve their members, not to make a profit. For this reason credit unions tend to offer better service than banks, and in some cases can offer lower interest rates than banks. Although credit union membership is not an option for everyone, if it is available to you it might be worth investigating.

 

Because you will be making payments on your car loan for many months to come, it is important to make sure you get the best rate possible. By shopping around you can be sure that you'll get the best deal for you.

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The Anatomy of a FICO Score

Posted on Sep 22, 2011 by Thalia Green
Sep 22

Few numbers will have more impact on your car loan application than your FICO score. A FICO score can tell a lender at a glance whether or not you will be a good credit risk. Most people know that a higher FICO score is desirable, but may not be aware how a FICO score is determined. Here is a breakdown of what factors will impact your FICO score.

 

1) Payment history on loans
Without question, your ability to make payments on time will impact your FICO score more than anything else. A whopping 35% of your FICO score is determined based on your payment history for other loans. This includes car loans, credit cards, personal loans, mortgages, and even utilities. If your FICO score is low, keeping your payments current is one of the easiest ways to improve it over time.

 

2) The amount of debt in relation to your income
30% of your FICO score is determined by the amount of debt that you have. For this reason, it's not good to have too many credit cards maxed out, as a high debt-to-income ratio will lower your credit score. Paying off your credit cards and keeping the balances low will definitely help your FICO score improve.

 

3) Length of credit history
Although it only accounts for 15% of your FICO score, the length of your credit history definitely is important. This is the most frustrating aspect for many young adults as most are working to build a credit history. Secured credit cards can be one way to begin building a small credit history. A secured credit card usually has a smaller balance, which is backed by an account at the same bank where the card is issued. The account is maintained solely for the purpose of insurance for the credit card. Should the customer default on a card payment, the bank can take the money out of the account. However, by keeping monthly payments on the card current, the customer can begin to build a credit history.

 

4) Number and diversity of accounts
Rounding out the list of factors are the number of accounts and the diversity of accounts. Each of these factors impacts the FICO score by 10%. While you certainly don't want to have too many accounts opened, having a few open can show that more than one lender believes you are a good credit risk.

 

In a way, all five factors are tied to each other. Ultimately the best way to improve your FICO score is to make regular payments on your current loans, keep your balances on credit cards low, and do not open new loan accounts unless you absolutely need them. These three things will guarantee that your credit score will go up over time. 

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A Full Deck: What Income Can You Bring To The Table?

Posted on Sep 22, 2011 by Thalia Green
Sep 22

Calculate income for car loansRegardless of your credit status, most lenders will want you to show proof of income. There are many ways to show a lender that you have the means to pay for a car loan. Here are some options that you can consider.

 

Employment
Employment is most commonly they way that people show that they they have the means to pay for a car loan. To show proof of employment income, most people bring a few of their paystubs. However, if you are an independent contractor or self-employed, there are other ways that you can show proof of income. Bank statements showing proof of direct deposit, or tax returns showing reported income from all customers are also acceptable to show proof of income. Don't forget that if you are currently holding two jobs, you can also use the income from your second job to qualify for your loan.

 

Alimony
If you are receiving alimony from a divorce settlement, this too can be shown as proof of income. Like employment, alimony earnings can be shown through bank statements, cancelled checks, or tax returns.

 

Settlements, Inheritance, Lottery Winnings
In some cases, people are receiving regular payouts of a large amount of money. This could be the case if you have inherited money, but also if you are receiving payments from a large lawsuit settlement, or monthly payments on lottery winnings. In all three cases bank statements and cancelled checks can be used as proof of income. You may also have to show additional paperwork regarding the payment arrangement as proof that the income from this source will be steady through the term of the loan.

 

Rental Income
If you are making money off of a rental property, rental income can also be used as income. You'll need to show proof that you own the property, in addition to your bank statements and cancelled checks from the renters.

 

In most cases employment is the primary source of income, but don't forget that other sources of income can be counted towards your loan application as well. By presenting all your cards on the table, you may find that you are able to qualify for a larger loan, or a more favorable interest rate. Each lender will have their own regulations as to what income sources are permitted. If you have sources of income other than your job, be sure to inquire with your lender as to whether your other income sources can be applied to your car loan. 

The Real Cost of Car Ownership

Posted on Sep 21, 2011 by Thalia Green
Sep 21

Are you thinking about getting your first car? If so, there are several expenses you'll need to consider. Certainly the car loan payment is the largest expense associated with car ownership, but there are others that will need to be factored into your budget. Here is a short list of car-related expenses that you'll need to consider.

 

Gas
It's no secret that gas costs have gone up significantly for everyone over the last several years. Speculators believe that gas prices of over $3 per gallon are hear to stay. With this in mind, the price of gas will definitely need to be considered. To determine you gas costs, you'll need to know your car's MPG (miles per gallon) rating. Cars with 4-cylinder engines are always more fuel efficient than V6 or V8. Consider the length of your daily commute, as well as transportation necessary for extracurricular activities. From this you should have a decent idea of how much you can spend on gas per week.

 

Insurance
Having car insurance is required in all 50 states, but the minimum coverage required varies from state to state. While state requirements are usually for liability only, most lenders will require the more expensive comprehensive and collision insurance to cover the car while you are paying off the car loan. It's a sensible measure to visit with at least a few agents and get some quotes to find out what your best option is. Insurance payments can be made anywhere between once a month to every six months. If the payments are less frequent, you may need hold back a portion of your monthly paycheck in savings.

 

Maintenance
Even for newer cars, there will be maintenance costs to consider. Regular oil changes, tire and brake replacements, as well as milestone checkups. All of these will need to be budgeted for to keep your car running in top condition.

 

By knowing what expenses are associated with the upkeep of a vehicle, you'll have a much better idea of the true cost of ownership. More than just the car loan payment, additional related expenses will help you to budget accordingly, and not be taking by surprise as to how expensive owning a car can be. A good option is to talk to someone who already owns the car that you are thinking about buying. They can tell you about the ongoing expenses that they have, and also give you any suggestions about problems that they have faced with that vehicle.

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Cars under $5,000 for buyers with no credit

Posted on Sep 21, 2011 by Thalia Green
Sep 21

If you are just starting out in life, making a large purchase such as a car can be a challenging task. Odds are good that your lender will require a sizable down payment, and that the car loan amount may be relatively small compared to those with good credit. You may find that a used vehicle for under $5,000 might be your best option. Fortunately, there are some great options for cars under $5,000 that are not only affordable but also reliable. Here are some suggestions for cars that might fit well into a modest budget.

 

2002 Honda Civic
As a brand, Honda's are celebrated for their longevity and reliability. With regular maintenance, many Civic owners hang onto their cars for well over 10 years. For this reason the Honda Civic should be at the top of your list for cars to consider. The Civic is also very gas efficient, which will help keep the operational costs down, as well.

 

2001 Toyota Corolla
Almost as celebrated as the Honda Civic, Toyota Corollas are equally well known for their durability. Like the Honda, regular maintenance is essential for keeping your Corolla running for years to come. This car is an excellent choice for college students who need a dependable way to get back and forth to classes.

 

1997 Mazda Miata
Inexpensive does not necessarily have to me a lack of style! For those who think a convertible is outside of their means, a 1997 Mazda Miata migh change their perceptions. The Mazda Miata convertible is a great option for those who are looking for a fun ride that will still help them stay within their means.

 

1998 Ford Ranger
Fuel economy is important for those on a strict budget, but what about if you need a truck? The Ford Ranger is a fantastic option if this is the case. As a smaller truck, you can budget less money for fuel, and maintenance costs for Fords are more reasonable than their foreign counterparts.

 

As you can see, getting a car for under $5000 does not always mean sacrificing on reliability. There are many options available to those who are looking for a car with no credit. If you choose take out a car loan for your purchase, remember to make room in your budget for routine maintenance costs. If you take good care of your car, it can serve you for many years to come.

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Should you purchase gap insurance?

Posted on Sep 21, 2011 by Thalia Green
Sep 21

When you get a new (or new-to-you) car, the salesperson and finance manager will attempt to add in all sorts of additional extras to the auto loan. While some of these are tangible, such as a nicer stereo system or a moon roof, others fall into the service category. Gap insurance is an example of the latter. Depending on your situation, it may make sense to add the cost of gap insurance into your car loan. To help you decide whether its right for you, consider the following.

 

What is gap insurance?
In order to determine whether gap insurance is right for you, it's helpful to first know what gap insurance is. Gap insurance will cover the difference between the balance on the loan and the value of the car. In other words, it will cover you in the event that you find yourself underwater on the loan. Gap insurance is often recommended, but it is not required.

 

When is gap insurance helpful?
If you are purchasing a new car and not making a very big down payment, gap insurance is almost a must. During the first three years a new car depreciates rapidly, almost always faster than the rate of payment on the loan. Its a certainty that you will have a period during the beginning of the loan where you owe more than the value of the car. If you were to total the car, the insurance would only pay the fair market value, which could be less than the value of the loan. You would be responsible for the balance...unless you had gap insurance.

 

Can I get around needing gap insurance?
The easiest way to get around purchasing gap insurance is to buy a used rather than new car. Ideally, you should shoot for a car with low mileage that is between 3 and 5 years old. This is old enough that the car has already taken its largest depreciation hit, yet not so old that it has a high likelihood of having major problems. If you absolutely must purchase a newer vehicle, make at least a 20% down payment. This will cover the depreciation within the first year and give you a better chance of outpacing depreciation for the balance of the car loan term.

 

Gap insurance is not a scam; it's definitely something that makes prefect sense for certain buyers. If you would like to find out more about the cost, ask your lender about gap insurance and whether it would make sense for the car you have in mind.

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Should I Include An Extended Warranty On My Car Loan?

Posted on Sep 20, 2011 by Thalia Green
Sep 20

In almost every case when you get a car loan, either the salesman or the finance manager will attempt to talk you into purchasing an extended warranty. An extended warranty will cover you after the standard warranty has expired. While some buyers will insist that no car should be purchased without an extended warranty, this option does not make sense for everyone. Here are some questions to help you make up your mind as to whether or not an extended warranty makes sense for you.

 

How long are you planning on keeping the car?
An extended warranty only makes sense if you are planning to hold on to the car for awhile. If you trade in the car after just a few years, the extended warranty is just a waste of money. Consider too that many people may say that they want to hold onto a car for awhile, but after about four years the car doesn't look as shiny and new as it used to. The new cars at your local dealer start looking more appealing, and you find yourself making an emotionally-based purchase of a new car. If you are planning on keeping the car for several years to come, an extended warranty could be a worthwhile purchase, however you have to have the emotional discipline to not get swept up by new car euphoria.

 

What exactly does the extended warranty cover?
You need to be extremely clear on the the terms of the warranty so you know what exactly it is that you are purchasing. You may have a rude awakening when you take the car in for dashboard repairs, only to find out that the warranty only covers the engine and the transmission. In addition, keep in mind that certain repairs are never covered under warranty, such as new brake pads, new tires, and other items on the car that could be considered wear and tear.

 

Are you a saver or a spender?
Your own personal financial habits should also be considered. Some people avoid purchasing the warranty, but set aside a certain amount in savings to pay for repairs. Again, it comes down to how disciplined you are. If you know that you can set aside a portion of your paycheck each month to prepare for repairs, then you may not need the extended warranty.

Ultimately, extended warranties make sense for some people, but not necessarily for everyone.

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Three Useful Websites for Buying A Car

Posted on Sep 20, 2011 by Thalia Green
Sep 20

best websites for car loansThe internet is a commonly used tool for shopping for a car and doing research on the purchase. While there are many websites out there that are dedicated to the purchase of a car, here are a few that you should definitely visit before purchasing a vehicle.

 

1) Carfax.com
Dealers can do a lot to make a car more appealing. Cleaning and a good paint job can conceal a multitude of issues. Very few people can tell just by looking at a car whether or not it had been in a severe accident. Yet, if you aren't aware of this there could be many issues with the car that could pop up down the road. To protect yourself, enter the vehicle identification number (VIN) on Carfax.com. You'll quickly find out things such as whether the car had any flood damage, whether it was in a wreck, the last reported mileage and how many owners the car has had. There is a small fee for running the report, but many dealers will run the report for you for free, if you just ask.

 

2) KBB.com
Kelley Blue Book has long been the standard for determining fair market value of all kinds of vehicles. Whether you are considering buying a new or used vehicle, you should definitely visit Bluebook.com. This site permits you to look up a car based on its make, model, condition, and mileage, and give you an estimate as to its current value. This can be in immense help when it comes time to negotiate trade in price at the dealer, and also to ensure that you are getting a good deal on your next car.

 

3) Carloan.com
Carloan.com makes the process of procuring a car loan easy. Rather than doing the the legwork yourself and visiting with various lenders, Carloan.com takes your information and searches for the most competitive rates possible on your behalf. They work with customers of all types of credit, and especially welcome those who have bad credit or no credit. A personal loan adviser is assigned to each customer, who acts as a liaison between buyer and seller. Turnaround time is quick; most of the time the loan is approved within 48 hours.

 

The internet can be a marvelous tool in helping you get a great deal on your next car. Whether new or used, good credit or bad, you owe it to yourself to check out these three websites.

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Why Consider a Credit Union for a Car Loan

Posted on Sep 20, 2011 by Thalia Green
Sep 20

credit unions car loansAre you a member of a credit union? If so, you're in luck! Being a member of a credit union can afford you some great benefits. Larger companies or organizations will sometimes offer the option of joining a credit union. Here are some reasons that you should give serious consideration to joining a credit union.

 

1) Credit unions are non-profit.
Unlike a traditional financial institution, credit unions are not operating to make profit. They are looking out for the interest of their members, not their own interest. As such, you are more likely to get impartial advice from a credit union than from a bank. The credit union has no motivation to not give you the best information possible.

 

2) Credit unions generally have a record of providing better service.
Because they operate for the sole purpose of serving their members, credit unions must raise the bar in terms of service to compete with more traditional financial institutions. Most credit union members will say that the service they receive from their credit union is better than the service they received in the past from banks. If customer service is important to you, a credit union might be the way to go.

 

3) More convenient.
Many people chose their financial institution based on how convenient it will be to bank there. What can be more convenient than your workplace's in-house credit union? Most people travel to work five days a week, and typically a branch for the credit union will be nearby the workplace, if not inside the workplace itself. With gas prices being fairly high right now, not having to waste gas to do your banking errands can be a great perk.

 

4) Lower interest fees.
As stated before, credit unions are non-profit organizations. As such, they generally offer lower interest rates on all kinds of loans, including car loans. If you are a member of a credit union or have the means to become one, it can be well worth your while to see what kind of loan your credit union would be willing to offer you.

 

Not everyone has the option of joining a credit union. For those who are in business for themselves or work at a smaller company, credit union membership might not be available. but if your workplace does have a credit union, it's well worth looking into. The amount required to open an account is usually minimal, and you'll enjoy great service and low rates.

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What You'll Need To Refinance a Used Car

Posted on Sep 16, 2011 by Thalia Green
Sep 16

Thinking about refinancing on your used car loan? Refinancing is a great way to save a ton of money on your car loan. Interest rates are extremely low right now, so if you have a high rate it's definitely worth looking into. Unlike refinancing on a home, refinancing a car loan is a very quick process, and the cost of doing so is minimal. Here are some things you can expect if you decide to refinance your car loan.



1) Credit History
If you decide to refinance your car loan, whether through your current lender or a third party lender, you can expect that they will take a look at your credit history. In general, your credit report is a good indicator of how responsible you will be with the refinanced loan. The higher your credit score is, the less risk that is perceived by the lender. If you have a lower credit score presently, you may want to wait to refinance until you can build a more recent history of timely payments on your debt, or pay some of the debt you owe down.



2) Proof of Insurance
Of course it goes without saying that the company you choose to refinance your loan will want to make sure you are legally able to drive the car! You will be asked to present your driver's licence, as well as proof of insurance on the vehicle in question. In some cases the lender may require you to carry comprehensive and collision insurance, to protect the value of your car should it be wrecked.



3) Proof of Income
Your lender will want to know that you have the means with which to pay for your refinanced loan, so you will be asked to show some proof of income. In most cases, recent paystubs will be the easiest way to do this. If you are an independent contractor or self-employed however, there are other ways you can show proof of income. Bank statement can show records of your direct deposits from your clients, or you can show your tax return if you have many clients and want to show a summary of what you made last year. Rental income and alimony can also be considered as sources of income as well.



Refinancing a car loan is a relatively painless process and can usually be done on the same day that you apply. By having the required documents, you'll be able to make the process go just that much faster.

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