Debt-Free Business Financing With No Loss of Ownership Or Control

Posted by Credit Financing Guru on 23rd October 2009

There is a form of business financing that is debt-free, with no loss of ownership or control. It is very quick and still readily available. It is the only form of finance that grows as fast as invoices. There is no minimum time in business or collateral requirement. The client’s personal or company credit is usually not important. Prior liens are usually not a problem, so long as they’re disclosed up front. (Factors don’t like surprises. A deal that could have worked will probably die if the factor’s due diligence turns up undisclosed liens.)

This form of finance is called factoring. Say your company (the client) provides a product or service to a customer, then issues an invoice for those goods or services. The customer frequently takes 30-90 days to pay the invoice. Rather than wait, the client can sell the invoice to a third party, called a factor. The factor will verify that the invoice is valid and that the customer has the willingness and the ability to pay.

The factor will pay for the invoice in two parts. Initially, he will pay the client an advance of typically 70-80% of the face value of the invoice. This usually takes less than 48 hours. When the customer pays, the factor will deduct a fee, and refund the balance to the client. This fee is mostly affected by the time the invoice is outstanding.

There are numerous advantages to factoring for a client company. The most obvious one is that cash flow improves immediately. Factors also provide other benefits as part of their normal business, such as handling collections and tracking accounts receivable. A factor can provide quality assurance when they verify that the customer received the product. Another benefit is that a factor will verify a customers’ credit before advancing funds. If you’re looking to do business with a new customer, but the factor won’t fund their invoices, you will want to be very careful about the terms you offer them.

Factoring rates tend to be higher than bank rates, but when considering costs it’s important to consider the benefits as well. Having cash on hand to bid more work or take advantage of supplier discounts can make a huge difference. The objective is to make more money by factoring than you would if you didn’t factor.

Factoring has changed a great deal over the last ten years. There are 5-10 times as many funding sources now as there were then, so rates and terms are much more competitive. There are factors for invoice volumes of $500/month to over $10 million/month. There are factors of all sizes who specialize in the construction and medical industries.

Because there are so many funding sources, your best bet is to use an independent broker. Most brokers don’t charge any client fees. They are paid referral fees by the funding sources because the funding sources are wonderful people (many of them are very nice, actually) and because it’s less expensive for them than advertising. There is very little difference in referral fee rates between different funding sources, so finding the best match between the needs of the client and the funding source is the primary concern.

Mike Curtin, Owner, MSC Funding

Business Financing FAQ:

Question: What are some alternative forms of financing for a small business?
During these tough times, it’s getting harder and harder to achieve traditional funding from banks. As a small business owner myself (a janitorial and cleaning service) I wanted to know what alternative funding sources are available for us?

Answer: There are many sources of alternative funding for small business. They all vary, depending on who your clients are, but I will list a few with a description for each.

The first option, factoring, is a practice wherein one company purchases a debt or invoice from another company. It refers to the acquisition of accounts receivable, which are discounted in order to allow the buyer to make a profit upon collection of monies owed.

PO Funding covers the supplier expenses associated with a specific purchase order. It enables you to make sales that exceed your current financial capabilities and provides a solid platform for growth. When used properly, purchase order financing can help you grow your company by enabling you to accept larger orders.

A Merchant Cash Advance, otherwise known as credit-card-receivable funding, is an increasingly popular solution for small businesses looking for a flexible form of business capital. As use of credit cards grows as a form of payment at a greater variety of businesses, more small business operators are able to tap into a previously unrecognized form of capital: their credit card receipts.

Question: Rental Business: Re-financing a 4-Plex.?
I am a landlord. I have two 4-plexes and one triplex in Ontario, Canada. I wanted to ask about re-financing a residential 4-Plex: Is it reasonable to expect to be able to refinance it up to 75% or 65%? Right now mortgage is about 50% of value. Please note: I only bought it 12 months ago. Also, although I am an engineer, I do NOT have a regular day job, just the income properties and being a landlord. Also my credit score is very good – above 750.

Answer: You should be able to with 50% equity and a 750 credit score.

Question: How can I finance a small business with proven profit potential in today’s credit market with no credit score?
I have no credit score because I have never borrowed money. I had struggled many years because of my obligations to my terminally child. My home is paid for and because of my age it will stay that way. I am in a “green” business with a good market for my product which involves turning a waste product into a marketable product.

Answer: There are two really manageable options that I can think of right off:
1. family and friends. To make the financing more palpable to them, go look at the website for virgin money. They make up loan papers and even emails to potential lenders from your list of friends and family, and make everything upfront and legal. the money is electronically transferred from your account and deposited into theirs so that you only have to make your payment and there are no hurt feelings.
2. there are a couple of websites available where you ask for private loans from strangers. You put up your information and the amount you need to finance your business, and anywhere from one to thousands of people bid for parcels of your loan. one person can fund 1000 dollars while another person can fund 100. It’s the same as above, the website takes a monthly payment from you’re account, and distributes it.

Question: Why is it important to separate business and personal finances?

Answer: If you do not separate than if your business owes money then they can come after your personal finances and property. You don’t want your house to be taken because your business is in trouble.

Question: Are banks still giving loans to start a small business?
I am thinking of going into business for myself but I don’t want to go through the whole process of putting together a business plan if I cannot get financing.

Answer: As an aspiring entrepreneur you have to realize the road ahead is going to be tough. While one of the hardest things that you have to do to start your small business is to get the funding that you need to start up. Most small-business owners are lucky enough to have enough resources such as surplus funds in their savings accounts to start their businesses. But for the majority of those business owners just like you and I, we require some help and assistance.

With the recent recession and the economy heading towards a downward spiral, getting the loan that you need to start your small business is going to be a very difficult road for you. But thanks to Uncle Sam there is a better choice out there for you. Look into applying for a small business loan grant from the government. The benefits of getting a grant from the government is the fact that it never has to be paid back unlike a normal loan from major banks such as Bank of America Wells Fargo etc.

Question: What is the purpose and usefulness of accounting and finance professional bodies to small business owners?

Answer: Accounting professionals can help small business owners to set up accounting systems that can help make their financial information more organized and readable by outside entities. This can be useful if a small business owner needs to create financial statements to get a loan at a bank. Accounting professionals can also help small business owners complete their tax returns.

Question: How do I get large finance to buy a business?
I want to purchase a skip business and need to know how to raise the finances.

Answer: With great difficulty nowadays. Banks don’t want to lend even to good companies! As a start up you will not appeal to them. You may get finance as long as you are making a size-able financial contribution yourself. No lender will risk their money unless you risk yours too.

Question: What do I need to start a small business?
A coworker and I are thinking about opening up a small clothing store but don’t exactly know where to start or what it takes. We know it takes finances and are currently working on finding grants and other means but what else would we need?

Answer: It totally depends on what you are starting with. If you have product but not a lot of finances and you really want to get established as a clothing line, then you need to start small. You can sell your product on the internet, but you will be able to build a reputation for the product quicker if you sell locally. To actually start a store you are going to need a minimum of $200,000 start-up, that’s just what it usually comes out to after all the expenses are paid. There are very few grants for “stores.” There are grants available for clothing designers, training, etc., but the statistics of a store crashing and burning within the first five years is so high that there just aren’t many companies that are willing to give grants to start-up stores unless it is a franchise. Your best bet if you have a product is to partner with a local store or boutique that you can pay a commission for allowing you to park your product in their store. The commission is based on sales so you don’t lose anything. Then, as you get a reputation and following for the clothing you’ll have more availability for expanding.

Categories: Business Financing
10Oct

Computer Financing With Bad Credit

Posted by Credit Financing Guru on 22nd October 2009

You’ve got a good job, steady income, pay your bills on time, yet can’t even get financing for a candy bar. Many people find themselves in this very situation after unexpected unemployment, divorce, or bankruptcy. Maybe you haven’t been able to establish a line of credit at all, good or bad. So how can you finance a new computer with bad credit?

One way to finance a computer would be to get a small personal loan from a bank or credit union. Personal loans are probably the easiest to secure, especially if you have some form of collateral. This of course is not going to be an option for everyone, but it’s worth a shot and will be the cheapest way to get your computer financed with bad credit.

Financing a computer with bad credit through a rent to own store is something just about anyone with an income can do. Though you’ll likely be able to get a computer this way, it isn’t highly recommended since you could end up paying up to three times the retail value of a most likely used computer. Rent to own should be a last resort.

Put a computer on layaway at a retail outlet like Wall Mart. If you have a sizeable income, but just don’t have good credit, this may be a viable option for you. The only draw back with putting a computer on layaway through a retail outlet is that it will be a shelf computer meaning “as is” and you’ll need to pay in full in about 90 days.

In recent years there have been computer financing companies willing to take payments via check by phone provided you have a valid checking account. If you have poor credit and want to get guaranteed computer financing, and need to break up the payments, plus pay what the computer is worth, this is going to be a very good option for you.

Computer financing with bad credit isn’t always easy, but it is possible. Ironically, you are likely going to pay slightly more for financing with bad credit than you would have if your credit was good. On the bright side, you may be able to boost your credit rating a little bit if you keep up on your computer payments.

Daymon Hoag is the founder of Cheapest Service where you can shop for Bad Credit Computers – Laptop – Desktop – Computer Financing


Computer Financing FAQ:

Question: Is it legal for a company to charge you $3000 for a $1000 computer?
My son is a marine, he is only 18 and got suckerd into buying this laptop from a kiosk that is only worth $1000. They “financed” it for $4000. Is this legal?

Answer: In general, yes they can. There are special protections available to servicemen, he needs to ask if they can help. This is why a credit card is so important, he would have had ten days to change his mind under any circumstances.

Question: Why the heck do you need to get financed just to buy a computer?
I hate those dumb commercials. They have people on there saying, “I couldn’t get financed, so I couldn’t get a computer.” I’m thinking, “You don’t need good credit to get a computer. I got my laptop and I don’t even HAVE credit.” Man! People are so naive.

Answer: When you buy a mac you need credit..unless you have $2500 cash to just throw into a laptop..which actually you probably would have money to throw away if you had good enough credit to get the Juniper card needed to purchase a mac…those cards are like impossible to get.

Question: Does anyone know any good bad credit financing websites for Computers and laptops?

Answer: The only company that I know finances for computers and laptops is Blue Rhino. I’m not sure if they’re still in business. You can also try the Home Shopping Network. They do their own kind of financing. But since laptops are so cheap nowadays, people just pay with a credit card or cash.

Question: Dell computer loan help?
A really good friend of mine asked me to finance a dell computer in my name last year and i did it for him. At the time he said he would have it payed off in no time. Well a year later almost the full balance remains. What can I do? Can I get the loan transfered to his name?

Answer: Nope and don’t do things like this anymore. It’s just bad practice.

Question: Is it possible to finance a laptop at bestbuy?
I’m looking for a computer and I don’t have that kind of money to spend at once and best buy seems like the best store.

Answer: Depends. Financing plans are available but you have to have a BB Credit Card first. If you are under 18 this might be a problem.

Alternatively, work out something with your parents where they purchase/finance the laptop and you pay them back.

Question: How come I can’t get approved for credit?
Ok, my computer that I’ve had for the past 3 years is about to go belly up on me, and it’s vital that I have a computer because I do most all my bill paying and banking on-line. My credit score is 720 and I’ve tried using bill me later with tigerdirect.com and getting an alienware credit line, but I can’t get approved for a few hundred dollars in credit to buy a decent computer. Can someone tell me why even with a score of 720 I can’t get financing for a computer? I know this is a stupid question but it irritates me how the system works.

Answer: Your score really is not much of a factor in getting credit approved. It’s what shows on your actual credit report. You probably have a limited credit history — too few accounts and/or too new. Or your debt to income ratio may be too high.

Question: This is about HP computer financing?
Is it worth getting HP computer financing where you pay 20 dollars every month? I want to get a new computer because my dell laptop sucks and does not work right but i don’t have 400 dollars to just blow on a computer. If it is worth it how much more to the normal price of the computer do you pay and how long does it take to pay off?

Answer: It depends on how many months you have to pay 20 bucks! Just make sure you calculate the total payable, and then minus the 400 to see how much of a premium you are paying. If you think it’s reasonable then go ahead and get it.

Question: Financing on apple computers Canada?
Last year I broke my MacBook and it’ll take me a few years to have enough money to buy a new one. I was wondering if there were financing options for apple products in Canada.

Answer: I’m pretty sure they will finance it for you, if you qualify. Why don’t you go to apple.com/ca, and try to buy one. When you go to check out there should be a link right under the total price for financing.

Categories: Computer Financing
10Oct

How to Determine Which Mortgage Type is Right For You

Posted by Credit Financing Guru on 22nd October 2009

The following are the most important factors involved in selecting a mortgage that is truly suitable for you:

1. Check Your Financial Position – To get a mortgage one must check the current financial position and weaknesses one has. These strengths and weaknesses include:

• The monthly income earned by you which gives you the ability to pay the mortgage payment
• The savings collected by you. This will help you making down payments and covering the closing costs at the time of refinancing. Once must also keep cash in hand for emergencies.
• The way you manage the loans and credit cards and your all financial documents is a crucial matter.

2. Your Savings – The amount of your savings relative to the money earned by you is checked. One must add the savings money, mutual funds, and gifts in the form of money and see the final value derived which can be used for the down payment. If the savings you have are less than 25% of the money you earned then it is considered as deficit.

However, if the savings amount is more than 25% of the income but lesser than 75% of the money earned then it is considered as enough. Hence 5% of your money can be used for purchasing the house.

If the amount of your savings is more than 75% of the money earned then you are capable to make a down payment of nearly 20% of the cost of the house.

3. Debt In Relation To Income – One can manage the credits by checking the ratio of the payment of debts to the income. The debt payments include student loan payments, payments for car, installment loans, alimony charges, interest rates and any other obligations. However, these do not involve rent or bills and the payment for the mortgage of the house sold or purchased by you.

4. How Long You Wish To Keep The Home- This is an important issue because if you plan to move within three to five years then an adjustable rate mortgage is a better option. The rate of interest and the payment is lower during the first few years. Hence this helps you save money. However if you plan to keep the home for 15 years or more then a fixed rate mortgage is a better option.

To learn about the various types of mortgage loan programs available visit mortgage loan details.

Mortgage Financing FAQ:

Question: I have excellent credit (800) and need a mortgage.
I’m looking to buy a rental property. The problem is that at the time I’m not employed. I actually have enough money to put 30% down and enough money in the bank to pay mortgage on the house for 10 years. I will also have my sister who works co-sign the loan but her credit is around 600. Will getting a good loan be a problem? Or will it be sub prime?

Answer: Without verifiable income, you won’t get a loan no matter what your credit score. Lenders want to see that you have the cash flow to pay the loan note. Investing in real estate while unemployed is questionable.

Question: Should we pay for a property in all cash or put a large down payment and get a small mortgage?
My wife and I are looking at purchasing a town home or smaller home in the area of Tracy, CA. We are looking at homes in the 180 to 200k range. We can afford to pay cash in this price range, but we will only have about 50k in savings leftover if we do this. We don’t qualify for a low interest loan because we recently started a new business and don’t have a solid track record yet. We could qualify for a high interest FHA at about 9%. My thoughts are to pay all in cash, but my wife thinks we should do mostly in cash and get a small loan. I like the idea of having no mortgage, hence less overhead each month, and we’re not throwing away lots of money interest each month. My wife however doesn’t like the idea of having too little money leftover after we buy the home, just in case something happens. So, do you think we should pay all in cash or pay mostly in cash and get a loan for about 50k or so, and why do you feel that way?

Answer: Pay cash for the house. You will avoid the application, loan origination and reconveyance and credit-pull fees, which could add up to almost 2%-4% of the loan amount.

Then, after you have moved in for a few months, apply for a HELOC from your bank. Since you have 100% equity in the home, you will get the HELOC. And the HELOC is usually free in application, and you pay interest only on the amount you take out. If you don’t use the money, you don’t pay any interest whatsoever.

This, to me, is the best way to go about this.

Question: How to write a mortgage for owner financing?
Can a title company write a mortgage (the paper contract that says the buyer owes the lender etc. and gets recorded as a lien)? Or does it require a real estate lawyer to write one? Or can you write it yourself and then get a real estate lawyer to approve it? If you write it yourself, is there boilerplate text for it available on the internet?

Answer: Call a title company in town. They may have a format you can use. If not better go to an attorney. This is too important to mess up.

Question: Is it a wise choice to go for seller financing if I can’t get a mortgage?
Also does a real estate agent help you with this process and are there still closing costs invloved?

Answer: Seller financing can work, but there are some things to watch out for:

If you can’t get a regular loan, can you make the payments on the seller financed loan? Most of them will “balloon” or come due within 2 to 5 years, so will you be able to get regular financing by then if you can’t get it now?

Is the seller charging more than market value for the house, or charging a much higher than normal interest rate?

Does the seller own the house free and clear? They may not have the right to offer you seller financing if there is any existing loan. Most mortgages have a “due on sale” clause, which means that if the title is transferred to you, the seller’s mortgage can become immediately payable. If there is an existing loan and the seller “wraps” that one with your loan, how do you know that his or her mortgage is getting paid?

Yes, an experienced real estate agent should be able to help you with this and write up the contract so you understand the terms of the note. Also do get title insurance so you don’t have problems in the future. Yes, there are still costs involved – title fees, inspection, but not near as many as if you got a regular mortgage loan.

Question: I am about to buy a home with an inground pool that is 12 years old in fair condition.
The type of mortgage loan I am getting is 100% financing (USDA), but will not finance the value the pool brings to the home on the appraisal. Does anybody have any idea what kind of value, if any, does an inground pool bring to the value of a home on an appraisal?

Answer: Usually it is no value, they are not investments, but amenities and have no value at all, even a negative values as your insurance for the house will be so high that many people can not afford to buy the house because they can’t afford the insurance premiums.

Question: Where can I find a contract for a change in mortgage payment?
We purchased an owner financed house, so we pay our mortgage payment directly to the sellers. We have damage to the roof and they are going to deduct $200 from each payment for a year. We want something in writing so they can’t ever come back and say we owe them more money or say that we didn’t pay our full payment. I was trying to find a form or example contract that I could follow to write this up.

Answer: If you purchased the house,then your name must be on the title deed why are the people you are paying deducting $200.00 per month for damage to the roof? This is your responsibility.

If the person you are paying is deducting money from your payment, I have come to the conclusion that you must be purchasing your home on a land contract or a lease with an option to buy sometimes called a rent to own.

You do not need a particular document, you simply need a piece of paper where you may write down what you want to say. After this has been written you and the owner need to sign this document. Once signed by the both of you this document becomes legal and enforceable in any court in the United States.

Write on this piece of paper that says owner and buyer agree that $200.00 will be deducted from each mortgage payment for 12 months beginning on (What ever month) and continuing until (What ever month).

For any legal and tax matters you should contact your attorney or tax consultant.

Question: Bought house with owner financing, can I get the first time homebuyer tax credit?
I just purchased my first home and it is through owner financing. I put $10,000 down and am making payments to the owner for ten years. We have a contract through a lawyer. Can I get the first time homebuyers credit just like someone would purchasing a home with a mortgage loan?? What kind of papers do I need to claim the credit? What does the IRS need?

Answer: ONLY if you took title NOW, and are on a recorded deed. Many times with owner financing, you have to pay for some time, then get other financing and buy them out. So depends on the type of owner-financing you have. Who is on the title, the seller/owner or you? You will need a copy of the deed, closing papers.

It is likely there will be some new home buyer’s tax credit next year or an extension of this one. You can restructure your deal to qualify if you don’t currently. However, as seller, I wouldn’t give you deed yet.

Question: How to get a mortgage after a foreclosure?
Foreclosed on in 08, been renting for a year now, how do I find financing for another home?

Answer: Unlikely unless you are specially qualified (VA…FHA). You won’t qualify for another mortgage for at least three years after your past foreclosure, and that is assuming that all credit information since then has been flawless.

Categories: Mortgage Financing
10Oct

No Money Down Mortgage Loans – How to Buy a House with No Money Down

Posted by Credit Financing Guru on 22nd October 2009

Fortunately, homebuyers do not need a large cash reserve in order to purchase their dream house. Before mortgage lenders begun offering different types of loan programs, those interested in buying a house would have to save money for a down payment. This made it impracticable for many people to purchase starter homes. However, buying a home with no money down has become a common trend. Here are few tips to help you locate a zero down home loan.

Types of Zero Down Home Loans

In addition to loans that make it promising for homebuyers to purchase with zero down, there are also home loans that pay for all closing fees. Thus, homebuyers are not obligated to pay out-of-pocket cash. This is ideal for young couples or those with little cash on hand.

Zero down home loans are commonly termed 100% mortgage financing. Traditionally, homebuyers would need about 20 percent of the home price to qualify for a mortgage. Because of rising home prices and moderate incomes, it has become difficult for normal hardworking individuals to build a large savings.

There is also the option of buying private mortgage insurance. However, if you want to avoid monthly PMI premiums, 100% financing is a better alternative. 100% mortgage financing consist of buying a new home with two mortgages. A first mortgage finances 80% of the home price, and a second mortgage finances the remaining 20%.

Other Ways to Finance Mortgage with Zero Down

Zero down mortgage loans are available to people with good and bad credit. Although these loans alleviate down payments, homebuyers are responsible for paying closing fees. Closing fees vary. Typical fees are about 3% – 5% of the loan amount. If homebuyers are unable to get their hands on the cash, they may opt for a 103% mortgage financing loan. These loans also offer 100% financing, plus addition money to pay closing costs.

Finding a Lender for a Zero Down Home Loan

Try using one of ABC Loan Guide’s Recommended Zero Down Home Loan Lenders.

Various lenders offer zero down home loans. When shopping for a mortgage you have two options: choosing a subprime lender or a prime lender. Credit scores below 640 rarely get approved by prime lenders. Nonetheless, subprime lenders offer mortgage loans to individuals with credit scores as low as 500. View our recommended lenders for Mortgage Financing. Also, view our recommended sources for Home Loans For People With Poor Credit.

Mortgage Loans FAQ:

Question: Would you borrow money for house down payment?
I essentially lost my down payment for a new house when I took a hit selling my old house. So, I have no money to put down on a house and will either have to go VA or FHA. Both will essentially cost me an additional 3% which will be added to the loan balance. I have a somewhat intrusive relative that will loan me the down payment of $40K to avoid the mortgage insurance or VA funding fee (Both around $7K). Is it bad to borrow money from relatives like this? Any experience with it or thoughts on it?

Answer: When you apply for a mortgage, you have to state where the downpayment came from (savings, gift, borrow, etc). If you borrow the entire down payment, that means you are financing 100% of the house and most lenders won’t go for that anymore.

Question: Am I at default under mortgage contract if I cant come up with sufficient down payment funds within 30 days?
The contract stated that if buyer cannot obtain loan with 30 days contract is considered null and void and earnest money deposit is returned to seller, doesn’t not having sufficient funds for downpayment meet those guidelines?

Answer: You need approval from the lender – the down payment is part of the loan agreement and the due date is usually the loan origination date. However, some in fact many loans, require that the funds must have been in your account for a certain period of time and if so – you could be in real trouble if you do not have them in hand at this point in time.

Verification of the source of the down payment money is required in all but FHA loans and nearly all require the funds to have been in hand for 3-6 months.

Question: Which mortgage loan is better: FHA or Rural Development’s Guaranteed Home loan?
My husband and I are buying a builders spec home in Lafayette, IN for $115,000. The home is in a new community that qualifies for USDA loans. We have been pre-approved for a FHA mortgage through Bank of America & a local mortgage broker. FHA was the mortgage we were planning on taking until we found this house. Now we are torn between the two and are unsure on which one would benefit us now & in the long run.

Our objective – To use the least amount of money up front as possible, and maintain a total housing payment of less than $780 a month. (Interest rates quoted range from 5.125% to 5.5% & Taxes = $600yr & Home Ins. = $595yr)

Answer: According to your objective it would be the Rural Housing USDA. This program is a 100% LTV (loan to value), no MI with rates usually comparable to FHA.

Now with that being said your the loan fee is charged to you at the beginning of the loan. Your loan amount will have an add on of 2% giving you an actual LTV of 102%. The seller can pay closing fees up to 6%.

This program carries some strict guidelines. You have an income max, also back end debt ratio max of 42%. Other than the current turn time for approval (which is now two weeks) it is a great program for those who don’t have the down payment or which to hold on to their down payment.

Question: Need to sell my house but I’m upside down- anyone taken out a loan to pay off negative equity?
My husband took a new job and we need to sell our house. We are about $20K upside down. We don’t have this money in our pocket to bring to closing when we sell. Our community is flooded with rental homes, so renting is not a great plan cause we can’t afford to rent a home in our new town and pay our mortgage on our current home if we can’t find a renter or if the renter rents for only a year and then we can’t find anyone to rent after that. Has anyone had any experience with taking out a personal loan to pay off the negative equity before selling or maybe even paid it off with a credit card with a low interest rate?

Answer: Avoid the short sale if at all possible. It hurts your credit. Work out a deal with your lender to arrange a personal loan for the 20k difference.

Question: Should I tell the bank the reason for getting loan?
I want to borrow money from the bank to buy a small condo, a mortgage company will not finance such a small amount, will the bank turn me down if I tell them its for a home? Am I better off telling them its for a car loan? I have excellent credit so I have a good chance but just don’t want to be turned down because they don’t like how it will be spent.

Answer: Yes. So long as you have good credit and qualify for the loan (prove that you can afford to make your payments), a real estate loan is the least expensive loan. Credit unions often offer low rates, but also check with banks.

Question: What are loan options for a low money down mortgage?
I found a duplex I’m interested in buying. The place costs $79,000. I can put down 5% of that but that’s all I have to put down. Is it possible to roll closing costs up into the loan? I keep hearing about FHA loans but are there any other loan options that allow you to put a low down payment of 3.5% to 5%?

Answer: FHA is the only loan option now with an official “low-down” of 3.5%. You will also need closing costs in cash, plus reserves of at least 3-6 months. However, we are finding that property deals with less than 20% down are developing “last-minute hitches” at a rather alarming rate, and these deals are not getting funded by the closing date even though they were supposedly “approved.”

If you only have $4000 cash, you only have about a third of what you need to do FHA (if it goes through), and only a fifth of what it really takes to get the deal done.

Question: How do I refinance my home loan/mortgage?
My mother used a “VA” loan to pay for our home. The interest rate is above 6% and she is looking to refinance to a lower rate. Now I watch many (money) shows but seeing that I don’t own a home, I never payed attention. Can you give me a run-down of how to go about refinancing a home loan and some possible tips?

Answer: If she has a VA loan then have her call the company that holds her mortgage, see if she can get a lower rate with a new loan. They may offer some type of VA streamline refinance so it will be fast and easy and a lower rate for her.

Question: Mortgage Loan problem .. U/W?
Finally my home purchase entered in to escrow and and loan is in underwriting, but unfortunately lender bank sent an email asking explanation for mortgage tax write off that I made last year.

Going to the short history, I took loan and bought an apartment in INDIA in early 2008, off course spent some money from my pocket towards down payment, repairs and the payments until it was rented. When I was filing taxes for 2008, my tax agent suggested me to write of tax on that money, so I did write of on payment that I was made before it was rented. Now lender bank looked in to my last year tax transcripts and asking for explanation about the mortgage write off on my taxes last year.

Can some one please shed some light on how to come out of the situation? Is this a big mistake to write of the mortgage on other countries? Did my other properties helps me to get this loan approval?

Answer: We are all experiencing the effects of several years of borrower fraud (among other causes) so underwriters are being extra cautious these days. All they are trying to do is reconcile what you said you owed to various other creditors to other documents.

Did you include that other mortgage on your application? If not, and they saw that deduction on your tax return, that would raise a red flag.

If you fully disclosed everything you owed, then you have done all you can in giving them a letter of explanation. If your credit is good and your income is verified and enough to cover your debts (including the new house), then there shouldn’t be a problem just because you have some different things that other people don’t usually have.

You should be okay.

Categories: Mortgage Financing
10Oct

Different Mortgage Types Match Your Finance Needs

Posted by Credit Financing Guru on 22nd October 2009

If you are thinking about making a real estate purchase, you may find the financing options quite confusing. Before you can proceed, you have to know your terms, and understand what your options are.

There are two variables to consider – mortgage type, and interest rates. These are the most important considerations when deciding on real estate, so it is essential that you have a basic understanding of what they are. Your two main options are repayment and interest-only types, and under those are more specific kinds.

Repayment Mortgages

This type of financing operates like a simple loan. Every month, you make a payment and the money goes to both the capital (the actual home itself) and the interest. The loan lasts a certain period of time, and if you make all of your payments according to schedule, you will have both the interest and capital paid off at the end of that term.

Interest-Only Mortgages

With this type of payment option, you are making your payments to the lender for the interest only. These loans have other options for paying off the capital in a lump sum. These have their benefits, but they are only good for those who can definitely make those payments according to schedule. If you do not keep up your payments, you risk losing the loan.

You will be saving the money for the capital in a savings plan of some sort, like a pension plan, ISA or endowment. At a certain time, that saved money will be used to pay for the mortgage, and the interest will already have been paid off.

- Endowment Mortgages.

With this type of financing, you are paying money into a life insurance plan. Those funds will eventually be used for the house. At the end of the term, this money will go to the house. The advantage is that you are not only saving for your mortgage, but also getting life insurance. If you die during the payment period, the loan will still be paid off so your family doesn’t have to worry. You also might end up with extra cash left over after it’s paid off.

- ISA Mortgages. With an ISA, your monthly payments are being split two ways. One part is used to pay the interest on the principle (or original amount you borrowed), and the other goes into an ISA plan, which is invested. Part of the ISA plan will be simple savings, and the rest will go into stocks and other investments. This is an excellent way to pay off your loan like a repayment mortgage, but save lots of money on taxes.

- Pension Mortgages. You pay money into a pension that will be used to pay for the house when you retire. This option is usually only available to those who are self-employed. You are basically saving for both your home and retirement, so you have to make sure that there will be enough when you retire for the house and to take care of you throughout the rest of your life. With this type, you pay almost no tax on your house, and end up saving all that extra money.

Once you’ve decided which payment plan is best for you, you will have to choose an interest rate. Whether you need a fixed interest rate, variable rate or capped rate will depend on your lender and your own personal needs. Having advanced knowledge about your options will let you select the plan best suited to you and your future.

Knowing which of the different mortgage types suits you helps with financing your home. The terms can often be complicated, so awareness of your financing and payment options can only make things easier. Get the information you need from a New Orleans Realtor. http://www.thelatourteam.com

Mortgage Financing FAQ:

Question: Can you apply for both a conventional and FHA mortgage at the same time?
We are purchasing a new home and the builder is upset we are applying for a FHA Mortgage. The contract was written that we would go conventional, however, FHA is a lower monthly payment, lower interest rate. They are telling me that I need to get a commitment for both types of mortgages – can I do that?

Answer: The question might be, “Would you even want to do that?” And, “Will the lender do it?”

Sadly, there are those in the real estate business these days who feel that more work AND time are required to process FHA mortgages. Some also falsely believe that the borrower who can qualify and obtain a conventional mortgage loan is a “better” applicant for the mortgage. For them, “better” applicants mean a higher likelihood that everything will go okay and they will sell the house and get their commission check or fee. The “commission” is what it all boils down to.

I am equally amazed that this builder cannot see that requiring you and the lender to do double work could cause a delay in closing the loan. More is likely to go wrong just because the buyer has 2 files being processed. Is the home being built or is it already standing? And what about the fees to lock in the interest rate for 2 loans if your lender requires you to pay a lock fee? I can imagine that if you want 2 loans processed, and the lender agrees, expect to pay for it in some way.

It will boil down to how much you want this house and how desperate the builder is (if at all). AND what happens on the lender side will be crucial. If you decide to go along with this scenario, then you certainly would want a lender who does both FHA and conventional. Along with a mortgage person who has no problem doing double duty in crunch time.

Question: I am late on my mortgage and 4 credit cards…?
I would like to seek legal advice but do not know what type of attorney can help me with this. I am looking to possibly lower my current mortgage amount, down to what my home is currently valued at. Also, I’d like to make amends with the credit card companies that I owe so that I can get back on track. Any suggestions?

Answer: You really don’t need a lawyer. You just need to call the mortgage compant and see if you’re late enough for them to lower your mortgage or interest rate; it may take a few days for them to respond since everyone’s asking the same thing.

The same with the credit cards: you can call and ask if they’ll take 50 cents on the dollar, or what they’ll do to reinstate your account. Just call these guys. It’s not like a few years ago–now they are more willing to work with you.

Question: Which mortgage should I get ?
My parents took half of the value of their property (they were mortgage free) so that I could buy my first house. They had Interest only for 2 years, which is now coming to an end. So I own my property outright, but I obviously have to repay them! The trouble is I’m so confused about the different types of mortgages that are available, what do I need if I own the property outright? I need to take around 68k out of my property to pay them back, my house is probably only worth approx 75k at the moment (we still have a little work to do on it).

I’m sure I want a fixed rate mortgage but I’m not classed as a first time buyer, or remortgage or buy to let or anything else! Is equity release the only way ?

Answer: You really need to speak to an independent mortgage adviser who will ask you various other questions (incomes etc), and then explain your options. You need to raise a remortgage on an ‘unencumbered property’.
Based on your figures you will need a 90% mortgage, which is almost impossible in the current market.
You will probably have to pay your parents interest only payments until the market picks up.
By the way ‘Equity Release’ is the term normally given to roll up interest mortgages for the over 55′s.

Question: Hope for Homeowners mortgage help?
I went through 6 months of working with Chase bank to modify my mortgage under the Hope for Homeowners program, which I qualify for. I finally get a letter from them saying that the investor objects, so my loan will not be altered. Are there any other possibilities in this type of situation? At this point, if nothing is done, my home will go into forclosure in the next year.

Answer: You could try calling 888 995 HOPE to see if there are any other programs out there to help you. Some options, ask lender to accept deed in lieu of for closure, if no, then ask if you can short sale the propriety. You could talk with Realtors in the area to see if there are any investors who might be interested in buying your home. Maybe you could take in a renter for awhile, until you can get on your feet. If you plan to let the house go back to the bank, at least you would have some additional income from the renter with which to use in finding a place to rent once you do have to move. Last resort file bankruptcy.

Question: What type of mortgage FHA or Conventional? Looking to put down 20%.?
My wife and I have found a condo in NYC that we are close to making an offer on. We have 20% to put down and have already been pre-approved. Which loan type is better, FHA or Conventional? We will be going through the options with our lender, but I would like to get some 3rd party feedback here beforehand. We are first time buyers, so any help much appreciated.

Answer: If you have 20% down conventional is always better- no mortgage insurance required and slightly lower rates & costs. FHA insured loans are primarily for people who can’t afford the insurance for their conventional loan. And since you’re a first time home buyer and have no “hardships” established with a previous home, I think you’ll end up with a conventional loan.

Question: I have a question regarding private mortgage loans?
This might be a really dumb question but it’s legit. This is about investing by doing private mortgage loans. I was wondering when you are doing a private mortgage loan and your charging… lets say 10% interest on a $50,000 loan… does that mean your charging 10% interest a month or does that mean a year? If you can give me any kind of feedback about this type of investing.

Answer: That normally means you are charging 10% per year. Mortgage rates are normally quoted as annual rates. It’s all good until a bankruptcy judge writes down the debtor’s debt and you eat the difference.

Question: Fha mortgage tradeline question?
I need 2 more tradelines to obtain a mortgage. Do instant approval prepaid type cards that report to all the credit bureaus count as a tradeline?

Answer: Yes they do, you can also add alternative trade lines to your credit report.

Question: Anyone familiar with financing a home mortgage with “premium pricing”?
I will be closing on a new home in November. Because I will pay off the entire mortgage within 19 months of closing, one mortgage company suggested that we finance the mortgage with “premium pricing” in order to minimize closing costs, etc. I just wondered if this option is available today given the current interest rates and is this a good approach for me to take.

Answer: You will have to compare the numbers, but the “premium” is designed to make the lender money even though you plan to pay the loan off quickly and he won’t make any interest income after you do.

According to one web article, lenders generally do not make money on a loan until the second year, which is right when you want to pay of the loan.

Categories: Mortgage Financing
10Oct

What Happens to Your Mortgage Credit Score If You Default and Can’t Pay Your Mortgage?

Posted by Credit Financing Guru on 22nd October 2009

Losing your home is a scary thought, but for many people in the current economy, it’s an unfortunate reality. It’s not just people that are irresponsible with their finances that are foreclosing, it’s also the ones that have savings and budget plans. Unemployment is high, and it’s getting tougher for everyone to pay their bills. If foreclosure happens to you, your first thoughts are about how to recover, and to do that, you can start by looking at how your mortgage credit score will be affected.

Your mortgage credit score determines whether or not you’ll be approved for a home loan, and it doesn’t matter if you’re applying for your very first home or even a fourth home. It’s going to come into play every time. You should be aware that practically the moment you foreclose, your score will drop, and on average, it will drop at least 250 points. Even if you start with excellent credit, that’s enough to put you into the “bad credit” category.

With that said, you won’t be able to qualify for a new home right away, so you may need to consider other options like an apartment until you can build your score up again. A foreclosure will stay on your credit report for 7 years, but it is possible to rebuild your score in the meantime. You won’t be able to achieve perfect credit, but the more time that passes, the higher your score can go.

After at least 2-4 years, if you’ve been able to successfully manage all of the other bills and credit accounts that affect your mortgage credit score, you can get yourself back in the position to apply for a new home. You just may have to accept a higher interest rate than you had to on your previous home. As you build your score back up, remain focused on improving all the factors that are under your control. As long as you do that, time can only help you.

Check your mortgage credit rating and see how it compares to the national average. Know where you stand.

Free Credit Reports…Pay $0 Here

Mortgage Credit Score FAQ:

Question: Can you get a mortgage with a credit score of 602 and previous bankruptcy?
I filed bankruptcy last year and now rebuilding my credit with one credit card. I found out that my credit score is now 602, can I get a mortgage now?

Answer: You’ll probably need to wait another 1 to 2 years of on-time payments before anyone will take you on. Even the FHA, which is the most lax and doesn’t look at scores, has a 2 to 3 year wait policy after bankruptcy.

Question: Is there any way to get pre-approval for home mortgage without affecting credit score?
A mortgage broker said there is a way to get pre-approval without affecting your credit score at all …should I trust him?

Answer: The FICO formula allows multiple inquiries from mortgage lenders within a 30 day period to count as a single inquiry for the purposes of computing your FICO score. The inquiry WILL effect your score, but not enough to make any difference. (one or two points) The PRIMARY impact of a mortgage on your score is when you actually get the loan. This does not happen until the closing on the home.

Question: What Credit Score is need to Mortgage and buy a Foreclosed home?
And how much would monthly payments be approximately, if the home costs about $55,000?

Answer: It depends on who is selling the mortgage and how much interest you are willing to pay, and how much of a down payment you have. Also if you are eligible for FHA and that first-time buyer discount.

Question: Is it possible to get a mortgage loan with a credit score of 600?
Credit unions, banks, anything?

Answer: Most likely, not. Gotta get that up about another 20 points for an FHA loan, which has the lowest requirements as far as credit score goes.

Question: Can a married homemaker use her credit score instead of her husband’s when applying for a mortgage loan?
My husband and I are interested in purchasing our first home. The problem is his credit score is only 602. Mine is around 700 but I don’t have a job as I stay home with my children. Will the lender even consider my credit score when making a decision as to whether or not they will lend us money, or will they just look at my husband’s since he is the one with the job?

Answer: It depends on the lenders policy. For certain credit products (like mortgages) a lender will allow the “primary” applicant be the one with the better credit score but still allowing you to qualify the family income. I would advise that you ask for or research a few lender’s policies, but at times this can be difficult because many of them will still qualify you but at a less than ideal interest rate while downplaying the effect your husband’s credit score had on the decision. While probably not your favorite thing to hear, maybe you should evaluate why your husbands score is so low and see if it’s easily repaired or, more importantly, its a sign of potential distress for him and your family by taking out this loan. While far from perfect, keep in mind that credit scoring is used by lenders as an indicator of potential default and although we often don’t want to admit it to ourselves, it may be that waiting to take out this mortgage is the best thing to do until his credit score is repaired.

Question: Credit score 560 can I get a mortgage?
My credit score is 560 want to buy a 99000.00 home. Taxes around 3000, my income is 56000.00, will increase to 92000.00 in increaments over the next two years.

Answer: Not a chance. Work on improving your credit before worrying about buying a house.

Question: How does a mortgage broker calculate your credit score?

Answer: Mortgage brokers do not calculate credit scores. Credit reporting bureaus do that based on a proprietary formula or based on the Fair Issac Company model (FICO). There are three main credit reporting agencies in the US, Experian, Equifax and Trans Union.

The two items with the most weight in a credit score are on-time payments (~35% of the score) and the amount of credit used to credit available (also ~35% of the score). They also look at age of credit, mix of credit, etc.

Major negatives are missed payments, judgments, defaults, foreclosures and bankruptcy.

Question: Do Mortgage Lenders judge based on Credit Score alone or do they take in other considerations?
The reason I ask, is that I have a credit score of 566, which I know is bad, but I have no debt except for $118.00 a month in student loans. I have been renting for the past 3 years and I am tired of jumping from Apartment -to- Apartment. I have cleaned up my credit (completely removing 19 past due medical accounts that were never billed to my insurance), yet my credit score did not take the jump I thought it would (increased only 50 points). What are my chances of obtaining a First Time Mortgage or should I even try?

Answer: They look at income and expenses as well, but those don’t go far to offset a bad score.

Take some time to repair your score. Home prices aren’t going anywhere in a hurry so you shouldn’t feel rushed to get a “deal”. Live below your means, stash up a lot of cash so you can make a 20% down payment plus closing costs, and have an emergency cash reserve. And pay everything on time. Get one credit card if you can, use it sparingly (only for things you could pay cash for if you had to) and make those payments as agreed. All this will go toward boosting your score.

Categories: Mortgage Financing
10Oct

Your Used Car Finance Choices

Posted by Credit Financing Guru on 21st October 2009

There are options open to you if you want to buy a used car. Maybe you have relatives that are able to lend you the money, or you may be able to borrow on your credit card if the vehicle is relatively cheap. However usually when looking for used car finance, you have to consider other options and two of these are hire purchase and personal loans.

· When buying your vehicle privately you have two basic options, you can look for a loan yourself, which may take some time, or you can choose to go to a specialist motoring website and let them search on your behalf. Some websites allow you to browse through used cars online so you may be able to find not only the best deal on finance but also a great used vehicle too.

· If you have savings that you are able to put towards the car, you may have to borrow less. This may work out to your advantage, as there is less interest to pay on the borrowing. This means you save money of course, you may choose to pay something towards the cost of the vehicle if you are taking a loan, it just means you borrow less and with hire purchase, a deposit is usually a requirement.

· If you decide to choose the hire purchase option when looking for used car finance then you may want to take into account that you do not own the vehicle until the final installment has been made on the loan. This means you cannot sell the vehicle or trade it in until this time. However if you have chosen to take out a personal loan, providing you keep up your repayments on the borrowing you are free to do whatever you want with the vehicle.

· You are able to spread out the cost of car finance whether you decide to choose a personal loan or you choose hire purchase. The longer amount of time you take the loan out over, then typically the cheaper the regular repayments may be. However the downside is that you will pay more in interest.

· The cheapest rates of interest are sometimes offered to those individuals whose credit rating is perfect. Your credit score is taken into account by all lenders whatever type of loan you decide to choose. You might therefore want check your credit file before applying for any type of finance to buy a vehicle so that you are able to see what the lender sees. You can contact any one of the three main credit reference agencies – CallCredit, Experian or Equifax.

These of course are just some of the many things you may want to take into consideration when looking for used car finance. You may want to spend some time online researching loans and your options before rushing into taking on a loan of any type.

Louis Rix is a Director of NetCars, one of the UK’s leading motoring websites. First established in January 2000, its mission is to become the number one site for used car searches. NetCars provide Used Car Finance.

Used Car Financing FAQ:

Question: Used Car Financing ?
I will be a first time car buyer. I would like to purchase a 2007 Cadillac for $20,500 after the dp and taxes. My question is what will the terms likely look like for first time car buyers? I have about 2 years of revolving accounts and that’s it! I have a 650 f(A)ko. Is it possible to finance @ 5% for 60 months or is this pushing it? If not what will my offers look like?

Answer: Expect more like 10% or more. To get around 5% you need a score of over 700 or higher. Talk to your bank and get some firm figures. You may find you will have to spend less on a car in order to afford the payments.

Question: How long is the longest you can finance a used car in texas?
I have really bad credit and the last car I bought not to long ago I had to pay 21% interest.

Answer: With bad credit, I doubt you could get anyone to finance you for over 48 months. Many will only go 24-36.

Question: Car Buying Advise, financing or paying cash?
What is your advise regarding car buying. I want to spend 20k on a used car. I do have the cash in hand. Should I finance (and use my cash money for something else) or buy it cash? My only Concern at this point is the insurance cost associated with financing a car.

Answer: If you have the cash, you can save the cost of financing and interest. However, if you have more productive uses for the money or need it in case of emergencies, you might want to consider financing.

Your concern about insurance with financing is interesting. You mean you would buy less insurance than a bank or loan company would require of you? Their insurance requirements are no higher than the level of insurance any intelligent person should have anyway. If the bank would want to protect their financial interest in a car, why wouldn’t you want to protect your own if you pay cash? Without insurance, paying for a new car after your old car is totaled is very expensive.

Question: Is it possible to finance a used car from a dealer with no money down?
Can they put the taxes and other fees into the cost of the car?

Answer: Depends on the dealer and your credit. The worse the credit, the higher the interest rate.

If you are in a situation where you can get an inexpensive used car and pay cash, I would do so. Then you can save until you can pay cash for an upgrade.

Yes, they can put the taxes and other fees into the loan if the total loan is less than or equal to the cars value.

For example, if you get a car valued at $5000 and the dealer sells it to you for $4000 then you have $1000 leeway that will cover taxes and other fees if the dealer will do it.

Question: How likely is it for a person with a 630 credit rating to finance a used car with a trade & no money down?
I am looking to trade in my 2000 Jetta, good condition, 118K miles. Not sure how likely this would be but I work out in the field and need a gas efficient vehicle.

Answer: Really hard to say looking at the current economic situation. Do you have any delinquent accounts on your credit report? 2 years ago it wouldn’t have been an issue, but now it may be. The only way to know for sure is to go to a dealership. Then they will have different banks “fight” over your loan, assuming you get approved.

Question: Can I finance a USED car with SSD as my only income?
I live in NYC and I NEED a car. I don’t want a car but NEED one for my sons occasional emergency issues and to get around the city since trains/buses are hard for him. My credit after I got ill went downward to my current score of 563 because of my inability to pay off my student loan since I could not work or anything but that debt has been discharged. I rent a home and rely only on mine and my sons SSD income that reaches a total of $1,380 a month altogether. The car I’m looking for doesn’t have to be a top of the line vehicle. I’m looking for any sedan/minivan from years 1990-1999. I was wondering if it would be at all possible to finance a car from a dealer?

Answer: Sorry – it is highly unlikely that you will be able to finance a car with that credit score and that income. Car finance agencies will want to see you have a steady source of income, and something that can be garnished if you stop paying, which SSD cannot. Insurance alone will eat up 1/4 of your income in the city. I don’t think you can reasonably afford this on your income.

You may want to look into the Zip Car program, where you pay for hourly use of a car that includes everything (parking, gas, insurance), or the disability transit options on the MTA.

Otherwise, pretend you have a car, and put $400 a month into a savings account (which is about what you will spend on a payment, insurance, tags, parking and gas) for the next year. If you do that, not only will you know you can afford a car, but you will have almost $5,000 for a down payment, which will increase your ability to get a loan.

Question: How new does a car have to be to finance?
I want to buy a used car for around $6000 with a $2000 down payment. So the year of the car will likely be 1997-2003 and I was wondering if a bank will still finance a car that is that old. Is there a set year?

Answer: There’s no set year. It depends more on your credit score and credit record, and the value of the car vs. the amount of loan.

One thing to consider – find out how much the car will depreciate over the next few years, and compare that to the balance of the loan you want to get. You want to avoid a situation where the car depreciates faster than the balance of the loan, or you’ll end up owing more for the car than it’s worth. If you can’t make the payments, and you have to sell it, you won’t be able to get out from under the loan, and you’ll be screwed.

Also – remember that as long as you have a loan on it, you’ll probably have to carry full coverage for the insurance. Factor that cost into the cost of ownership, and call your insurance agent for quotes on cars before you commit to buying any vehicle.

Question: Trying to finance a car, but I’ve got a question?
I’m interested in financing a used car. The car I want is from a used car dealership around 200 miles from my current residence. Will they finance me even though I live so far from them? Does it usually matter?

Answer: Your location should not matter. I would suggest you go ahead and talk to a local bank about getting pre approved for a loan. That way you will get a better rate and don’t have to worry about the loan when you are at the dealership.

Categories: Auto Financing
10Oct

Typical New Car Finance Options

Posted by Credit Financing Guru on 21st October 2009

Most of us at some point have overstretched ourselves, whether it is by spending a bit too much on the monthly shopping or splashing thousands of pounds in savings on a lavish holiday. It is also possible to overdo it when it comes to buying a new car, as there is always the temptation to get wrapped up in a vehicle which you can’t really afford. Taking a pragmatic approach to new car finance may be one of the best ways of sticking within your budget and making sure you don’t buy something which you can’t really afford.

It is easy to be tempted by more expensive vehicles – if you can’t really afford them, the level of new car finance that you end up having to take out may dominate your budget from one month to the next and rule your life.

It may be beneficial to write down an exact budget in relation to how much you may afford on a loan each month, plus work out how much of a deposit you are capable of getting together, as these two factors combined may define how much you spend.

Then you may want to turn to a specialist motoring website which may help you to compare different makes and models and prices, and which may also be able to compare loan products and rates for you.

Something else which may be worth doing is considering carefully how much the car you are after costs to run. The purchase price is one thing, but vehicles have their own set of everyday costs, from filling the petrol tank to regular servicing and the costs of replacing the tires.

It may be a good idea to even phone a few garages and get a quote from some of them for how much it may cost to service the vehicle you are thinking of buying. This may be a good way of getting a true picture of the budget you need to run it.

When the time comes to buy the vehicle you may typically get hire purchase offers from dealerships. Essentially this is a seller’s own form of finance, normally meaning you put down a deposit and then spread the cost of the rest over regular installments. In many cases you may pay a considerable amount of interest which may be higher if you spread the payments over a particularly long period.

However, some dealerships are prepared to offer zero per cent interest, particularly if you put down a sizable deposit.

A second common method of arranging new car finance is to set up your own personal loan with an independent company such as a loan specialist or bank. Again a specialist motoring website may be able to compare deals for you and give you an idea of the interest and repayment rates.

You may be able to go straight to a dealership with your approval and use your pre-existing buying power to negotiate. If the dealer knows that you may stump up all of the money straight away and don’t need to pay back in installments they may be more inclined to drop the price of a new vehicle.

Whatever you decide, while a new car finance deal is the main way in which people may afford to buy a brand new vehicle, that does not mean they are to be taken lightly. A considerable debt needs careful budgeting, and you may want to do a considerable amount of your own research before you take the plunge.

Louis Rix is a Director of NetCars, one of the UK’s leading motoring websites. First established in January 2000, its mission is to become the number one site for used car searches. NetCars provide New Car Finance.

Car Financing FAQ:

Question: How does a new hire go about getting car financing?
I just graduated from university with a BS degree and will begin work soon. I need to buy a car and need financing. The conundrum is that I am planning to drive myself to the new city I will be in, which means I will be signing my lease after I buy the car.

Am I technically employed for the purpose of a loan application? Is there any special way for new hires to go about loan applications?

Answer: No just apply like normal & ask if they have a first time car buyer discount.

Question: Where can I download a private party car financing contract?
We are purchasing a car from a family member who is allowing us to do payments on it until tax time when we will pay the remaining balance in full. For the protection of both parties we would like to have a contract stating our “financing” terms. I know I can just write one up myself, but there has to be someplace online that has like a PDF format or something I can just fill in.

Answer: I am not sure what type you are looking for (term etc) or how much you are willing to spend, but if you type legal documents into the internet search bar then many options of websites will come up, you can click on any of those and you’ll be able to find your sub topic needed- purchase fill in print and get notarized.

Question: Just bought new car, financed through dealer, can I change to bank financing?
I live in MA and I just bought a new car about a week ago. I think I can get better financing through my credit union. Can I switch financing without a penalty or how does that work?

Answer: Read your contract, it depends on the terms of the loan…but normally yes you can refinance if you have good credit and the car is worth the amount you got loaned.

Question: Do I need full coverage insurance if I get in-house car financing?
I have no credit and I think in-house car financing is the only way I can get a loan for a cheap car (I’m looking for something up to $3000).
Is full coverage car insurance mandatory if I get in-house car financing?

Answer: Any time you finance a vehicle full coverage is required to protect the interest of the lender.

Question: Which bank to go to for new car financing?
Now that bank of america is loosing its worth because of credit card and auto load default, is it okay to get a new car financing from Bank of America.

Answer: Yes, it’s fine to go to Bank of America. I would suggest if you have great credit, the best interest rates you’re going to get are through the dealer. Many of the car companies have rates under 4%, including some 0% interest rates for short loan periods.

Another good avenue is to go through a credit union. Pentagon Federal has new auto loans at about 4.25% right now. If you qualify for a credit union through your job or through some other means, definitely check that route out.

Question: What is the average used car financing percentage?
I am just trying to calculate how much it would cost me to finance a car. Down payment will be anywhere from 10% to 20% of the car price. I have good, not excellent credit.

Answer: There are a number of factors that will affect the rate you get. Credit, miles on the car, year model of the car, term, etc. I would say just as a generic answer without knowing any details but what you have given that anything from 8.5% or lower would be ok. If you go 72 months term it might be slightly higher.

Question: For tax purpose, can I amortize the cost of the financing or leasing car for my business?
I plan to finance or lease a car for my business. My friend told me that: For tax purpose, I cannot amortize the cost for a leasing car. But I can amortize the cost for a financing car. Is that correct?

Answer: There is no such thing as amortizing in Canada. Leasing or financing interest can both be deducted as expenses. You also can claim Capital Cost Allowance on the cost of the car.

Question: Need Help Finding Online Car Financing Service.
I’m looking for a reputable online Car Financing Company that will cater to me so I can avoid the dealer “tricks” and the insulting low-ball offer that my bank just presented me with. I am a first time car buyer and only 22 years old so I understand that some companies will just not want to deal with me.

Answer: Financing is something you need to take care of locally and in person. Visit a Credit Union of your current bank isn’t offering you a decent rate. But you are correct in one thing, you need to bring in a pre-approved loan from a 3rd party lender in order to avoid the financing shell game the dealers play.

But in this economic climate don’t be put off if all the offers you get are slightly unfavorable. You are a young first time buyer and your credit history probably isn’t what it needs to be to get the best rates. Money is tight, I’d be happy with any reasonable approval from a traditional lender.

Categories: Auto Financing
10Oct

Bad Credit Auto Loan Financing – How to Get Approval For Your Loan

Posted by Credit Financing Guru on 21st October 2009

Owning a car is something that most people around America have the luxury of doing. Even people who have low credit scores still have the opportunity to get access to automobiles. Due to the recent decline in the auto industry, there has never been a better time to own that car of your dreams. Getting bad credit auto loan financing has never been easier if you are willing to look around.

The key to getting any car loan approved is to show the value that your loan offers to lenders. Because the auto industry is very competitive, most lenders are willing to work with people who don’t have the best credit rating. This usually means that you can get very competitive interest rates if you find the right lender.

One thing that you can do if your credit history is extremely bad to get a loan approved is provide collateral. By providing collateral for the loan, you are reducing the risk that lenders bear when they approve your loan. The less risk that the lender bears, the more willing they are to approve your car loan with a good interest rate.

When it comes to finding the right lender, you should use the internet. Bad credit auto loan financing is possible if you are willing to look at the different lenders that are available. You can get comprehensive quotes from different lenders to ensure that you get the best interest rate possible. Remember that you will need to look around in order to get your loan approved.

If you are looking to get a Bad Credit Auto Loan the first place you should look when it comes to getting car loans is the internet. Get a comprehensive quote from an Online Loan Lender to ensure that you get the best interest rate possible for your loan.

Bad Credit Auto Financing FAQ:

Question: Auto loan, but no credit history? How do I get one?
Is there any way for me to get a loan for a used vehicle? I have no credit history. I’m employed part-time with $5k-$6k annual. I need a $4k loan.

My bank (USAA) will not finance me because I have no credit history (good or bad). They said I need to build up credit over a year or more before I’m applicable for a loan. Does anybody have any ideas?

Answer: Best thing is to get a co-signer to help get you a loan, usually if you are buying through a car dealer it is easier to get a loan, than a regular bank. The loan will help build your credit as long as you pay on time.

If you are talking about a regular purchase from another person, it is more difficult to get a personal loan that way.

Question: Am I a bad risk (auto loan)?
I have been trying to secure a loan via my banks and was denied. I have been working for a little over a year at a Ford Dealership (mechanic) with a gross income of $25,000. My credit score is 762-750 depending on which company is contacted. I have paid off cards (2) and one student Sally May loan out ($1500) that I won’t start paying for another 3 years (due to agreement terms.) I am trying to secure a used 2008 GM certified Vehicle that is list price of $26k but I beleive I can easily wiggle down to about a final price of $22k. I have yet to try the dealers financing which I assume would be harder to obtain then the banks.(?)

Answer: Auto finance is what I do for a living and it comes down to simple math. You make $25,000.00 a year divided by 12-months is $2,083.00 most major lenders on allow 16% of your gross monthly income for a car payment so all you qualify for is a $333.00 payment. There is no way you can afford a $22,000.00 vehicle period.

Even with good credit your looking at a payment around $440.00 a month.

Question: How can I get real Auto Financing?
I need to get a car, I don’t have any credit, but I have like 3 jobs. any one know of any good auto financing places online?

Answer: CapitalOne, Lending Tree, and eLoan are good online companies for people with good credit. You may have trouble, however, if you have no credit or bad credit. You may have to look for subprime lenders, which are harder to find, and expect to pay high interest rates and make high down payments.

Question: Where can I get auto financing with co-signer but insurance on the principal applicant only?
I have limited credit score so my dad is co-signing to get my auto financing application approved, but I need the insurance on my name only? is it possible?

Answer: Well, if the COSIGNER is NOT a co-owner, then anywhere. But if the cosigner is also CO OWNER, then they can be sued, regarding your car! That means, they need to be INSURED for the damage the car does!!

If you don’t want him listed to DRIVE your car, you can always specifically exclude him from coverage. But, if you need a cosigner for the loan for your car, most likely, the insurance is going to cost you more than the car loan, and if you have an accident the first two years, your car won’t be worth as much as your loan payoff.

Question: How does bank auto financing work?
I went to a bank in order to get preapproved. The banker told me everything was fine and that they need a car purchase agreement and letter of origin and proof of insurance. I don’t get it. How do I get these things without actually buying the car? And how do I buy a car without having some kind of financing already in hand when I am ready to buy? Can somebody explain the process?

Answer: The process is very simple. Shop around until you find a car that you like. Negotiate your best price with the dealer. When you are comfortable with the deal you are getting, you will sign a purchase agreement. You then have to obtain a certificate of origin for the particular car you are purchasing to prove that the vehicle exists. You will also need to arrange insurance to be effective the day you are to pick up the car. Bring all of this to the bank and they will arrange to pay the dealer for the vehicle.

Question: What’s the best way to get auto financing with minimal credit history?
My FICO score about 4 months ago was about 650, I’ve since cleared up some bad marks, so I’m guessing it’s a little higher now but I haven’t checked to be sure.

I’m a recent college graduate just about to start a full time job, and I really need a new car. Are there any reliable online lenders I should look to? Or should I stick with dealer financing? I already tried Capital One and they denied my application based on lack of credit history and one bad mark I have on my credit history.

Answer: Many car companies like Honda & Toyota offer incentives for recent college grads, perhaps their in house financing (American Honda, Toyota Financial Svcs) also offer discounted finance rates. As far as being a first time buyer, many banks such as Cap One are going to need you to find a cosigner. Go to the dealer and if you have a 650 FICO (you must have SOME credit or else you wouldn’t have a score) you should fit into a first time buyer program offered by one of the many finance companies they work with as long as it isn’t a little Mom & Pop dealership.

Question: Where do I go to get auto financing?
I am in need of auto financing that I can take anywhere to get a used car. I have a low credit score and I live in michigan. I am not interested in a dealer. I already have the car but they only use outside financing.

Answer: A local credit union would be your best bet. I think some of the online companies like HSBC Auto still do loans with lower credit scores, but your rate will be very high if your credit isn’t good. Nobody is giving loans to people with really bad credit right now.

Question: What does my minimum credit score need to be to get auto financing at a good rate?

Answer: 750 for the top deals. That’s the low down payment or lease deals. You can still get a pretty good rate above 700 but probably not the zero or $299 down deals some dealers advertise.

Categories: Auto Financing
10Oct

Subprime Auto Loans – How To Get Financed With Bad Credit

Posted by Credit Financing Guru on 21st October 2009

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.

For a list of Recommended Poor Credit Auto Loan Lenders, visit ABC Loan Guide, an informational website about various types of loans.

Subprime Auto Loans FAQ:

Question: What is the highest interest rate for a subprime auto loan?
I have really horrible credit due to my divorce…like 400! I am working very hard to build it back up. I was “approved” for a subprime auto loan but I want to know what I can expect the interest rate to be on a used auto. What is the highest ( worst ) it can be? Are we talking 30% or more? I live in New York if that matters.

Answer: With your score it will be what ever your States maximum rate is.

Question: Where can I get an auto loan if I have subprime credit?
I am hesitant to apply at banks or credit bureaus because of my credit, so I applied at 2 different websites. One said that they aren’t offering loans at this time, and they didn’t pull my credit. The other said that they don’t offer loans in my area. So, where should I apply?

Answer: If your employer has a credit union and you are a member, that is a good place to get a loan, since they usually have the facility to do a payroll deduction. If not, call around and see what the qualifications are for local credit unions (you may find you qualify for membership). Other than that, you are limited to banks or some of the high-interest “we finance anyone” places.

Question: Usury laws: do they NOT apply to subprime auto loans?
I am in the market (unfortunately) for a bad credit AUTO loan. My score is horrendous thanks to a messy divorce (400!) I am aware that this score will qualify me for the state MAX interest rate.

I was told that the interest rate here in NEW YORK will be 30-35%, but when I looked up New York’s usury laws, they said the state max is 16%. I’m confused, can local auto dealers charge me 30-35% interest for an auto loan or not?

Answer: Although New York’s usury laws may state 16% as a maximum, National Banks (see if there is an N.A. after the bank’s name) are governed by the state in which they are registered. For example, if the bank you are dealing with is based/chartered out of Delaware, they in essence can charge whatever they want, since Delaware has no law pertaining to usury.

Try applying for a car loan at a local bank chartered in New York, who would be regulated by the state and subject to New York’s usury laws.

Question: How can I exit this subprime auto loan hole?
If I threw $1400 at the principle on a $6700 balance w/24% interest what will be my balance?

Answer: Your new balance should be $5,434.00. The interest payment for $6,700 (interest rate 24%) is $134.00.

1400-134=1266
6700-1266=5434

If you send a monthly payment of $469.00 after the $1,400 You will pay off this account is 12 months.

Question: My credit score is 511, does anyone know who will finance an auto loan with credit as poor as mine?
I need to buy a car that’s safe for my 14 week old son and I, and I have some pretty bad credit. 511 to be exact. Does anyone know of a bank, or online bank to go to ask for a loan. I have good income, and a little bit of a down.

Answer: Auto finance is what I do for a living and with your score and a “little bit down” your not going to find a major lender that will finance a vehicle for you.

As much as I hate to say this your best bet is most likely going to be a “Buy here pay here” lot. Try and find one that actually reports to the credit bureaus, a lot of the larger ones do, otherwise all the payments you make will do nothing to help your credit.

Question: No credit auto loans?
I am in need of a car fast. I have tried two of my banks. I can’t get a loan due to my low income (1200 to 1300 a month) and no credit. I need an auto loan with VERY LOW interest. Car price range I’m looking for is $8,000 or under. The max I can pay a month is 140 not including my car insurance.

Answer: Yes there are bad credit auto loans online for people with a poor credit history and low FICO scores who need transportation, and need a fresh start in repairing their credit. Although it may seem hopeless if you have blemishes on your credit there is a solution. First you will want to get rate quotes from various sources this is very important, you should shop around to find the best deal. However, keep in mind that there are different factors at play with each lender, as to whether or not you get a loan and if so at what interest rate. You can get approved for a auto loan.

Question: What factors are to be thought before buying a car?
bad credit auto loan, bad credit car finance

Answer: The following information can help you “prepare” your case, before you actually sign your buying contract:

* Compare the dealer cost price with prices displayed on window stickers
* Get a quote from the dealer in writing
* Check out many dealerships
* Negotiate independently
* If you’re not confident about arbitration avail car buying services
* Shop around and compare
* Work out the auto insurance before you buy
* Test drive before buying etc.

Categories: Auto Financing
10Oct