Is Refinancing the Right Choice for You 2015?

Is Refinancing the Right Choice for You 2015?

RULE No. 1 – Never Lose Money

RULE No. 2 – Never Forget RULE No. 1

– Warren Buffet

When one of the world’s richest man talks about money, everyone must pay attention. His advice is useful for everyone including people with car loans. If you have a car loan and are losing money because of high-interest rates, you must take necessary steps for saving your hard-earned money.

You can save money by applying for refinancing because it will help you in obtaining lower interest rates and affordable monthly payments. When you begin the process of refinancing, you apply for a second loan to pay off your first loan.

When should you apply for Refinancing?

Even though it is a good move for saving your money, you should not opt for it without thorough understanding of your situation. If any of the following situations applies to you, only then you must initiate the refinancing process:

Is there a Significant Drop in Interest Rates?

Check out the current interest rates for obtaining a used car loan in your area. If the interest rates have reduced phenomenally since you purchased your car, you could save money by refinancing your car.

Is there an Improvement in your Credit Score?

Your credit score is an important factor for lenders to determine your interest rates. If you had a bad credit history or zero credit score at the time of buying your car, you may have received high-interest rates.

If you want to start the refinancing process, check your credit score. If your credit score is healthier and has improved considerably, you can apply for it.

Is your Loan Term Lengthy?

Most people concentrate on lower monthly payments but forget to consider the car loan term. A lengthy loan term is bad news because it means you have to pay interest for a longer period of time. So, if your loan term is longer than five years, you must opt for refinancing and choose a shorter loan term. It will help you in reducing the total interest amount.

Is there a Pre-Payment Penalty?

Before opting for refinancing, you must consider the terms and conditions of your present car loan. There are many lenders that charge high pre-payment penalties for breaking the loan contract. You must opt for refinancing only if penalty fees don’t negate the savings that you will receive by refinancing your car loan.

Is your Car Lease expiring?

Under a car lease agreement, the financing company purchases the car and then leases it to you for regular rental payments. At the end of the lease period, you have the option of buying the car or returning it to the financing company. If your car lease is expiring and you have no money to buy the car, you can opt for refinancing. The refinancing option is also helpful for those people who want to get out of their ongoing lease agreement.

Where to look for Refinancing?

Once you are sure of refinancing, you have several options to start the process. You can apply for refinancing at your local bank or a credit union. You can even visit websites of several online auto financing companies and choose one that offers you the best interest rates.

Car Loans 2015 for People on Social Security

Car Loans 2015 for People on Social Security

Since 1974, the Supplemental Security Income (SSI) program has helped several blind, aged and disabled Americans. Today, the SSI program is a source of income to approximately eight million people of America.

Car lenders often have a problem in approving your loan request, if you receive income from SSI or any of the following sources:

>> Social security benefits

>> Disability income

>> Workers compensation

>> Unemployment benefits

>> Pension

>> Interest income

>> Cash from friends and relatives

Why do Lenders have a problem with People on Social Security?

Lenders categorize income in two parts:

1. Earned Income

You earn wages, net-earnings and other such incomes because of your job or business. Such income is considered earned income.

2. Unearned Income

SSI, compensation and other social security benefits that you receive without doing any work are considered unearned income.

Lenders believe that unearned income is unstable. It is possible that you may receive less income in future due to change in government policies. Also, the unearned income is necessary for your survival. It is usually inadequate to make regular monthly payments on a car loan.

So, if you have unearned income, lenders will not approve your car loan application easily.

How to get a Car Loan if you are on Social Security?

People with social security are considered risky borrowers. So, to get approved for a car loan, your goal must be to reduce the lender’s risk and ensure regular payments. Following are the ways in which you can fulfill your goal:

1. Income from Job

There are several factors that determine your loan approval. Earned income is one of them. If you are currently employed, you can ask the lender to consider your income from the job.

2. Duration of Employment

If your earned income is slightly lower than the lender’s minimum monthly income requirement, you can convince him of regular payments by providing a proof of your stable employment. Show your Employment Verification Letter to the lender as it includes the duration of your employment.

3. Inexpensive Car

Expensive car results in higher risk to a lender and lowers your chances of approval. So, it is important that you choose an inexpensive car. If you opt for a cheaper car, the loan amount will be reduced along with the lender’s risk. So, he will have no problem in approving your loan application.

4. Down Payment

Down payment is the upfront amount that you pay to the dealer. It will lower the loan amount and lender’s risk. Getting a car loan will become very easy if you can manage a down payment of at least ten percent of the total car price.

5. Co-Owner

A co-owner has the right of ownership as well as shares the responsibility of the car loan. You can ask your spouse or children to co-own the car. If anyone is willing to share your responsibility, lender’s risk will be reduced and you will have no problem in getting the loan.

6. Co-Signer

There is also the option of finding someone to co-sign your loan agreement. If you can find someone to assume the responsibility of regular payments, lenders will approve your loan application. But, remember that co-signer needs to have good credit score and lower debt-to-income ratio.

If a car is a necessity for you, it is important that you do not let anything to create an obstacle in getting a car loan. Social security is a boon for you. Follow the tips mentioned in this guide to ensure that it doesn’t become a bane for you.