Leasing a Car: 7 Reasons Why You Should Consider It

7 Reasons Leasing a Car May Be Smarter for You

Would you like to spend less money up-front, drive away from the dealership in a brand-new car, and spend less time and money on vehicle maintenance?

Consider leasing your next car.

What Does Leasing a Car Mean?

Leasing a car is a lot like renting one—but for a much longer period of time. When you buy a car, you own it after you’ve made all your monthly payments. When you lease a car, you make monthly payments, drive it for a set amount of time (usually about three years), and then give it back to the dealer when that time is up.

Then you get to decide what you want to do next with no strings attached—do you want to lease again or buy a car this time?

While leasing isn’t the perfect solution for everyone, it is absolutely worth considering. Here are seven reasons leasing a car might be the better option for you.

1. You Get to Drive Newer Cars

If you’re the kind of person who likes driving a new car, leasing your vehicle may be a better option than buying one. Cars depreciate quickly, so if you buy a new car, you’ll probably owe more than it’s worth not long after you make the initial purchase.

If you lease instead of buy, you can keep driving new cars indefinitely—just trade in your old lease for a new one every few years. That means you’ll have access to the latest features, like better navigation, back-up cameras, or music players. You could even lease an expensive car for an affordable monthly payment.

2. You Probably Pay Less Up-Front

Traditional car loans usually come with somewhat hefty down payments. But if you lease instead, you’ll likely have a lower down payment than you would with a normal loan. In fact, some dealers may not require a down payment at all.

This means you pay much less up-front so you can put that extra money toward home repairs, a vacation, or paying down existing debt.

3. You Get to Drive a Safer, More Reliable Car

When you lease, you’ll probably drive a newer car, which can be safer and more reliable. The newest cars have the most recent safety features and are compliant with current safety regulations that older cars might not meet.

Plus, since a newer car has less wear and tear, it’s less likely to break down and leave you stranded in an unsafe situation on the side of a fast highway or miles away from civilization.

4. You’ll Likely Spend Less on Repairs and Maintenance

Usually, a newer car needs fewer repairs, but when issues do come up, repairs will often cost less if you lease your vehicle. Most of the time, the vehicle you’re leasing will still be covered by the manufacturer’s warranty, so you won’t have to foot the bill for expensive repairs. There’s a good chance that basic maintenance, like oil changes, will also be covered in your lease agreement or car warranty. 

5. Your Monthly Payments Might Be Lower

When you lease a vehicle, you pay for the vehicle’s depreciation during the lease. When you buy, you’re paying taxes, fees, special finance charges, and the full price of the vehicle.

This means that monthly lease payments are usually lower than loan payments.

6. You Don’t Have to Worry about Selling Your Car

Selling a used car can be a hassle. With leasing, you skip it entirely. Instead, you drop the car off with the dealer when the lease is up. Then you’re free to lease a car again or purchase a new one without worrying about trade-in value or an ownership transfer.

7. You May Pay Less Sales Tax

If you buy a car, you pay taxes all at once for the full value of the vehicle. When you lease, you pay taxes on your monthly payment and spread that cost out over time, so there’s a good chance you’ll pay less sales tax.

Things to Remember about Leasing a Car

There are lots of great perks about leasing instead of buying, but it isn’t the perfect solution for every person. If you decide to lease a car, there are a few things you should remember.

  1. You Still Need to Get through a Credit Check

Leasing isn’t the same as a normal car loan, but it is still a form of financing, so a dealer will check your credit to make sure you’re eligible for a lease. In fact, you might need a higher credit score to lease than you would need to buy.

If you have a low credit score, you may pay a higher interest rate or be denied financing altogether. It is always wise to keep an eye on your credit report throughout the year to look for errors or other problems. For the best rates, make sure your credit is in good shape before you apply for financing.

  1. You May Have to Stick to a Mileage Limit

Leases come with mileage limitations. In most cases, that limitation will be somewhere between 10,000 and 12,000 miles per year. If you go over that limit, you pay extra fees for every extra mile—which can be costly.

Before you sign up for a lease, think carefully about how much you drive each year. Your daily commute is probably the biggest thing to consider, but all those little trips to the grocery store can also add up. If you drive more than 10,000 miles in a year, you may want to pay for extra miles or buy a car instead.

  1. You Get Charged for Extra Wear and Tear

Leases require you to keep the vehicle in good condition. If you turn it in with stains, scratches, dents, or dings, you’ll have to pay extra charges. Should you lease a car, take extra good care of it.

  1. You Could Be Penalized for Terminating the Lease Early

Car leases work a lot like other lease agreements. If you terminate your lease early, you may be subject to significant penalties and fees—just like you would be if you broke an apartment lease early.

  1. You Can’t Modify the Vehicle

Lease agreements have strict rules, and if you violate the agreement, you’ll be fined. Modifications will likely violate the warranty or lease terms—even if they’re modifications that you consider upgrades, such as shiny new rims or a more powerful sound system.

Should You Lease or Buy a Car?

Leasing is an excellent option if you’re comfortable with the limitations that are spelled out in the lease agreement. If you’re still on the fence, ask yourself the following questions to determine whether a lease is best for you:

  • How much do you drive each year? If you love going on epic road trips, leasing may not be the best option, but if you just need a car to get to and from work and around town, a lease would work well.
  • How much do you want to spend up-front? If you don’t have a large down payment saved up, you could get into a new car faster by leasing instead of buying.
  • Is driving a new car important to you? If you’re okay driving the same car for the next 10 to 15 years, you should probably just buy one. However, if you want to consistently drive newer vehicles, leasing is one of the easiest ways to do that.
  • Does vehicle maintenance frustrate you? Because leased cars are newer, they usually have fewer maintenance issues. And when those issues do come up, they’re often covered under the manufacturer’s warranty. If you don’t want to think too often about maintenance, leasing might be a good call.
  • Do you have good credit? Sometimes, you need better credit to lease a car than to buy one. If you’re still working on repairing your credit, you may have to purchase a car instead of leasing one.
  • Do you care more about short-term or long-term savings? Leasing is a great way to save on up-front costs. It also usually results in smaller monthly payments, which makes leasing a perfect option if you want to save money right now. However, in the long run, leasing may cost more than buying since you don’t own any property at the end of your lease.

When deciding whether leasing or buying a car is better for you, carefully consider all the various factors. It’s important to take your own needs and preferences into account to determine which is the most reasonable solution. Use the tips above and research local leasing options to ensure you pick the best one.
Image: iStock

The post Leasing a Car: 7 Reasons Why You Should Consider It appeared first on Credit.com.

Source: credit.com

What Is a Recourse Loan?

Car loan application

In borrowing, there are two types of debts, recourse and nonrecourse. Recourse debt holds the person borrowing money personally liable for the debt. If you default on a recourse loan, the lender will have license, or recourse, to go after your personal assets if the collateral’s value doesn’t cover the remaining amount of the loan that is due. Recourse loans are often used to finance construction or invest in real estate. Here’s what you need to know about recourse loans, how they work and how they differ from other types of loans.

What Is a Recourse Loan?

A recourse loan is a type of loan that allows the lender to go after any of a borrower’s assets if that borrower defaults on the loan. The first choice of any lender is to seize the asset that is collateral for the loan. For example, if someone stops making payments on an auto loan, the lender would take back the car and sell it.

However, if someone defaults on a hard money loan, which is a type of recourse loan, the lender might seize the borrower’s home or other assets. Then, the lender would sell it to recover the balance of the principal due. Recourse loans also allow lenders to garnish wages or access bank accounts if the full debt obligation isn’t fulfilled.

Essentially, recourse loans help lenders recover their investments if borrowers fail to pay off their loans and the collateral value attached to those loans is not enough to cover the balance due.

How Recourse Loans Work

When a borrower takes out debt, he typically has several options. Most hard money loans are recourse loans. In other words, if the borrower fails to make payments, the lender can seize the borrower’s other assets such as his home or car and sell it to recover the money borrowed for the loan.

Lenders can go after a borrower’s other assets or take legal action against a borrower. Other assets that a lender can seize might include savings accounts and checking accounts. Depending on the situation, they may also be able to garnish a borrower’s wages or take further legal action.

When a lender writes a loan’s terms and conditions, what types of assets the lender can pursue if a debtor fails to make debt payments are listed. If you are at risk of defaulting on your loan, you may want to look at the language in your loan to see what your lender might pursue and what your options are.

Recourse Loans vs. Nonrecourse Loans

Bank repo signNonrecourse loans are also secured loans, but rather than being secured by all a person’s assets, nonrecourse loans are only secured by the asset involved as collateral. For example, a mortgage is typically a nonrecourse loan, because the lender will only go after the home if a borrower stops making payments. Similarly, most auto loans are nonrecourse loans, and the bank or lender will only be able to seize the car if the borrower stops making payments.

Nonrecourse loans are riskier for lenders because they will have fewer options for getting their money back. Therefore, most lenders will only offer nonrecourse loans to people with exceedingly high credit scores.

Types of Recourse Loans

There are several types of recourse loans that you should be aware of before taking on debt. Some of the most common recourse loans are:

  • Hard money loans. Even if someone uses their hard money loan, also known as hard cash loan, to buy a property, these types of loans are typically recourse loans.
  • Auto loans. Because cars depreciate, most auto loans are recourse loans to ensure the lender receive full debt payments.

Recourse Loans Pros and Cons

For borrowers, recourse loans have both pros and and at least one con. You should evaluate each before deciding to take out a recourse loan.

Pros

Although they may seem riskier upfront, recourse loans are still attractive to borrowers.

  • Easier underwriting and approval. Because a recourse loan is less risky for lenders, the underwriting and approval process is more manageable for borrowers to navigate.
  • Lower credit score. It’s easier for people with lower credit scores to get approved for a recourse loan. This is because more collateral is available to the lender if the borrower defaults on the loan.
  • Lower interest rate. Recourse loans typically have lower interest rates than nonrecourse loans.

Con

The one major disadvantage of a recourse loan is the risk involved. With a recourse loan, the borrower is held personally liable. This means that if the borrower does default, more than just the loan’s collateral could be at stake.

The Takeaway

Hard Money Loan signLoans can be divided into two types, recourse loans and nonrecourse loans. Recourse loans, such as hard money loans, allow the lender to pursue more than what is listed as collateral in the loan agreement if a borrower defaults on the loan. Be sure to check your state’s laws about determining when a loan is in default. While there are advantages to recourse loans, which are often used to finance construction, buy vehicles or invest in real estate, such as lower interest rates and a more straightforward approval process, they carry more risk than nonrecourse loans.

Tips on Borrowing

  • Borrowing money from a lender is a significant commitment. Consider talking to a financial advisor before you take that step to be completely clear about how it will impact your finances. Finding a financial advisor doesn’t have to be difficult. In just a few minutes our financial advisor search tool can help you find a professional in your area to work with. If you’re ready, get started now.
  • For many people, taking out a mortgage is the biggest debt they incur. Our mortgage calculator will tell you how much your monthly payments will be, based on the principal, interest rate, type of mortgage and length of the term.

Photo credit: ©iStock.com/aee_werawan, ©iStock.com/PictureLake, ©iStock.com/designer491

The post What Is a Recourse Loan? appeared first on SmartAsset Blog.

Source: smartasset.com

Can I Get a Car Loan If I Have No Credit?

buy a car with no credit

Yes, lenders have auto loans for people with no credit, but getting one is not guaranteed. It will depend on the lender’s flexibility, the down payment you can afford, and the kind of car you want to buy. It may even depend on how you ask.

Phil Reed, senior consumer advice editor for the consumer auto site Edmunds has some good advice on how to get a car loan with no credit. He says a surprising number of people simply walk into a dealership and say, “Hi, I have no credit, and I want to buy a car.” He doesn’t recommend this approach. Instead, he offers these five tips for people who need a no-credit car loan.

1. Get Pre-Approved

If you have no credit or a thin credit profile, you should try to get preapproved for a loan before heading to the dealership. This will let you compare rates with any loan the dealer may offer. It may also give you a bargaining chip when negotiating the final deal.

If you have a relationship with a bank or credit union, you should start looking for financing there. Reed recommends making an appointment to meet with your bank’s loan officer in person.

“Make a case for yourself,” he says. That means bringing your pay stubs and bank account records with you. You should also check your credit reports, if they exist, and credit scores. You want to know as much about your credit profile as a lender would. If you don’t know your credit score, don’t worry—you can check your credit score for free every month on Credit.com.

If you can’t get a loan from your financial institution, you may be able to find a no-credit auto loan online. Just make sure it’s from a reputable lender. Credit.com can also help you find auto loan offers from trustworthy lending institutions.

// <![CDATA[
googletag.cmd.push(function() { googletag.display('div-gpt-ad-1523377147000-0'); });
// ]]>

 

2. Negotiate a Good Price

A dealership could beat the offer you get from your bank or credit union. However, if you know you’re already approved for a loan, you can focus on comparing rates and prices instead of worrying about financing.

Reed says that it’s important to be wary. You don’t want to feel so indebted to the dealer for “giving” you a loan that you fail to negotiate the price of the car. And if the dealer’s financing isn’t better than the bank’s, at least you still have an approval in your pocket.

Having a good down payment or trade-in can also help your case. A trade-in would reduce the amount you’ll need to borrow, and a larger down payment would show the lender some commitment on your part. Edmunds recommends putting at least 10% down on a used car, so start saving now.

3. Choose the Right Car

Be sure the car you’re buying is affordable for you, even if it’s not the car you’d choose if you had more money and better credit. “If you have no credit, it’s not the time to get your dream car,” Reed says. “You have to choose the right car and the right amount [to borrow].”

You want reliable transportation you can afford. Making regular, on-time payments won’t just pay down your load, it will also build your credit, so don’t get a loan that requires higher payments than you can comfortably make.

Sites like Kelley Blue Book, Cars.com, and Edmunds can help you find information on the cars that match your budget. When you’re at the car dealership, remember your budget and don’t spring for optional add-ons you don’t really need.

4. Don’t Let Interest Rates Scare You Off

Reed cautions that when you get a loan with no credit, the interest rates you’re offered may seem appallingly high, but that’s part of the cost of having no credit history.

When you don’t have a credit score, lenders can’t assess how big of a risk they’re taking by giving you a loan. To protect the money they’re lending, they will likely treat you as a high-risk borrower, which means the loan will have a higher interest rate.

As you make payments, you’ll establish a pattern of reliably paying back money. Over time, you can improve your interest rate by refinancing. Reed says that, according to a dealership employee, a customer once lowered his interest rate from 13% to 2% in two years’ time by improving his credit and refinancing.

5. Give Yourself Some Credit, Not a Cosigner

Reed advises against cosigning—a process that involves checking someone else’s credit and using that score to qualify for a loan. It might get you a lower rate and help you get approved, but Reed says that if you bite the bullet and pay a higher interest rate rather than get a cosigner, you’ll have the opportunity to build credit.

In addition, having a cosigner will tie that person’s credit to yours, and the way you repay your car loan will influence their credit. Reed says if you’re going to do it, do it only as a last resort, and make sure the cosigner is a relative.

Bottom line, though, as Reed explains, “It’s asking a lot.” It’s better to finance the car yourself, pay on time, and build your credit. That way, the next time you need a loan, you won’t have to worry about whether you’ll qualify.

Good credit doesn’t just help you get reliable transportation: good credit can make a huge difference in improving your financial security and the peace of mind that comes with it. Start tracking your credit for free today at Credit.com. Your new car will get you moving around town, but your new credit score will get you moving up in the world.

Image: iStock

The post Can I Get a Car Loan If I Have No Credit? appeared first on Credit.com.

Source: credit.com

Fed reports credit card balances continued to dip in November

Credit card balances slightly dipped in November, as the COVID pandemic fallouts continued, and with the government continuing to wrangle about a second round of fiscal stimulus measures.

Consumer revolving debt – which is mostly based on credit card balances – was down $700 million on a seasonally adjusted basis in November to $978.8 billion, according to the Fed’s G. 19 consumer credit report released Jan. 8.

In November, credit card balances were off 1% on an annualized basis, after October’s 6.7% drop, which came on the heels of September’s 3.2% annualized gain.

Total consumer debt outstanding – which includes student loans and auto loans, as well as revolving debt – continued to grow and rose $15.3 billion to $4.176 trillion in November, a 4.4% annualized gain.

Card balances had touched an all-time high in February 2020 before the coronavirus pandemic started impacting consumer spending and bank lending. They dipped below the $1 trillion mark in May, for the first time since September 2017.

The Fed also reports that interest rates on credit cards were at 14.65% in November, with the rates on cards that are assessed interest (since they carry a balance) at 16.28%.

See related: Paying with credit is getting more expensive in the pandemic

Consumers expect household spending to rise

Consumers expect their household spending at the median to grow 3.7% in the year ahead, the highest in more than four years – even though they don’t anticipate much growth in their income (2.1%) or earnings (2%) – according to the New York Fed’s survey of consumer expectations for November.

Moreover, they are less optimistic about their household financial situation in the year ahead, with more of them expecting it to decline, and fewer consumers expecting an improvement.

Even then, more respondents are optimistic about their ability to access credit in the coming year, expecting it will be easier. However, the mean probability of missing a minimum debt payment in the next three months rose by 1.6 percentage points to 10.9%. Even then, this is still below its 11.5% average for 2019.

Less cheer on labor market front

On the labor market front, more consumers expect that the U.S. unemployment rate will be higher in the year ahead, with the average probability of this outcome rising to 40.1% in November, from October’s 35.4%.

However, they were less pessimistic about the prospects of losing their jobs, with this probability down to 14.6% on average, from October’s 15.5% (but still above the 2019 average of 14.3%).  Those above the age of 60 and those without a college degree were more optimistic about holding on to their jobs.

The respondents were less likely to voluntarily leave their jobs, with the mean probability of this down 1.3 percentage points to 16.6% (a low for the survey). Those 60 and older were at the forefront of this decline. However, respondents on average were more optimistic about the prospects for landing a new job if they lost their current ones.

In the meantime, the government reported that the economy shed 140,000 jobs in December, and the unemployment rate remained at 6.7%. The jobs lost were mostly in the sectors hard hit from the pandemic, with closures impacting the leisure and hospitality sector, as well as private education jobs.

The retail sector added jobs to aid holiday shopping, mostly in warehouses (which benefit from e-commerce) and superstores.

Although average hourly earnings for private sector employees rose $0.23, this is mostly because of the loss of lower-paying jobs in the leisure and hospitality sector, which tilted the average wage for the employed workers to the upside.

In online commentary, Diane Swonk, chief economist at GrantThornton, noted, “The silver lining to a bad overall jobs report is that the losses were concentrated in sectors that are most sensitive to COVID. Many of those jobs will come back once we get to herd immunity. The challenge is getting there, given the slow rollout of vaccines and poor uptake in some areas.”

Given that it will take a while to more fully open the economy, she is in favor of “aid today and another tranche once the new administration takes office.”

See related: Second stimulus deal provides $600 per individual

Application rates for credit cards plunged on pandemic impact

The New York Fed also reported in its credit access survey, which is conducted every four months as part of its survey of consumer expectations, that most credit applications and acceptance rates fell sharply after last February. Mortgage credit was the exception to this.

For credit cards, the application rate was off a steep 10.6 percentage points since February to touch a survey low of 15.7%. This decline impacted all age groups and credit score categories. Applications for credit card limit increases dropped 6.6 percentage points to 7.1% between February and October, another series low since the survey began in October 2013. The decline was spread across all ages and credit score categories.

Consumers applying for credit cards were also subject to steep rejection rates, with this rate rising 11.6 percentage points from February to touch 21.3% in October. Those looking for higher credit limits also were rejected about 37% of the time, from about 25% of the time in February.

No wonder consumers said they were less likely to apply for a credit card or credit limit increase in the next 12 months, with these figures falling 36% and 34% on average since February 2020. Those with credit scores above 680 led this decline.

Source: creditcards.com

I Was Denied an Auto Loan. Now What?

October 9, 2019 &• 7 min read by Steve Ely Comments 3 Comments

div#contentdisclaimer {background: #fff;padding: 1.5em;line-height: 1.25em;max-width: 500px;}
Advertiser Disclosure

Disclaimer

You’re in the market for a new car but you’ve been denied an auto loan. Now what? Here’s what you need to know about why you may have been denied and what to do to make sure it doesn’t happen again.

Why Do I Keep Getting Denied for Auto Loans?

Unfortunately, there are many reasons a bank might reject your application for a car loan. If your loan application has recently been denied or you keep getting denied, it might be due to one of these common reasons:

  • Application errors. Sometimes, the application could be rejected because of an error you made when filling it out. A missed section, some incorrect information, a missing form or another mistake can mean your loan is ultimately denied.
  • Bad credit. Bad credit is a common reason for auto loan denial. A score below 670 is usually considered a bad credit score, and this damages lenders’ trust in your ability to pay off a loan.
  • Too much debt. A high debt-to-income ratio can make lenders leery. If you have a number of loans or credit cards with large amounts of debt, this raises your DTI and may lower your chance of getting approved for future loans, car loans included.
  • No credit. Lenders look for proof of consistency in paying off past loans when reviewing your application. If you have no credit history, lenders may feel they don’t have enough information about your ability to pay off a future loan.

What Can I Do If My Loan Application Is Denied?

You have a few options when you’ve been denied an auto loan, depending on the reason you were rejected.

Application Error

If you were rejected because of an application error on your part, you should contact the bank as soon as you can. Hopefully, the mix-up can be resolved and your request will be approved. If not, the lender will tell you when you can reapply.

Poor Credit

If you were rejected because of poor credit, check your credit report so you can determine what is negatively impacting your score. Depending on what your report says, look into ways to improve your credit so you can be approved next time. Pay your bills on time, and use your credit cards to make and then repay smaller purchases. Keep in mind that building or rebuilding your credit can take a while. Don’t be disappointed if it takes months or even a year or two to really get your score where you want it.

If you need a loan sooner, consider adding a cosigner to your application that can be your backup if you fail to pay the loan. Lenders feel more comfortable with this method, and it’s a good way to prove dependability.

Debt

If you were rejected because you already have too much debt, it’s important to reduce that amount in steady increments. Set a budget and stick to it, tackling the largest debts first. Avoid adding any debt to what you already have. Examine your credit card usage for any unnecessary expenses and cut back on those in the future.

No Credit

If you don’t have a credit history, now’s the time to start. There are a lot of ways to start building your credit: you might be able to become an authorized user on someone else’s credit card or find a co-signer for your loan, for example. You also might want to apply for a secured credit card or credit card for no credit.

Find the right credit card for your needs. Learn more.

Does Getting Denied a Loan Hurt My Credit?

Getting denied for an auto loan doesn’t in itself hurt your credit score. The lender didn’t extend anything, so there’s nothing that can hurt your score. However, multiple denied applications at once could hurt your score.

A bank conducts a “hard inquiry” when you apply for a loan. This can cause a drop in your credit score slightly—about five to ten points—whether you’re accepted or not. If you apply for too many loans, numerous hard inquiries on your credit can cause a larger drop.

What Are My Other Options?

If you don’t have time to build or rebuild your credit, can’t get a co-signer, and need a car fast, there are two options to be considered as a last resort.

“Buy Here Pay Here” Dealers

Stop by your neighborhood “Buy Here Pay Here” (BHPH) auto dealer, and one way or another, it will probably get you into a car. It won’t be a new car, and it will probably have lots of miles on it, but at least you’ll get a car you desperately need to get you to and fro.

The BHPH dealer won’t want to talk to you about interest rates. Your local BHPH will focus on your expected monthly payment and ask for a really big down payment. They mostly care about whether or not you have a current, steady income. Based on that, they’ll determine how much they are willing to lend and which car options are available to you. It’s not a great way to buy a car, but for millions of Americans, it is the only way they can make this significant a purchase.

#animation-wrapper { max-width: 450px; margin: 0 auto; width: auto; height: 600px; font-family: ProximaNova-Regular, Arial, sans-serif } #animation-wrapper .box { background-color: #f5f5f5; color: #000; text-align: center; font-family: ProximaNova-Regular, Arial, sans-serif; height: 130px; padding-top: 10px } .content .box p { margin: 0 0 } .box .btn-primary { color: #fff; background-color: #ff7f00; margin: 10px 0 } .chat ul { margin: 0; padding: 0; list-style: none } .message-left .message-time { display: block; font-size: 12px; text-align: left; padding-left: 30px; padding-top: 4px; color: #ccc; font-family: Courier } .message-right .message-time { display: block; font-size: 12px; text-align: right; padding-right: 20px; padding-top: 4px; color: #ccc; font-family: Courier } .message-left { text-align: left; margin-bottom: 8px !important; } .message-left .message-text { max-width: 80%; display: inline-block; background: #79af3e; padding: 13px; font-size: 14px; color: #fff; border-radius: 30px; font-weight: 100; line-height: 1.5em } .message-right { text-align: right; margin-bottom: 8px !important; } .message-right .message-text { line-height: 1.5em; display: inline-block; background: #2e5e89; padding: 13px; font-size: 14px; color: #fff; border-radius: 30px; line-height: 1.5em; font-weight: 100; text-align: left } .chat { background: #fff; margin: 0; border-radius: 0 } .chat-container { height: 450px; padding: 5px 15px; overflow: hidden } .spinme-right { display: inline-block; padding: 15px 20px; font-size: 14px; border-radius: 30px; line-height: 1.25em; font-weight: 100; opacity: .2 } .spinme-left { display: inline-block; padding: 15px 20px; font-size: 14px; color: #ccc; border-radius: 30px; line-height: 1.25em; font-weight: 100; opacity: .2 } .spinner { margin: 0; width: 30px; text-align: center } .spinner>div { width: 10px; height: 10px; border-radius: 100%; display: inline-block; -webkit-animation: sk-bouncedelay 1.4s infinite ease-in-out both; animation: sk-bouncedelay 1.4s infinite ease-in-out both; background: #000 } .spinner .bounce1 { -webkit-animation-delay: -.32s; animation-delay: -.32s } .spinner .bounce2 { -webkit-animation-delay: -.16s; animation-delay: -.16s } @-webkit-keyframes sk-bouncedelay { 0%, 100%, 80% { -webkit-transform: scale(0) } 40% { -webkit-transform: scale(1) } } @keyframes sk-bouncedelay { 0%, 100%, 80% { -webkit-transform: scale(0); transform: scale(0) } 40% { -webkit-transform: scale(1); transform: scale(1) } } .ad-container { padding: 15px 30px; background-color: #fff; max-width: 690px; box-shadow: 1px 1px 4px #888; margin: 20px auto } .ad { padding: 10px 6px; max-width: 630px } .ad-title { font-size: 20px; color: #07b; line-height: 22px; margin-bottom: 6px; letter-spacing: -.32px } .ad-link { line-height: 18px; padding-left: 26px; position: relative } .ad-link::before { content: ‘Ad’; color: #006621; font-size: 10px; width: 21px; line-height: 12px; padding: 2px 0; text-align: center; border: 1px solid #006621; border-radius: 4px; box-sizing: border-box; display: inline-block; position: absolute; left: 0 } .ad-link a { color: #006621; text-decoration: none; font-size: 14px; line-height: 14px } .ad-copy { color: #000; font-size: 14px; line-height: 18px; letter-spacing: -.34px; margin-top: 6px; display: inline-block } .ad .breaker { font-size: 0 } .box .box-desc { font-family: ProximaNova-Bold, Arial, sans-serif; font-size: 17px; font-weight: 600 } .btn { display: inline-block; margin-bottom: 0; font-weight: 400; text-align: center; vertical-align: middle; touch-action: manipulation; cursor: pointer; background-image: none; border: 1px solid transparent; white-space: nowrap; padding: 6px 12px; font-size: 14px; line-height: 1.428571429; border-radius: 4px; -webkit-user-select: none; -moz-user-select: none; -ms-user-select: none; user-select: none; font-family: ProximaNova-Semibold, Arial, sans-serif; text-decoration: none } .btn-group-lg>.btn, .btn-lg { padding: 10px 16px; font-size: 18px; line-height: 1.3333333; border-radius: 6px } #ad-4 { font-family: Arial, sans-serif; background-color: #fff } #ad-4 .ad-title { color: #2130ab } #animation-wrapper .cta-amone { background: #79af3e; color: #fff; width: 155px; height: 41px; font-family: ProximaNova-Semibold, Arial, sans-serif; font-size: 14px; margin: 10px auto 7px auto } #animation-wrapper .amone-logo { display: block; margin: 0 auto } @media (max-width:500px) { .ad { padding: 20px 18px; max-width: 630px } }

Get matched with a personal loan that’s right for you today.

Learn more

Unfortunately, purchasing a car at a BHPH dealer isn’t a credit boost at all. They usually don’t report anything positive to credit reporting agencies, but they will report negative actions like a missed payment or repossession. Always ask about their late payment policies before making a decision.

Alternative Credit Bureaus

If your credit score is low or your credit history is light based on traditional credit trade lines (credit cards and loans), but you have a solid history of paying your everyday bills, you may be able to take advantage of alternative credit scoring methods. If you can prove your creditworthiness by having your everyday bills verified, some companies will work with alternative credit scoring methods to offer credit. Alternative credit generally doesn’t carry the same weight as traditional credit lines, so interest rates likely will not be as competitive.

At this point, you can go to any dealer and buy the car you really want instead of being limited to the inventory on a BHPH lot. If you can afford the payments, you can buy a new car that’s under warranty and has no mileage on the odometer. If you can continue to work on your credit and improve your credit score, refinancing may even be available down the road.

However, many lenders still do not use alternative credit and don’t view it as proof of reliability. Most of these alternative credit companies also don’t report your findings to the major credit bureaus. So, while these alternative creditors may be a short-term option, building credit through traditional methods should be a priority.

Why Would I Get Rejected for a Car Refinance?

If you were denied for refinancing, it’s probably because of a poor credit score or a high DTI. Usually, these are the same as the reasons you might be denied an auto loan. Your score may have been satisfactory when you purchased the vehicle but taken a few hits since its purchase.

How to Get Approved Next Time

Before you reapply for an auto loan, make sure all your information is in order. Gather your records and make sure everything is ironed out and correct before you go to a lender. For a better shot at loan approval, your credit score should be in a comfortable range, and you shouldn’t have any large outstanding debts. Always check your credit score before you apply. If it’s not high enough for loan approval, work to improve your credit first. Then, make sure you’ve determined what type of payments and interest you can afford.

If you do get denied, don’t worry! By making sure you meet all of the income, credit and debt requirements for an auto loan, you can increase your chance of getting accepted the next time you apply.


Source: credit.com