Weigh All The Factors Before Deciding
There isnt any one-size-fits-all way to determine the best car loan. Thats why you need to take the time to understand how auto loans work and make the right decision for your specific financial situation.
Some people will benefit most by taking a longer term to reduce monthly payments and using the difference to pay down higher-interest debt. Others will prefer to make a higher monthly payment and pay off the loan sooner.
And if you have an existing car loan, you may be able to save by refinancing. Try our refinancing calculator to find out if you can lower your monthly payment by refinancing.
A Lower Monthly Payment On Your Car Loan Doesnt Always Mean Youre Saving Money Heres How Car Loans Work
Purchasing a car typically means taking out a car loan. If youre in the market for a new vehicle, youve probably spent a lot of time researching car options, but do you have a good understanding of how car loans work? When you take out a car loan from a financial institution, you receive your money in a lump sum, then pay it back over time. How much you borrow, how much time you take to pay it back and your interest rate all affect the size of your monthly payment. Here are the 3 major factors that affect both your monthly payment and the total amount youll pay on your loan:
Finding The Option That Works For You
Once you decide on the solution that’s right for you, we want to help you find an affordable vehicle and the dealership that can provide it. If you don’t know where to start, you’re in luck because you’re already in the right place.
Here at CarsDirect, we not only have the inside scoop on all the new and used cars you need to know about, we can get you matched up with a local special finance dealer.
We work with a coast-to-coast network of dealerships that have lending solutions for bad credit borrowers. Don’t hesitate any longer! Simply fill out our fast and free auto loan request form to get started today.
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How To Refinance A Car Into Someone Elses Name
It is technically possible to refinance your vehicle into someone elses name as part of a multistep process, but it takes time and may not work. Here are the steps:
1. Refinance with the new person as a cosigner.
Apply for a loan and the lender will consider the car, how much you owe and both of your credit scores and incomes. If you qualify, both you and the cosigner will sign the loan and the cars title will be updated with the cosigners name in addition to yours.
2. Refinance keeping the cosigner, removing you from the loan
Refinance again to remove your name from the loan and the title. There is no guarantee that the new lender will approve the loan application. They might turn it down if there is not a significant amount of time since the vehicle was last refinanced. Also, they might not make an offer if the only person applying has a low credit score or a low income.
Other options are much easier and quicker.
How To Take Over Car Loan Payments
If you would like to take over payments on an auto loan, you should consider whether you are also taking over ownership of the car. These two items are handled separately. You will have to go through one process to gain ownership of the loan and another process to gain ownership of the car. Ensure you do both to prevent losing the asset you are making payments for.
Taking Over an Auto Loan
You will have to primary options to take over an auto loan. The first is to modify the loan directly with the lender, and the second is to take out a wholly new loan for the asset to pay off the existing debt. The decision will depend on your credit situation and the desires of the current debt holder.
- Taking over an existing loan is easiest if your credit is as good as the existing debtor. The person listed on the loan will have to contact the lender and ask for the modification. You will then submit your application to be approved for the loan take over. Terms may change with the modification. This is also the best option if the current debtor is worried about a credit score drop.
- If your credit is worse than the existing debtor, then you may have to seek a separate loan. The current lender may not approve you, and it is even possible you will need a high risk auto loan. You can then use this loan to pay off the existing. This option will hurt the current debtor’s credit more.
Taking Over a Car Title
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Who Would Want To Take Over My Car Payments
You may struggle to find someone to take over your car payments, especially if you bought the car new. Cars lose value rapidly once they’re driven off the lot. If you have a significant amount of your loan left, then it may not make financial sense for someone to take it over. On the other hand, if the amount of the loan is less than or equal to the resale value, then you will have an easier time finding someone to take over the loan.
How Do You Assume A Car Loan
My daughter is in over her head with her car loan. She lost her job last year and can’t keep up with the payments. How can I assume her car loan to make things a little easier on her?
contact her loan companyhigher interest rates than car loansadding
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Verify Credit Life Insurance Or The Estates Ability To Pay Down The Loan
You may learn more about your deceased loved ones overall financial picture as the estate settles. The owner of the car may have purchased credit life insurance on the car loan.
This insurance offers a death benefit that helps pay off a car loan when someone dies. If you find out there was credit life insurance on the car loan, tell the administrator or executor of the estate right away.
Another possibility is that the car loan could be paid out of the estate. As you might recall, estates include all the assets and all the debts someone has at the point of death.
If the estate contains more assets than debts, its possible to use some of the liquid assets to pay off the car loan. This will depend on the provisions of the will, if any, and decisions by the executor or administrator of the estate.
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How Do You Take Over Someones Car Loan
So, what if your loan is transferable? If you want to pass it along to someone else, youll need to liaise with your lender. Then, the potential new loan holder needs to fill out an application with your lender and meet criteria before you sign your title over.
Lets break those steps down:
- After checking to ensure you have an assumable loan, talk to your lender about what you want to do. Ask about fees associated with a car loan transfer, and make sure you know exactly what the assumption criteria are for new loan holders.
- Next, the new loan holder effectively has to apply for a car loan. If they intend to stay with your current loan company, both of you can liaise with the institution to ensure the vehicle details stay consistent.
- After the new loan holder is approved, you can modify the vehicle title. In a nutshell, you and the cars new owner visit your local DMV office with a bill of sale and IDs in hand and the DMV triggers a title transfer.
- Finally, the new owner has to get car insurance on the vehicle before driving it away.
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How To Return A Leased Vehicle
If you’ve leased the car, you’re in a somewhat different situation. Obviously, you can’t sell it.You can return the vehicle to the dealer, but if it’s before the lease expires, you’ll likely face some stiff early termination fees. Plus, you will still owe the balance remaining on the lease andâto add insult to injuryâalso lose the upfront money originally paid.
However, drivers who want out of their contract ahead of schedule can take heart: There are a few options that allow you to circumvent the usually harsh termination penalties. One frequently overlooked pathâand often the least expensive choiceâis to transfer the lease to someone else.
It works like this. Suppose you have two years left on a three-year lease. Whoever buys your lease agrees to make the remaining monthly payments. While some finance companies donât allow such transfers, the vast majority do. The trick is finding someone interested in taking the reins from you.
Alternatives To Transferring An Auto Loan
- Sell the vehicle to someone else. This scenario may be the cleanest and quickest way to resolve an unwanted auto situation. Selling the vehicle not only avoids the need to transfer an auto loan, it can also provide a cash infusion if you’re experiencing financial struggles.
- Have a family member or friend take over the auto loan payments temporarily. If youre an auto loan holder and youre having short-term financial problems , you can ask a trusted friend or family member to take over the loan for a few months until you’re financially solvent again. In that event, its highly recommended that both parties sign a contract stipulating the length of the contract and how the auto loan will be paid.If the temporary auto loan payer will also be driving the vehicle on a regular basis, you need to be aware that any parking tickets or toll booth violations will be filed in your name. Traffic accidents are a risk, too, so the temporary driver would also need to be covered by insurance.
- Refinance the auto loan. To relieve some financial pressure, you can refinance the auto loan. This may potentially let you lower your interest rate or extend the loan term to reduce the size of your monthly payments. To do this, youll likely need to have good credit to get the best auto loan refinancing loan terms.
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The New Loan Holder Applies For The Loan
At this point, the new loan holder has to apply individually for the loan. If its you, its essential that you know you cant just transfer the loan to yourself from yourself.
If the loan holder is applying to your same lending institution, theyll need to fill out a new application with the same terms and conditions of your current loan agreement. In some instances, your lender may require them to cosign on your loan rather than giving them total control over the loan.
If youre refinancing your car through a new loan, youll also need to apply for that loan with your new lender. In other words, whoever is taking responsibility for the loan balance must be approved before any further considerations.
What To Do With Your Trade
Although it’s convenient to trade in your old vehicle to the dealer at the time of purchasing another, it’s not to your best advantage. You are likely to get the least value from the dealer, as they have to move it yet again and need to ensure a safe profit margin on selling it. They do not have to take your old automobile, and will offer you what will make them the highest profit. Some dealerships may offer artificially high trade in values, but only offer them in association with a higher price on the vehicle they sell you.
Selling Your Used Car Privately
The best option typically is to sell your vehicle privately. It seems even government agencies are freely giving out this advice from the Arizona Attorney General to the FTC. Don’t underestimate the value of your old car. Go to Kelly Blue Book online to do your valuation research. If you can sell it, even for a small amount, it’s extra bargaining power for your new vehicle.
Each year Americans buy roughly double as many used vehicles as new vehicles. You can put a”for sale” sign on your car parked out front if you live in a high traffic area. Sites like Craigslist or Auto Trader can also help send buyers your way.
Another option with your old automobile is to keep it. An old pick up truck used for heavy work can help protect the value of a new vehicle by minimizing wear and tear, along with depreciation. Automotive insurance companies typically offer multiple vehicle discounts.
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What Happens To The Car Loan When The Owner Dies
Your estate includes all the assets you own and any outstanding debts when you die. The estate is responsible for paying your debts if the total assets are greater than the total debts. Anything that remains goes to the designated beneficiaries through a court process called probate.
Probate is the court process that handles giving your assets to your beneficiaries. Probate involves legal fees and there are a variety of ways that people avoid having assets and debts go through probate. You can set up trusts and create direct beneficiaries or payable on death accounts, depending on the asset.
Your loans are still active when you die, and the lender still will work to receive payment. The estate, however, is the primary responsible party, since your assets in life are the first place where the lender should go to get paid.
Lets say the assets in the estate dont pay for the car. The car is still an asset itself and may have been bequeathed to someone in the will. This is a double-edged sword the beneficiary who receives the car may not have the money to keep up the payments on the loan.
Cosigners on car loans become responsible for the car loan after the death of their fellow cosigner. The same is true for situations where two people buy a car together. When one dies, the other becomes the sole owner by default without going through the probate process.
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Can I Get Someone To Take Over My Car Payments
If you cant make your car payments, can you just find someone who can? Credit.com blog reader Carlos asks:
I have had my car for 5 months my payment is $330 but I will soon be getting married and getting my own place. I have tried to advertise my car and have someone take over loan on my car and everyone is just trying to get a notarized agreement and keep the car under my name. I wont be able to make my next payment.
It sounds like Carlos is hoping is that someone will officially take over his payments and assume his loan. But that may not be possible. In most cases, car loans are not assumable, says Edmunds.com Senior Consumer Advice Editor Philip Reed. When the registration and title are transferred to a new owner, the lender needs to be notified. The lender will then step in and require a to make sure the new owner can make the payments. This leads to the initiation of a new loan at the new owners credit level.
Policies with regard to auto loan assumptions vary by lender. A representative from Wells Fargo said its car loans are not assumable, while a representative from Ally Financial said that it will work with a customer to determine whether an assumption is an option for them. If the assumption is allowed, the person taking on the finance contract would need to fill out an application to see if they qualify to assume the responsibility of the vehicle and payments.
Guarding His Own Credit
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Once You’re Back On Your Feet
If you weren’t able to keep your vehicle after a job loss, it’s likely you need auto financing again after the dust settles and you’re back on your feet. You should know that you don’t need to worry about a lower credit score or a fresh job standing in your way if you find the right kind of lender to work with.
Chances are you’re going to need a subprime lender the type that looks beyond credit scores to help people get loans, even if they’re struggling with bad credit, no credit, bankruptcy, or repossession. In the meantime, if you’ve lost your job, but don’t want to lose your vehicle, keep talking with your lender. Remember, you don’t have to lose your car in every case.
Some Used Cars Are A Real Bargain
Before you take the plunge of buying a new car, consider a used one. Frugal shoppers know that new cars depreciate as soon as they are driven off the lot, and in fact lose on average 15-25% of its value each year the first five years. Buying one that’s a couple years old can still provide you with a reliable vehicle for thousands less while letting someone else take the depreciation hit. If you trade in every few years then depreciation is something to consider, so look for vehicles that traditionally hold their value such as Honda, Toyota or Lexus. If you keep your automobile until it falls apart, then depreciation is not a concern for you. New models for the upcoming year usually arrive late summer or early fall. Although selection may be limited, this is a great time to consider buying last year’s model because the dealer will need to make room for the new ones.
Do Not Buy a Lemon!
Check the used car history by the VIN# on sites like Carfax or AutoCheck. This will help eliminate anything that looks questionable. Anything that says it’s a salvage should raise a red flag. Salvage vehicles are those in accidents that the insurance company has determined repair costs are more than it is worth. Some shops will try to repair them and sale them at a steep discount. These are given salvage titles. Unless you are mechanically savvy, it’s best to avoid these.
Program Cars Are Often a Great Value
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