Category: car loan

May 01

How to Get Rid of a Car Payment

According to Experian, the average car payment at the end of 2023 was more than $700 for new cars and more than $500 for used vehicles. What’s more, your prime or subprime credit score wouldn’t have really impacted your payment compared to everyone else. In other words, if you had a “good” credit score, you’d be paying about $10 more per month than someone with excellent credit. In any case, if you’re tired of your car loan, here’s how to get rid of your car payment.

Know your car loan payoff and create a plan

Until you’re aware of your remaining loan balance, you won’t be able to strategize paying it off. Call your lender or log into your account portal to determine the full loan balance, otherwise known as the “payoff.”

Once you understand the remaining sum, you can begin to create a payoff plan that will free you from the car payment treadmill sooner than your loan term.

While rare, you might be able to pay off your car loan with a lump sum

A lump sum payoff is a surefire way to quickly avoid paying interest to the bitter end of the loan’s terms. However, you’d need a relatively large sum to do so early in the loan term. Ensure that if you choose this option, it won’t leave you in a worse financial bind without that cash on hand. Additionally, confirm that your lender will allow an early payoff without penalty.

By submitting an amount that’s larger than your obligated payment, any additional funds can go toward your car loan principal. The principal is the core loan balance before interest. By paying down the loan balance, you can shorten the life of the loan, hence paying less interest overall.

Make biweekly car payments

Making biweekly car payments will ultimately shave off a whole month’s worth of the total loan every year. How? By making a half payment every two weeks, you’ll actually submit thirteen months of payment within a twelve-month period.

Understand car your loan payment terms

Before you move forward with any of these ways to get rid of a car payment, ensure that your lender accepts them and will submit additional funds or a lump sum to your balance without any punishment fees.

Car payments can feel suffocating and difficult to move away from. Overall, choosing a car with a retail price well within your financial comfort zone is best. Avoid entering a car loan if you can. If you must borrow from a lender, try to keep the payment as low as possible and do what you can to pay it off quickly without damaging your overall financial health.

Jul 20

Is an 84-Month Car Loan the Right Choice for You?

Understanding the 84-Month Car Loan

An 84-month car loan extends over seven years, allowing you to spread payments across a longer period. This can make monthly payments more manageable but generally results in higher total interest costs. Unlike shorter-term loans, which might have higher payments but lower overall interest, the 84-month term offers a more accessible monthly payment for budget-conscious buyers.

Pros and Cons of a Long-Term Loan

Opting for an 84-month car loan can be advantageous if you need lower monthly payments to fit your budget or if you plan to invest in a more reliable vehicle. This loan term can reduce your debt-to-income ratio, potentially aiding in future financing opportunities, and may allow for refinancing down the road. However, the major downside is the increased total interest paid and the risk of negative equity due to the car’s depreciation over time. Before committing, ensure you can handle the long repayment period and check if prepayment penalties apply, which could affect your ability to pay off the loan early and save on interest.

When an 84-Month Loan Makes Sense

An 84-month loan might be suitable if you’re currently on a tight budget but need a dependable vehicle, or if you foresee the possibility of refinancing when your financial situation improves. It’s also worth considering if you can secure a 0% APR deal, which would negate the long-term interest costs typically associated with such loans. Evaluating your financial goals and understanding the long-term costs can help you make an informed decision about whether this loan term aligns with your needs.

Jul 20

Can You Transfer Your Car Loan? What You Need to Know

Understanding Car Loan Transfers

If you’re struggling with your car payments, you might be wondering if transferring your car loan to someone else is a viable option. Transferring a car loan involves having someone else assume responsibility for the remaining balance, which could relieve you of the financial burden. However, this process requires checking with your lender to see if your loan agreement allows for such transfers and involves several steps, including updating the vehicle’s title and paperwork.

Reasons to Transfer Your Car Loan

There are several scenarios where transferring your car loan might be beneficial. If you no longer need the vehicle due to relocation or lifestyle changes, or if you’re facing financial difficulties that make the payments unaffordable, transferring the loan can offer relief. Additionally, if you’re considering upgrading to a new car and need to free up resources, transferring your current loan can be a strategic move.

Steps for a Successful Loan Transfer

To initiate a car loan transfer, start by contacting your lender to confirm whether loan transfers are permitted under your agreement. If so, the new borrower will need to complete a new loan application, provide a credit report, and submit proof of insurance. It’s also crucial to update the vehicle’s title to reflect the new owner and ensure that all legal and financial details are accurately handled.

Key Considerations Before Transferring

Before proceeding with a loan transfer, consider whether your lender permits it, as not all do. Be aware of potential financial impacts, such as assumed interest and possible effects on your credit score. Additionally, ensure the new borrower meets the lender’s criteria and that your car insurance policy is updated to reflect the new ownership.

Alternative Solutions

If transferring your car loan isn’t feasible, refinancing might be a worthwhile alternative. Refinancing involves taking out a new loan with better terms, potentially lowering your monthly payments. This can be particularly useful if you wish to retain your vehicle but need more manageable payment options.

Jul 20

Exploring Car Loan Transfers: Is Passing on Your Auto Loan Possible?

Understanding the Mechanics of Car Loan Transfers

Many find themselves tied to a car loan that becomes difficult to manage, prompting the question of whether they can transfer the responsibility and ownership of the vehicle to another person. This process involves considerable paperwork and must be approved by your lender, as not every loan is eligible for transfer. If the lender agrees, the new party will assume responsibility for the loan, essentially adopting your financial commitments.

Reasons to Consider a Car Loan Transfer

Transferring a car loan might be necessary if life circumstances change, such as relocating to an urban area where a car isn’t necessary, or if economic challenges make the loan untenable. Alternatively, you might find a vehicle that better fits your evolving family or personal needs, making a transfer a logical choice to avoid the negative impacts on your credit that could arise from failing to meet payment obligations.

Steps to Transfer Your Car Loan

Begin by verifying with your lender if your loan is transferable. If so, the next step is to identify a suitable candidate who meets the lender’s criteria for loan assumption. This process generally involves a credit evaluation and confirmation of the new borrower’s income to ensure they can afford the loan. If all requirements are met and all parties agree, the transfer can proceed, which includes legally changing the vehicle’s registered ownership.

Key Considerations Before Transferring Your Loan

Transferring a car loan comes with its challenges and risks:

  • Long-term Financial Impact: The person assuming the loan might face higher overall costs if the loan period extends.
  • Procedural Complexities: The transfer process can be intricate and may involve several administrative steps and fees.
  • Potential Credit Impact: Improper handling of the loan transfer could adversely affect your credit score.

Alternative Solutions to Car Loan Transfers

If a direct transfer is too cumbersome or impossible, other strategies might be more appropriate:

  • Refinancing: If your credit score has improved, securing a refinanced loan under more favorable terms might be a viable option.
  • Selling the Vehicle: This approach can be effective if the sale price covers the outstanding loan balance, thereby freeing you from the loan.
  • Negotiating with Your Lender: For temporary financial setbacks, discussing modified payment terms with your lender could be beneficial.

Before proceeding with a car loan transfer, it’s critical to evaluate your financial situation and explore all alternatives. While transferring the loan may alleviate immediate financial pressure, it requires careful consideration to avoid unintended financial strain or complications.