Auto loans – the things to know
If you are applying for an auto purchase or refinance you should know that there’s no any application fee. There are simple interest installment loans for the purchase of new and used autos or motorcycles. The rates differ and you can calculate them using any calculator given on many Internet web-sites. If you want to purchase or refinance a vehicle, you can’t use the application from your mortgage loan. First of all you will need to re-apply for the auto or motorcycle loan product you are interested in, so that the lender could make accredit determination based on information contained within your credit report. You are able to refinance the existing payoff balance from your current lender. In this case you’ll have to contact your current lender to obtain payoff balance information and an address to send the payoff. As a rule there are no hidden fees to apply. Each state usually imposes a title transfer fee which will be added into your final loan amount once you use a so-called Power Check (which works just like a personal check) to payoff your existing vehicle loan. The fee ranges from $5 to $65 depending on the state in which you live. After submitting your purchase or refinance application, you will get a response within 15 minutes if you applied during business hours. You Power Check can be used at any licensed dealer who is authorized by the state’s Department of Motor Vehicles to sell new or used vehicles. When you apply for vehicle financing at your lender, check the list of states where the financing is available. In case you have bad credit or a bankruptcy, there are lenders that offer a range of products to meet the needs of customers with strong credit histories as well as those who have experienced credit problems.
One of the most frequently asked questions is what GAP insurance is. New cars depreciate as much as 20-30% in the first 2-3 years (actual rates of depreciation may vary on a number of factors). As a result, insurance payouts can be much lower than the vehicle purchase price-even for those with full coverage. GAP (Guaranteed Auto Protection) insurance is additional protection to cover this “gap” between what one owes on a financed vehicle and its actual cash value, which is usually lower. For example, let’s say you borrow $26,000 for a new car and it’s totaled one month later. In the eyes of the insurance company, that vehicle has likely depreciated up to 30% (or about $7800) immediately after you drove it off the lot. Without GAP insurance, you could pay the full difference between what you owe to your lender and what your insurance company pays out to you. Please note that GAP insurance is cancelled after refinancing a vehicle. Those who plan to refinance for greater savings and are currently covered, will need to reapply to maintain it.
Another thing to know what simple interest is. It’s a method of allocating monthly loan payments between interest and principal. The amount of your payment allocated to interest is calculated based on your unpaid principal balance, the interest rate on your loan and the number of days since your last payment. For example, if we receive a payment and it has been 29 days since your last payment, then you will be charged 29 days of interest on the unpaid principal balance of your loan. The remainder of your payment is credited to principal and reduces the unpaid principal balance on your loan. Any interest rate is guaranteed for a maximum of 45 days after the date your application is approved. Once you write your power check and your loan is activated, you are locked into that interest rate for the life of the loan or until it is paid off.
Different lenders don’t finance certain kinds of vehicles, for example, motor homes, commercial vehicles, vehicles for business use, boats, taxis, limousines, camper vans, tow trucks, freight liners, tractor trailers, dump trucks, armored vehicles, conversion vans. Make sure to check that information.
When getting a purchase loan there’s a certain sum of money you can get. You are able to apply for a loan amount up to $100,000. However, you should apply for a loan based on your need. Loans over $100,000 are considered home equity loans. If you’re, for example, approved for a maximum $25,000 but write the check for $20,000, your loan will be activated for the amount that was filled in on your Power Check. Your monthly payment will be re-calculated based on the amount you use.