Auto Loan Modification

After the great recession last year, many of the broker and lenders have ventured in to loan modification. While the real estate broker took over home modification and others tried in different lines.  Yes, these companies have sprung up in recent times. But when there is demand there lays the supply. When people started feeling the brunt of high interests and defaulted payments, they reached modification companies- as one of their best options.

While nowadays people must have been aware of the loan modification through Obama’s administration new home program, similarly auto loan is also a reality.  The “core” rule of loan modification remains the same as home modification- which is to make structural changes in reducing the remaining balance or reducing the interest rate and even extending the loan term period. Too good to be true but the truth is people are going for it and the numbers are increasing.

Qualifications for a loan modification

Americans who plan to purchase a vehicle and go for an auto loan  generally does not have enough income to buy a car at a shot. agree to pay monthly payments plus interest rate till the date when they pay all their installments. However, things don’t go as planned and people face a credit crunch due to which they are unable to make their payments which leads them to a situation wherein their car gets repossessed.

To the car from repossession, people for a loan modification. Applying for an auto loan modification is not simple. There are a set of qualifications which should match your situation to convince the loan modification service providers to conduct a loan modification procedure for you.

The borrower must be able to convince the loan modification company about their financial crisis and the causes for it. If suppose a person’s job is lost or he recently had a divorce, his financial condition might not be stable. Thus, this particular situations needs to be explained to loan modification service provider.

This also helps the modification companies to renegotiate the loan terms with the banks/ lenders. If the borrow is unable to explain his financial situation and the reasons behind the non-payment of installments then the loan modification companies might also reject the application. It is because they will not have an appropriate reason to convince banks to ignore repossession and lower the monthly payments.

It is always better to present your financial condition by revealing facts and figures. If you show numbers there is a higher chance of getting your loan modification application accepted. Collect all your bills and expenditures which happened in the months of non-payments of auto loan bills and take time to explain what exactly had happened.

Once the application for an auto loan modification is accepted by the modification service provider, do not expect it to be modified at a shot. Documentation process, negotiation with banks, etc take some time. Loan modification service provider takes anywhere between 3  to 5 weeks to complete the entire loan modification procedure. The borrower must have the patience to get their loan modified.

Stuck in auto loan soup!

After the recession many new cars are being introduced in U.S. market. With the outlook that money is flowing and consumer have purchasing power, thanks to the recovery of economic slowdown and some intelligent policies. People are going out there and buying their dream car, not only car but an American car. Yes, An Associated Press-GfK Poll shows that 38 percent favor U.S. vehicles while 33 percent prefer Asian brands, a significant improvement for U.S. automakers compared to four years ago.

“With all that said, the General Motors product line, the Ford product line, have just really been producing hit after hit,” said Gill, citing the Chevrolet Malibu and Camaro as current hot sellers. He says his sales are up 30 percent so far this year.

These are interesting numbers which confirms that both manufacturers and consumers see more interest in auto sector. While it was a nightmare last year where auto giants like General Motors had to be revived from bankruptcy. Many other manufacturers were just saving their face and hanging on for the survival.

However, while many of the Americans who had already opt for loans before the recession had a bad time managing their finances. Recently, Obama has introduced scheme to save homes under loan modification program. American should also be aware that auto loan can also be modified; to repay these huge payments.

Beware of Loan Sharks

Loan is divided in to two categorize secured and unsecured loans. Secured loans are granted against pledging your assets. And unsecured loans are monetary in kind and are not pledged on your assets for example credit card, personal loan etc. While the loans before where very unorganized and there some disadvantages; as the lender used to leverage borrowers for unacceptable interest rates which was often extended to exploiting the borrowers.  Such kinds of lenders were called as “loan shark”.

A loan shark is a person/entity that offers unsecured loan at a very high interest rate. Not only this, the loan can also invite pressure like personal threats and which may add to to violence. However, these loan sharks hardly exist now but it’s important to be aware of such predators.  Today, the term “loan shark” is vastly associated with organized criminal setup dominated by mafias. A shocking figure reveals that 165,000 to 200,000 people are indebted to loan sharks in the United Kingdom.

Loan has become a very integral part of anyone’s life, when high finance is required. One can’t keep away from taking loan but it’s important not to get caught in this wrong side; though loan shark operations are negligible. It is always important to research and check the credibility of lenders and your ability to pay back the loan in time and at certain rate of interest. What if you obtain a loan and realize that it’s difficult for you to make high interest payments. Wait; still there is a good option for you and that is to go for a loan modification. Loan modification helps you to bring the interest rates low and also to extend the loan time period.

Lending rates will go higher

It was due to recession, when Federal Reserve had lowered interest rates to help borrowers pay back their debts at low cost. However, with the improvement in economy, the lending rates are expected to increase. The cost of borrowing was quite low for the past many months due to the adverse effects of recession on American’s life.

Auto loans in March averaged about 4.4%, which was much lower than the 7.3% average back in March 2007, according to Edmunds.com, an automotive website. The lending rates will remain low for a quite a while as demand for auto loans is much lower than its supply. However, the interest rates will not remain low forever. It will increase with the improvement in market.

“When recession was at its peak, it was easier for us to negotiate loan terms with banks and other financial institutions/ lenders”. “It was easier to convince them that people are unable to pay their installments/ EMIs due to loss of job, income cuts, etc. However, with the rise in economy, people are getting their jobs back and banks can be rigid in changes the terms of loans. Hence, I advise to the people who require loan modification services to hurry up and sign up instantly for modification service. Recession recovery will take this full year.

Lenders hate wasting more time and money on “bad” deals and prefer to get constructive proposals that make sense. Hence, negotiation and renegotiation becomes easier, especially at times of recession. We understand the things people have been through during this difficult phase of recession hit economy. This is the reason why we commit ourselves to provide the best deal for you by lowering your monthly auto payments.

Obama’s loan modification is working and spreading respite!

After hit by recession and the economic downturn, it was becoming difficult for the homeowners to pay hefty loan payments. Apart from dealing with other personal finances, Americans were suffering from deferred payments and the possibility of foreclosure. In order to grant some relief to the citizens, “Loan Modification Program” is introduced to provide some respite. This plan which is worth $75 billion has saved many houses owners that were qualified for this plan set according to government guidelines.

Well, but how did the “Obama’s Loan Modification Plan” made the difference and proved as a good option? The answer is, when you qualify for the exemption; the interest rates of existing loan were brought down to an astounding low rate of only 2% and with the option of extending loan term to nearly 40 years. In some cases principal balance was excused where the home had lost huge value incurring in to loss.

The plan is a structural change and modification to their already existence mortgages. Loan modification program turned out to be ray of light, whereby helping the homeowners to keep their house. However, this affordability plan has typical approval guidelines to qualify. The clue is to know and understand these specific guidelines and strategies how one can use the information, to tune in ones application.

Obama’s 2% Loan Modification Plan made the interest rates low, you could do the same for your auto loan too.

Smart people spend on right things

It becomes very difficult to manage your life if your expenses become more than your disposable income. It usually leads to more number of debts, non-payment of loans resulting in repossessions and foreclosures, bankruptcy, etc. It significantly increases your mental burden with unpaid bills if not paid on time, increases the bill amount with penalties and late fee charges.

In times of financial crisis, one must take a smart decision to go for an auto loan modification which helps reduce the monthly amount to be paid to banks. The loan modification service providers are specialists and they negotiate/ renegotiate your loan terms with your respective banks/ financial institutions on behalf of you.

While there are no universal rules, our experience shows that the earlier you start the process the better your chances of negotiating a successful transaction.  Lenders hate wasting more time and money on “bad” deals and prefer to get constructive proposals that make sense. It is never too early to start your modification process.

Unlike home loans, obtaining a new car loan may be very challenging after a repossession, which stays on your credit report for a minimum of seven years. Avoid the pitfalls of “post-repo” car shopping by keeping the car you have and protecting your good name. Know Your Options. Typical options include vehicle refinancing, sale, trade up, equity recapture or loan modification.

Additionally, report contains up-to-date information about your vehicle including current market value (based on real time data from auctions around the country) and even forecasted depreciation for the next 12, 24 and 36 months based on actual market dynamics. Since every situation is different, it is impossible to suggest which option is best suited for your particular needs. Obtaining your own Options Report™ is essential to understanding your choices before attempting any loan actions.

Thus, it is up to you to decide where you want to spend your money. Smart people always spend on right things.

Don’t let your car shed your reputation

In 2010 more and more people will opt for all kinds of loan from home to estate to auto. While the economic crisis has just brushed away the sinking market, it’s time to invest wisely.  And as Obama keeps some of us sailing through our past hefty home loans through his “Mortgage Modification Program,” it’s important that you don’t lose your FICO scores in other acquired loans such as Auto.

FICO scores represent the credit worthiness of a person and his or her position to pay back the debts. Credit scores are calculated to gauge the risk of default by considering and taking in account of various factors of a person’s financial history. However, the actual formulae to understand the credit score is highly guarded, FICO has revealed the mechanism and components with which they provide weight age for each category;  where the highest component  of FICO  i.e. 35% includes card or automobile loan.

Auto loans are quite risky for people who have low credit scores. A person with low credit score when applies for auto loan would qualify for a higher interest rate compared to a person with good scored card. “It’s not only about money but the ability to manage it, and more importantly to have a reputation via financial stability.

“If you are in the midst of a bad loan or hit by bad credit score, you can still act smart and go for loan modification. Where the lender not only gives you options and guidance but also examines a full research report on your status.

What’s CARD Act?

“The Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 is a federal law passed by the United States Congress and signed by President Barack Obama on May 22, 2009”.                         Source:  Wikipedia

The CARD Act is approved to protect card holders from the unfair practices, sudden hikes in interest rates and changes in terms and conditions usually done by credit card companies. Following is the extract summary of the bill:

• Credit card holders must be given protection against sudden hike in interest rates. A minimum 45 days notice must be provided to all card holders for any changes in interest rate so that they don’t feel cheated.

• Regular payers must not be penalized by credit card companies. If a customer is regularly paying all his/ her bills on time for six months continuously, they must be charged their previous interest rate and not the hiked rate.

• Credit card holders must be informed 21 days before the due date of their bill payments to avoid penalties.

• Credit card companies usually mention some confusing terms such as ‘fixed rate’ and ‘prime rate’ as it is misleading for credit card holders. It is important that they set proper definitions of those terms.

• The CARD act also gives the right to card holders to set a credit limit for their card. This will avoid over-spending and thus credit card companies will not be able to charge for non-payment.

• Fair allotment of payments must be done by the credit card companies. The debts which have a higher interest rate must be cleared off first and then other bills.

• The act also limits the amount of ‘over-the-limit’ fees that are usually highly charged by credit card companies to gain profit.

• Vulnerable consumers will be protected from fee-heavy subprime credit cards.

• Under this act, congress must collect the data on industry profits of credit card industry and present every year.

• The credit card holders will have the right to get an explanation of the minimum amount he/she has to pay against the debts and interest charges.

• A credit card cannot be issued to teenagers i.e. below 21 years or if issued they must present a co-signer who can give a guarantee to repay the debts.

• Banks must provide a reason for participating on college campuses and at university-themed events.

Under the CARD act people will get a chance to improve/ raise their credit score. The rules under this act automatically helps card holders to pay timely as they will be more aware of their limits, interest rates, etc and they can avoid paying penalties resulting in improvement in credit score. A high credit score in itself has many benefits for availing loans. Thus, you can get a loan at a lower interest rate as you would have paid off all your debts on time.

How to lessen your Car Loan payments?

Automobile is now categorized under basic necessities as life without it is unimaginable. We need a car for almost every work we do in our daily routine. However the current economic climate doesn’t give us the freedom to purchase a vehicle without availing for an auto loan.

All are not ready to pay the high interest rates and monthly payments for their vehicle. And if they miss out on timely payments then banks may even send them a notice for repossession. Repossession affects your credit score badly and remains there for almost seven years. The best thing you can do here is go for an auto loan modification.

It is never too early to start your modification process. Unlike home loans, obtaining a new car loan may be very challenging after a repossession, which stays on your credit report for a minimum of seven years. Avoid the pitfalls of “post-repo” car shopping by keeping the car you have and protecting your good name.