Hi guys,
SO I've decided to definately buy my little bro's Z off of him. Im not quite sure what the next step is about applying for a loan? (noob....go ahead say it..)

I've never taken out a personal loan or auto loan before. I would assume my credit is OK. I had a couple of late credit card payments(years ago)? I typically buy stuff with cash

Is there a post you might be able to direct me to that covers most of this, or...


Where is the best place to be looking to get the loan?

Is there a difference between looking for a "personal" or "auto" loan?

I'll probable need right around 12,000$, what is a "good" interest rate?

I can afford about 650$/month towards this loan and willl be trying to pay it off as quickly as possible.

What should I be paying attention to when looking for these loans (secrets or tricks of the trades from bankers?) ?

Any info appreciated.

THANK YOU!
Rob

 

Most likely this is a collateral loan. The vehicle is collateral.

Be prepared to put up some cash money. 20 percent. The lender wants to insure that you have some money in the game.

Shop for APR.

 

Best advice is to not borrow money on a car. It is one of the worst financial decisions you can make. I know you want the car now, but you are better off waiting until you can purchase a car for cash, or carry a very short term loan, such as if you had to sell your current car to cover the balance of the amount. Seriously, car loans are just a bad idea for most folks.

If you decide you absolutely just-have-to-buy-your-brothers-car-because-you'll-never-find-another-deal-like-this-anywhere,-and-besides-the-Z-should-hold-it's-value-over-time,-and-girls-will-think-I'm-cool, etc...... then first check with a bank or credit union that you have a relationship with. Then check around at your local banks and credit unions to see what they have to offer.

A few things to keep in mind.
1) Look carefully at the difference in the upfront fees and the interest rates. Often you can get a much lower interest rate by paying a higher loan fee. You can use some loan amortization calculators to help you out. For example, Bank of America is offering a 6% loan with a $200 loan fee. Over 4 years, you would pay about $1530 in interest for the loan PLUS the $200 loan fee. The same loan at 8% would cost you $2060 in interest with no loan fee. So the one with the fee in this case would be cheaper over the 4 yeras, unless you were going to pay off the loan early. Anyway, you get the idea.

2) If you get a loan at a bank that you have an account at, you can often get a 1/4 to 1/2% rate reduction using auto-payment from your account. This is well worth it.

3) The shorter the loan term, the cheaper the loan ends up costing you. Often the rates are lower for a shorter term and you save a bunch of money in interest. The difference of 4 to 6 years at 8% on your loan size means a difference of over $1k in interest payments.

4) Depreciation will lower the value of your car. At least with your brother's car, he has taken most of the depreciation hit already, but over the next 2 years it will probably still depreciate $3-5K. You won't be upside down on the loan, but it reflects the idea that you should never borrow money to buy a depreciating/non-income generating item.

 

ok..im kinda lost with what you just said

The car is 15,000$ I have about 3000$ cash. Im supposed to be putting money up to get a loan? That doesnt register in my brain?

What do you mean specifically with shop for APR?

I'm tellin ya', I've never borrowed any money and have no clue what to do to make sure I get a respectable loan

Ask about loan at local bank, online lender,etc???

ROb

 

Thank you.
I'll definately take all ofthis into consideration. I'll be looking for a short term loan as I want this paid off in 24-30 months MAX.

ROb

 

A personal loan means the bank lends you money just on the basis of who you are. A collateral loan means they lend the money based on who you are AND the value of what it is you are buying. If you borrow money to buy the car, the bank will be the lien holder, meaning that you won't have clear title to the car. If you sell the car, the bank gets paid first before the new buyer can get the title. If you fail to make your payments, the bank will come and reposes the car because they are the ones that really own it. The car in this case is the "collateral". It is also referred to as a "secured loan" and typically be at a lower interest rate since the bank is at less risk.

Banks don't want to lend the full value of the car because they are then at higher risk. As David pointed out, they will want you to pay at least 20% of the value of the car. If the car is worth $15,000, then your $3k will meet the 20% (but don't forget tax, license, etc...). If they feel the car isn't worth that much, they will only loan you 80% of what they consider to be the value of the car. Generally, the higher your downpayment, the lower your interest rate.


APR is "Annual Percentage Rate" and simply give you a way of comparing different loans with different terms and conditions.

Any of the above.

 

The lender will determine what the car is “worth.” Not the seller. Not the buyer. If the lender determines that the car is “worth” $13,000, then they will lend you $10,400. Your part is $2,600.

Any difference between $15,000 and $10,400 you pay to the seller.

Annual Percentage Rate (APR). 8 percent APR is better than 9 percent. 7 percent APR is better than 8 percent.

Are you a member of a Credit Union? Can you join a Credit Union?

 

Thanks again for this detailed Information.
I am not a member of a Credit Union and am not really sure if I could be. What are the differences vetween a CU and a regular bank?

Rob

P.S. The loan taken on the car still has 17,000$ left owed, I have agreed to take a loan out and give him $15,000 for the car. How would that work out???? would he have to tak an additional loan out of $2000 to pay off the $17000 owed on car?

 

The $17K will have to be paid in full before you can get the title. That money can come from you, your brother or a bank loan. You might contact the bank where he has the loan and see if they can work out something for you.

 

+1

This is a good example of why a car loan is a bad idea. He owes more than the car is worth. He is going to have to pay off the loan before you can get clear title. Presumably, you can trust your brother, but make sure that he has the $2000 cash to pay the difference between what you will pay him and what he owes. Also, it can be difficult to work out the deal because your lender will want the clear title before they give you any money.

Most likely what will happen is that your lender (bank, CU, whatever) will contact your brothers lender to get the payout information. Your brother will have to pay his lender the difference between what he owes and what your lender will finance. So, if your brother still owes $17k and your lender will finance $12k, then your brother will have to send $5k to his lender, and your lender will send $12k to his lender. Then his lender will send a clear title to your lender. You'll just have to give your brother the $3k so he can send payment to his lender.

The lenders can help you work it out.

Cash purchases and sales are the easiest for a reason.

 

So, Would it be easier to just try and take a personal loan with a higher interest rate? If I pay it down in under two years I wouldnt take that big of a hit with the higher interest.

 

The lien holder will insure that the lien is paid before the title is released.
Your lender will insure that the title will be free and clear.

The $2,000 will have to come from somewhere. Sit with your lender and the seller, and work this out.

 

No. Get an Auto Loan because the interest rates on a personal loan are exorbitant, particularly for a young person. That is even if you could get an unsecured loan for $12,000, which I kind of doubt.

+1

 

Thank you guys.

I'll be talking to my bank as well as the other local bank/credit unions tomorrow to see if I can get something worked out.


Once again, I do appreciate it.

Rob

 

Hello,

Well I spoke to my bank and got some general information from them(couldn't get too into it as I forgot to bring VIN#. DOH!)

I was told that unless my credit was so horrible that I would be denied any loan at all(it's not...i dont think ) that all auto loans given are between 7.49-9.49 APR (36 months).

My bro spoke to his bank and will be getting a small personal loan to bring the price down to around the <15K$ mark.

Do these APR's sound ridiculous or OK? I'll be shopping around today....just wanted to get your opinion.


Additionally. I checked with my insurance(Nationwide)
2003 Silver touring. 34,000miles
Im 25,male and have been with them since 17. No accidents or anything on my record.
They quoted 193$ month for full/comprehensive with 500$ deductable for collision.
I know everyone is different but does this sound reasonable ?

Thanks again for all of the input!

Rob

 

Loan APR sounds reasonable.

 

APR is kind of high but it's reasonable based on your credit.

your insurance coverage also sounds too high, but is effected by many things. I'm 23 with a clean record and my monthly is 140$.

they say you should swap insurance companies every few years, to keep your payments as low as possible. long term customers do not reap the benefits.

 

thank man

I'm gonna look into other insurance companies as well. I tried 2 yesterday and they both had me on hold for 20min so i just hung up

Rob

 

you can get quotes instantly online.

I heavily suggest waiting until your car loan is approved and in the works, though.

everytime you get an insurance quote, they are going to pull your credit, which can have a minor negative/temporary impact on your credit rating. this is not helpful at a time when you are getting a loan

 

Your insurance quote is way too high.

Try Geico.

I'm 24 with a spotless record, and I pay just under $70 per month for full coverage with a $250 comprehensive deductable, and a $500 collision. That price also includes having the "uninsured motorist coverage" set at the MAX.


-Tim