Loans, Insurance & credit card information

Here is the truth of the matter not everyone gets approved for car loans with very bad credit.

Here’s a typical question from a bad credit car loans applicant, “I have bad credit and I have been trying to get a car for awhile. Every dealer that I’ve been to wants a big down payment or they can’t help me. If that’s the case, why do they say no one gets turned down?”

Here’s the short answer: not everybody qualifies for a car loans for very bad credit. As a case in point, here are some of the basic requirements for this type of loan:

You must gross at least $1,500 in monthly income if your FICO score is below 625. All bankruptcies must be discharged. (Some lenders will consider a Chapter 13 that is 2/3 completed with an order to incur additional debt.) No repossessions in the last year unless included in a bankruptcy. Loans are for automobile purchases from authorized licensed dealer partners. You must be a U.S. resident at least 18 years of age. If you can’t pass these requirements, chances are you will not qualify for car loans for very bad credit. However, just because you meet these requirements does not guarantee that you’ll get approved.

Bad credit car loan lenders will also look at your debt to income ratio. If your monthly bills exceed 50% of your monthly income, then most lenders will not allow you to take on additional debt. Lenders will also consider what is known as payment to income. Most lenders will not allow your car payment to exceed 20% of your monthly income.

Car loans for very bad credit lenders also look at the source of your income. If you are a W-2 employee with multiple years at the same job, this works in your favor. If you are self-employed or have less than a year on the job, getting a lender to approve your application could prove to be more difficult.

But even if you don’t qualify for one of the car loans for very bad credit, don’t think that you’ll never qualify for this type of loan. Many credit situations are temporary. Not enough time on the job can be cured by – you guessed it – more time on the job. Debt to income problems can be solved with either less debt (paying off your bills) or more income (changing jobs or getting a raise) and self-employment issues can be resolved with better record keeping and having a tax professional prepare your income taxes. This means that, despite a temporary setback, what is holding you back now could very well change in six months or a year.

Your first step in reestablishing your credit is to deal with a web site that deals with customers honestly. These sites never mislead their customers by using phrases like “all applications accepted” or “guaranteed approval”. The best of them really have helped thousands of customers with bad credit get either a new car or a dependable, safe, low-mileage used car through our affiliate dealers. You’ll know this because the site is up front about the bad credit buying process and furnishes applicants with the tools – loan calculators and online resources – to make informed choices.

When you apply for a home equity loan, lenders consider your creditworthiness when deciding whether or not to extend a loan. Your creditworthiness is assessed based on three things: credit history, income, and loan-to-value ratio.

Credit History

As with any loan, your credit history will have a major effect on home equity loan availability and loan interest rates. Fortunately, qualifying for financing on a home you already own is much easier than qualifying for a new home loan. If you have good credit, you should have no trouble qualifying for a home equity loan. You should also be able to obtain a relatively good rate. If you have bad credit, you should still be able to obtain a home equity loan, but your rate will probably be a bit higher. Before applying for a home equity loan, take time to pull your credit report. If possible, improve your credit rating by removing mistakes and old debt.

Income

Even though the equity that has built up in your home belongs to you, lenders will still want to make sure that you can pay back any amount that you borrow. To determine your ability to repay, lenders will assess your monthly income and your total debt-to-income ratio. (Debt-to-income ratio is a term used to describe how much of your monthly income goes towards paying your mortgage, credit card debt, loan installments, and other financial obligations, including the home equity loan for which you are applying.) Most lenders will want to make sure that your total debt does not exceed 38 percent of your monthly income.

Loan-to-Value

The loan-to-value ratio is the amount you owe on your house versus the amount your house is worth. For example, if your house is worth $100,000 and you still owe $70,000, your loan-to-value ratio is 70 percent. When you get a home equity loan, the value of your home is re-assessed. The lender will add your current mortgage balance to the requested home equity loan amount, and divide the sum by your home’s current value. The final amount is the new loan-to-value ratio. Many lenders want to keep this amount below 80 percent. However, some lenders are willing to loan you 100 percent of your home’s value or more. Here is a list of recommended Home Equity Lenders online. It’s important to use a reputable lender online to make sure your personal information is secure.

Today, those with damaged credit have more opportunities to borrow to buy a house than they have had in the past. There are many lenders that specialize in what is often referred to as a bad credit home purchase loan. However, as with many things in life, just because you can, doesn’t mean you should. Indeed, loan availability could be considered a small part of the decision of whether or not you should purchase a home at this time.

What You Can Do

To help you in deciding whether or not you should purchase a home, the first step should be to run the numbers to find out what type of mortgage rates you may be eligible for and how much it would cost you to buy now. It’s better to do this before speaking with any lender offering bad credit purchase loans.

The first number you’ll explore is your credit rating, using information from one or more of the major credit reporting agencies. Among the best known is Trans Union, Equifax, and Experian. Then, you’ll need to consider the loan-to-value ratio, or the relationship between how much you want to borrow and the worth of the house. Your debt-to-income ratio, or how much your total debts are in comparison with your current income, is another factor that will influence the type and rate of loan that is available to you.

What You Should Do

You can use the numbers you collected above to determine what terms and rates may generally apply to your financial situation and, with the help of a mortgage calculator, make an estimate of what a loan for a given amount will cost you monthly. There are a variety of other factors, such as points and closing costs that will affect that number, but for initial decision making as to whether or not you should purchase a home at this point in time, it is useful.

There are many lenders willing to offer you a loan, even if your monthly mortgage payment surpasses the 30% of your income that is typically recommended. That does not make it a good idea. There are other expenses involved in home ownership that you’ll need to factor in, such as repairs and maintenance. Buying too soon could place an undue and unnecessary financial on your shoulders.

Consider and compare the advantages to waiting. You’ll have time to shop for the best bad credit home purchase loan possible. You’ll be able to save for a bigger down payment and continue to improve your credit rating. All of these actions may translate into better rates and terms, which will allow you to pay less in the end.

When someone applies for a loan with a financial institution, they are subject to a credit check. If they have a poor credit record or don’t have a sufficient credit history, their loan application may be denied. In this situation, they may turn to a friend or family member to cosign the loan for them.

A cosigner basically submits his or her own credit record for review along with that of the applicant. If the loan is approved, the cosigner becomes responsible for paying back the loan if the applicant defaults.

Needless to say, becoming a cosigner requires serious consideration because it puts your credit record and financial health at risk should the loan not be paid back. While it might be nice to help out a friend or family member, deciding to cosign should primarily be a business decision. Try to leave emotions out of it. Your main concern is whether the borrower will be able to pay back the loan.

First, be aware that the loan is going to show up on your credit report. This could affect your ability to be approved for your own loan later since the loan you co-signed for may be used to calculate your debt-to-income ratio. It can also affect the interest rate at which you can receive future loans.

If you decide to become a cosigner, do so with the understanding that the borrower will attempt to refinance the loan without you after a certain number of on-time payments. The more money you cosign for, the longer you can expect to be a part of that loan.

Since your credit rating is at risk, it’s important to have the loan set up so that you can access the account information. This will allow you to make sure that the loan is current as often as you want. Make sure the lender will inform you of any late payments or non-payments as soon as they happen. All too often, cosigners aren’t aware that there’s a problem with the loan until it has already affected their credit.

Cosigning a loan for a friend or family member can also put your relationship at risk. Nothing can sour a relationship faster than money issues. It’s important for a cosigner to consider the circumstances under which the borrower needs a loan in the first place. If it’s due to money management issues or credit card abuse, you aren’t going to do them or yourself any favors by cosigning. However, if it’s because they’re just starting out or it’s due to a life-changing event, you may want to consider becoming their cosigner.

To minimize your risk as a cosigner, don’t make a habit of it. Others may ask, but you should be firm and tell them you’ve got your own financial health to worry about. If you do find yourself facing another request down the road, consider it on its own merits. Don’t be swayed by your experience with the previous one. If you think your credit record and financial health will face unacceptable damage if the borrower doesn’t repay the loan, don’t cosign for it. While it may be very difficult to say no, it’s not as difficult as repairing your credit from someone else’s damage.

If you do cosign, ask the borrower to provide you with regular proof that the payments are being made on time. To further reduce your risk as a cosigner, insist that the borrower purchase personal loan insurance. Such insurance can cover loan payments for a certain amount of time due to unemployment, illness, or death.

Cosigning a loan for someone is much more than just signing your name. You’re putting your good credit and financial health on the line for the borrower. It’s very important that you carefully review the borrower’s need for the money as well as his or her spending habits. If there are too many other debts or they’re trying to live beyond their means, just say no.

There are times when being a cosigner for a friend or family member is the right thing to do. Only you can make that decision. If you decide to go through with it, make sure you can afford the cost of any missed payments and that the lender is going to keep you informed of the payment status of the loan.

For those of us in the loan modification business, lower interest rates greatly impact our business in a positive way. In this article I am going to explain how lower rates help our chances of success in the loan modification business.

So what do lower interest rates mean in the loan business? When rates drop significantly those of in the loan business call this a “refi boom”.

Is there such a thing as a “loan modification boom”? Well, I think there is. When lenders agree to modify hurting borrowers into a new loan, often the lender will offer the borrower a 30 year fixed rate loan at current market rates (regardless of the borrower’s credit scores, etc.). So when current interest rates go down, the modified 30 year rate offered will also go down.

So what does this mean? In a refinance boom, more borrowers will qualify based on the lower payments being offered at a lower rate.

So similarly in a loan modification boom, lower rates will also allow more borrowers to qualify for a loan modification.

Consider IndyMac Federal’s loan modification guidelines in which a 38% debt to income ratio (DTI) is used as a target for affordability. This 38% DTI ratio looks at the borrower’s current principal, interest, taxes and insurance payment and compares that to monthly income . With lower rates and lower payments, more of our customers who are facing hardships will qualify for a loan modification.

Recall that the FDIC took over IndyMac Bank earlier this year and IndyMac Bank made a lot of loans that are now in default or close to going into default. IndyMac Federal (the new name the Bank is now operating under FDIC control) is contacting its customers and is offering 30 year fixed rate mortgages permanently capped at the current Freddie Mac survey rate for conforming mortgages). This Freddie Mac Survey rate moves with the market so when interest rates go down so does this Freddie Mac Survey Rate.

So when you are marketing your services to potential loan modification clients, let them know that rates have dropped and their chances of a successful loan modification are going up if they act now.