5MinuteAutoLoan.com Blog

It is very important to keep your insurance record clean, therefore carefully consider whether or not you should file a claim in the first place. When you phone your insurance provider saying that you may be filing a claim, they are going to put that on your insurance record. Whether the accident is your fault or not, you should check out first, whether you can pay for the damage. If you can pay for it yourself, don’t file a claim.

Document as many details as possible of the accident and to get witnesses who can corroborate your story. Keep track of the information you will need to file your auto insurance claim. File the insurance claim as soon as possible with your insurance company. If there is a dispute between you and the other party in the accident, you may get quizzed by the other driver’s insurance company about what happened at the accident. In this case, make sure you document everything you say and get correct details of the Insurance agent you spoke to.

If your car gets wrecked in the accident, once your claim is approved, the insurance company will assess the damage and ask you to send it to a pre-approved shop to get it fixed.

Getting a car loan easily may be a thing of the past in these tough times of the credit squeeze. The finance wing of General Motors Corporation, GMAC LLC, is going to place curbs on its lending activities. Only customers with credit scores of at least 700 may be eligible for an auto loan, making it more difficult for many buyers to purchase a vehicle.

Detroit-based GMAC hiked the rate auto dealers pay for making loans outside of GM incentive programs by 0.75 percentage points. In a letter sent to dealers today, the company also said that most loans would not extend beyond a period of 60 months at the maximum. The curbs on customer credit come even as GM and GMAC stave off rumors about their own futures. 

According to Standard & Poor’s analyst Robert Schulz, GM’s sales slumped by 18 percent in 2008, and a further slide due to the credit crisis may see the automaker facing bankruptcy if business shows no signs of recovery. In June this year, GMAC had to come up with $60 billion of credit to bail itself out, as the company’s home mortgage came under severe pressure from foreclosures.

GMAC has seen some turbulent times as it posted $5.4 billion in losses owing to depressed auto sales and seven losing quarters with its Residential Capital LLC business. About 5,000 ResCap employees lost their jobs, and about 200 GMAC Mortgage retail offices were closed down because of weak responses in the real estate sector. GM holds a minority stake in GMAC after its 2006 sale to majority owner Cerberus Capital Management LP. Cerberus, a New York-based private equity firm, also owns Chrysler Financial, which has so far not changed its auto lending criteria. Spokeswoman for GMAC, Gina Proia said that the company’s focus was to manage the business prudently in the days of turbulent markets.

When you think of purchasing a new car, the chances are that you may not have the money to pay for it straight away, so an auto loan becomes a necessity, especially if you need to commute to work. With just a little bit of research, you should be able to figure out what type of auto loan will work out best for you. Be smart about comparing rates and definitely check out loans with as many lenders as possible for a good bargain.

The first kind of auto loan and the most common is a loan that has a fixed interest rate. This necessarily means that your interest rate will not change over the entire period of the loan, and you will be protected from any hikes in interest rates during the term.

A variable-rate loan leaves you vulnerable and you may have to accept interest-rate risk, but it usually has a lower current interest rate compared to a five-year fixed-rate loan. Variable-rate auto loans will be based on the prime lending rate prevailing at the time.

A long term loan is usually only offered when you buy a brand new car, and usually lasts for thirty six, forty eight, or sixty months. This type of loan involves a smaller monthly payment, but you end up paying more over the term of the loan. One problem with a long term loan is that, the value of your vehicle may drop well below what you actually having left to pay on the loan.

A short term car loan involves a higher monthly payment, but over the course of the loan you end up paying less. On a short term car loan, you will more often than not, be offered a lower rate of interest than what was available with the long term auto finance.

You can get a home equity car loan, by offering up your home as collateral. Normally, this type of car loan carries a higher rate of interest, but there are also some tax advantages available, that can offset the higher rate of interest.

If you are planning to buy a car and get confused by all the loan jargon, take some time to do your homework before you sign on the dotted line.

The interest on a loan is usually calculated on a flat rate or on a reducing balance interest rate which can be either daily, monthly, quarterly or annually. Stay away from attractive “flat interest rates”. The effective interest rate actually becomes higher with this method of calculation, rather than the normal methods like annual reducing balance or monthly reducing balance. The reason for this is that the principal amount doesn’t get reduced with EMI payments. So you end up paying more interest, apart from the loan amount.

On a ‘reducing balance’ interest rate, each interest payment is calculated as the previous balance multiplied by the annual interest for12 months. With each monthly payment made, the balance amount owed, becomes smaller and smaller. So the next payment is calculated including interest on the smaller balance.

Consumers with auto loans are finding it increasingly difficult to make payments, as the nations’ economic slowdown hits their credit availability. As a result, auto loan delinquencies are badly affecting lending companies.

According to a study conducted by Experian Automotive, auto loans amounting to nearly $25 billion are long overdue, with very little signs of pay-back capability among customers. Compared to 2007, auto financiers reported a 9% hike in loans of 30 days past due, and an 11% increase in 60 days past due. A marked decrease in the creditworthiness of people with outstanding payments, paints a dismal picture of the economic slowdown that American citizens are facing.

Lending companies now have a longer wait to get their loans repaid and have to stay afloat while they try to recover their money. According to Experian, 64 million auto loans worth $795 billion were outstanding in this year’s second quarter. Overall, 4.4 million loans were generated in the second quarter of 2008, compared to 5.1 million in 2007.

Scott Waldron, president of Experian Automotive, said that even a slight increase in delinquent loans, cripples the industry, accounting for hundreds of millions of dollars in unpaid debt. As lenders tighten their loan criteria, consumers have a tough time repaying loans, as there is a squeeze on credit as well.

If you have taken out a loan on a car or equipment, and are finding it difficult to pay the remaining amount at the end of the term, then a “lease buyout loan” is what you need. You can downsize the price of buying out your lease by negotiating smoothly and at least, be able to get the purchase-option fee reduced.

How a lease buyout loan works is like this: a financing company will pay out the remaining balance of your loan to the leasing company. You, in turn, will pay the financing company in monthly payments. You have a better chance of re-negotiating a lower lease buyout deal with a small financing company, rather than with a big company.

A lease buyout loan is very helpful to small businesses that need some equipment or a company vehicle. Through a lease, it is possible to acquire these assets at a low monthly rate, with an option to buy it, at the end of the term. As a borrower, to qualify for a lease buyout loan, you must have a track record of financial stability as well a good credit report.

Very often leasing is much cheaper than buying, which is why people opt for a lease instead of a loan. Leases are available for a fixed period of three to five year. There is a fixed purchase amount at the end of that period. You can buy out the lease at the end of the term; with a “lease buyout loan”. The leased equipment or car may be used as collateral.

FICO is your personal credit score, a tool used by credit agencies to assess your financial status. FICO stands for Fair Isaac Company, the organization that created this credit report score. FICO is the most trusted and the most frequently used score, especially by auto loan lenders. Other credit institutions such as leasing firms, rental firms, and mortgage firms, also use FICO ratings to make decisions about extending finance for a loan. 

Your FICO score can be anywhere between 300 and 850; the higher the score, the better your credit rating is. The score will be awarded according to your financial behavior and credit history. Very often, with a high FICO score, you can negotiate for a lower interest rate on a loan.

You can improve your FICO score by regularly paying your bills, being discretionary with credit card withdrawals and wiping your old debts clean. You need to be able to handle your credit well to enjoy a good financial profile.