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A Look Back At Housing 2020: Relief, Reality, And Rationality

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National Geographic has a series called Seconds From Disaster that, according to it’s website, uses “ Advanced computer graphics, forensic science, eyewitness accounts, interviews with experts, archival footage and re-enactments [to] piece together in great detail the events that led to some of the biggest disasters of modern time.” My last few posts remind me of the series; the housing market in the United States really is seconds from disaster at least figuratively. What can stop this from becoming a disaster of government run and rationed housing? The answer is relief, reality, and rationality.

Relief

It’s simple. When you tell people they can’t go to restaurants and bars those businesses can’t make any money and they lay off employees. When those employees don’t get a paycheck they can’t pay rent. Assuming that this intervention – shutting down the economy – is the right thing to do, wouldn’t it make sense to help the people most impacted by replacing some or all of that lost income?

Instead, what government has done is ban eviction. That makes no sense. If people needed food, you wouldn’t advise the suspension of shoplifting laws so people could help themselves to groceries at the local market, you’d get them cash for groceries or you would distribute them to people in need. As I’ve already pointed out, eviction bans are a time bomb of unpaid rent.

Government can solve this problem by having lenders give fast cash to housing providers who have residents with unpaid rent. It would be a forgivable loan and could be settled up in the months ahead with rent rolls and balance sheets submitted and a promise not to try and collect back rent if a loan is made. The wrong thing to do would be to have government distribute the relief; government isn’t set up to give out money, banks are.

Reality

Marriages, car loans, and businesses arrangements sometimes fail. Courts exist to adjudicate disputes that arise when transactions don’t work out. Eviction is no different. The vast majority of rental relationships between housing providers and their customers work out fine. Sometimes there is friction. Sometimes the housing provider is a bad actor. Sometimes the resident is. Housing providers don’t make money by evicting people any more than a bar makes money by throwing out its customers.

Contrary to the hype, eviction is rare in the United States and when it happens it is very expensive, complicated, and usually resolved without a sheriff putting the contents of a rental unit on the sidewalk. I did an analysis of hyped eviction data from Seattle and the actual removals in one year were vanishingly small, just .7 percent of all rental housing. How many of these 1,200 removals were because of bad actors? How many were the product of lost jobs? We don’t know because that data isn’t tracked. What’s important is eliminating the causes of eviction; especially poverty, mental health issues, and addiction all issues that when combined do lead to serious issues that impact housing. Making eviction more difficult helps eviction defense attorneys not residents short on cash or having complex problems.

Rationality

Maybe it’s not the best or the right term, but most human beings are rational actors in any economy. If prices go up, people find substitutes for products with higher prices. If they can’t find a substitute, they make due and change their lives around to get what they need. At the same time, producers strive to get a product to market that meets consumer demand at a lower price. This isn’t ideology it is how the world works. Price sends important signals to people on how to behave, innovate, challenge the status quo, and propose changes. Price isn’t a bad thing it is our best friend.

When housing prices go up, yes, it is because there isn’t enough. I’ve heard very smart people – much smarter than me – dispute this. “It is much more complicated than that,” they say. Well, it isn’t. It is that simple. Smart people don’t like three piece puzzles or crosswords with simple clues. Why go to Harvard or Yale or start a lab at Princeton if housing problems were so simple I could solve them. It’s this kind of lens through which government and experts survey the “housing crisis.”

Avoiding Disaster

A loftier image I often use is that of the Trojan horse, one that has become a trope for ignoring the obvious. Take people’s income away for a good reason then replace that income. Want to avoid the consequences of poverty – like bad credit, evictions, and housing cost burden – work to eliminate poverty. And if you want people to solve problems creatively, get out of their way; they can usually figure out the solution and if you can help, do it.

The fact that housing is a commodity is not the problem. The housing problem is worsened when government and non-profits decide to get in the way of buyers and sellers of housing with rules intended to protect consumers but instead become a proxy for incumbents who see their equity rise with limited supply. We should not subsidize that self imposed scarcity; instead we should encourage more housing everywhere of all kinds for people of all levels of income.

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Are No Down Payment Auto Loans Bad?

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Qualifying for a zero-down car deal likely means having good credit and qualifying income. However, if you’re a bad credit borrower, you’d be hard-pressed to qualify for an auto loan without a down payment. Besides – down payments are typically a great idea for borrowers across all credit ranges!

Is Zero Down a Bad Idea?

Opting for a zero-down car loan isn’t a bad thing – but with a lower credit score, it’s not likely to happen. Most bad credit auto lenders require at least $1,000 down or that you bring at least 10% of the vehicle’s selling price to the table. Down payments are a requirement of most subprime (bad credit) lenders, and it’s often called having “skin in the game.”

Are No Down Payment Car Loans Bad?Research shows that borrowers with skin in the game are more likely to complete a car loan. To a lender, a borrower that brings a down payment to a deal is more likely to make their payments, complete the loan, and avoid default. It also means a higher likelihood of qualifying for the auto loan.

Down payments can widen your vehicle choices since they allow you to get into more expensive cars that are outside your preapproval amount. If you’re approved for a $15,000 auto loan, but can’t find anything for your situation, adding a larger down payment amount may open up more vehicle choices. In this scenario, if you have your heart set on an $18,000 vehicle, coming in with a $3,000 down payment could put it in your price range.

More Down Payment Benefits

Auto loans are typically simple interest loans, meaning you’re charged interest on the principal of your loan. If you combine a large loan amount, a high interest rate, and a long term, it can mean paying more than your vehicle is worth.

Remember this:

High loan amount + High interest rate + Long loan term = Paying more interest charges. A down payment can combat this, and help save you money.

For borrowers with poor credit, a high interest rate could mean paying more for your auto loan – but a down payment can soften the blow.

Down payments can help protect you from negative equity, too. Negative equity is when you owe more on the auto loan than what the car is valued at. Vehicles are depreciating assets, meaning they lose value over time, and that never stops.

Negative equity causes problems for borrowers when it’s time to sell the vehicle. If you owe thousands more on the loan than what you can sell the car for, you may not be able to sell the car. You must pay off the loan before you can transfer vehicle ownership.

If you finance a vehicle for $10,000, that car may not be worth $10,000 in a year. Most used vehicles lose around 10% to 15% of their value each year. Brand new vehicles can see around a 20% drop in value within the first 12 months of ownership! Having a down payment can help keep your auto loan in an equity position, which means you’re likely to have fewer issues selling the car if you need to.

How Much Should Save for a Down Payment?

Your down payment requirement largely depends on your credit score and the size of the loan you’re applying for. Like we mentioned, saving at least $1,000 is probably a good starting point if your credit score is less than perfect. But if the vehicle you want is expensive, it could mean having to shell out more cash than that to qualify for the loan.

How much you need to save can also depend on your monthly budget. If you want a specific vehicle but the monthly payments are too high, you can put more cash down to lower your payment and make the loan work for your situation. You can use our auto loan calculator to estimate how much you may need to put down to get your car payment where you want.

You also don’t need cold, hard cash to meet a down payment requirement. Trade-ins with equity can completely satisfy a down payment requirement if there’s enough value, or you can use a combination of cash and your trade-in. If you have a car you’d like to trade in, research its estimated value on sites such as NADAguides and Kelley Blue Book so you can see what a dealer may offer.

The bottom line with down payments is you should save as much as you comfortably can afford. Even if you qualify for a zero-down car loan, putting cash down on your next auto loan is only going to bring you benefits in the long run.

Where Can I Find Bad Credit Car Loans?

If your income or credit score isn’t quite up to snuff, then you can expect to need some cash down to qualify for vehicle financing. You may also need to work with the right auto lender to get the vehicle financing you need.

With a lower credit score, not only are you faced with a down payment requirement but also the struggle of having to find an auto lender that can work with poor credit. Most traditional auto lenders prefer borrowers with good credit. If your credit score is rough around the edges, then applying for vehicle financing through a special finance dealership could be the way to go.

Special finance dealerships are signed up with subprime lenders. These lenders specialize in assisting borrowers with credit challenges and look at more than your credit reports and score. They do require a down payment, but they can often work around tough credit circumstances.

At Auto Credit Express, we’ve amassed a nationwide network of special finance dealerships and we want to help you find one in your local area. To get matched to a dealer near you that has bad credit lending options, fill out our free auto loan request form.

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19 Auto Loans For Bad Credit Drivers (2021)

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Bad credit auto loans with reasonable interest rates can be difficult to find. While it may be hard to secure an auto loan with poor credit, it’s not impossible. Many auto lenders specialize in providing auto loans for bad credit drivers.

In this review, we’ll list several auto loan providers that offer loans for drivers with low credit, no credit, and bankruptcies. We’ll also provide tips for how to apply for a loan when you have bad credit and how to improve your credit score. While the lowest rates with the best auto loan providers may not be available to those with poor credit, a low credit score doesn’t mean a reasonable car loan is impossible to find. 

You can see bad credit auto loan offers from multiple lenders using AutoCreditExpress.com.

 

In this article:

Can You Get A Car Loan With Horrible Credit?

Yes. Even with horrible credit, it is possible to get a car loan. It usually helps if you have a steady income and/or have someone with good credit cosign your loan.

It may be difficult to find a bad credit car loan with a low interest rate if your credit score is under 600. When you look for auto financing, seek out lenders that offer prequalification. Prequalification allows you to see interest rate offers without the loan company performing a hard credit check. A hard credit check can further hurt your credit score.

Be prepared to face higher interest rates if you have poor credit. However, you can reduce the amount of interest you will pay on a bad credit auto loan if you place a bigger down payment or request a shorter loan payoff period.

 


 

19 Auto Loans For Bad Credit Drivers

The list below names 19 auto loan providers that offer loans to drivers with bankruptcies and/or poor FICO credit scores. Several of the companies listed below even specialize in bad credit auto loans. Which lender will work best for you depends on your specific circumstances, but this list is a good place to begin your search.

Don’t hesitate to submit loan applications to companies that allow you to prequalify without a hard credit check. You should only agree to a hard credit check once you plan to accept the loan offer (and after comparing prequalification offers).

Auto Loan Provider

Minimum Credit Score Required

Minimum Annual Income Required

Clearlane580$21,600
Auto Approve580$18,000
myAutoloan.com575$21,000
RateGenius550Not specified
Tresl500Not specified
Prestige FinancialNo minimum credit$27,000
VroomNo minimum credit$21,600
Auto Credit ExpressNo minimum credit$18,000
Capital OneNo minimum credit$18,000
CarvanaNo minimum credit$4,00
New RoadsNo minimum creditNot specified
Credit Acceptance CorpNo minimum creditNot specified
DrivetimeNo minimum creditNot specified
AutopayNo minimum creditNot specified
LightstreamNo minimum creditNot specified
CarmaxNo minimum creditNot specified
CarZingNo minimum creditNot specified
ByriderNo minimum creditNot specified
RoadLoansNo minimum creditNot specified
 

 


 

Applying For A Bad Credit Auto Loan

Applying for auto financing used to take place primarily in banks or at the car dealership. Today, most companies have online applications, making it easy to request and compare several auto loans at a time. You can also use a service like AutoCreditExpress.com, which lets you see personalized loan offers from multiple lenders at once. However, it’s still a good idea to apply for your auto loan at your local bank or credit union in addition to searching online.

Look for companies that offer a preapproval process that does not require a hard credit check. What this means is that you will self-report your FICO score and income information to the lender. You will then be made a provisional auto loan offer. This is not an official offer, and your terms may not be finalized until after a hard credit check. Do not submit to a hard credit check unless you are fairly confident you will accept the loan offer. You want to limit the number of hard credit checks as much as possible.

While applying, you will likely need to supply potential lenders with information such as:

  • Personal details like your name, address, age, and Social Security number
  • Gross annual income information
  • Vehicle information like model, age, mileage, and vehicle identification number (VIN)

Before you finalize your auto loan, you may also be required to supply copies of your:

  • Driver’s license
  • Recent pay stubs
  • Personal references

Your credit score is the most important factor that determines your auto loan interest rate. The tables below show the average auto loan rates by credit score for new and used car purchases, according to a 2020 Experian State of the Auto Finance Market report.

Average Auto Loan Rates For New Car Purchases
Credit ScoreAverage Auto Loan Rate
300 – 50013.97%
501 – 60011.33%
601 – 6607.14%
661 – 7804.21%
781 – 8503.24%
 
Average Auto Loan Rates For Used Car Purchases
Credit ScoreAverage Auto Loan Rate
300 – 50020.67%
501 – 60017.78%
601 – 66011.41%
661 – 7806.05%
781 – 8504.08%
 

As you can see from the tables above, auto loan interest rates increase steeply for borrowers with credit scores of 660 and below. You will also notice that interest rates for new car purchases tend to be lower than those for used car purchases. However, if money is tight, you may still save more by purchasing a used car, though you will pay a higher interest rate.

The best way to get a lower interest rate if you have poor credit is to add a cosigner with good credit to your loan. A cosigner is someone who accepts responsibility for the loan and will be on the hook with collections if you miss any payments.

While it may not lower your interest rate, placing a larger down payment or opting for a higher monthly payment can help you save money on a bad credit auto loan. A shorter loan term may also reduce overall costs. The more quickly you pay off your auto loan, the less interest you will ultimately accumulate.

 


 

Tips For Improving Your Credit Score

A good credit score is vital to saving money and has benefits beyond a low interest rate on your auto loan. In several states, your credit history may also be used to determine your auto insurance premium. If you have bad credit, you should work to improve it as soon as possible. However, raising your credit score cannot be accomplished overnight.

Some ways to improve your credit score include:

  • Open a credit card: Don’t let your credit balance get too high, and pay off your bill in full each month. This shows lenders that you are dependable and can be trusted to make your loan payments.
  • Increase your credit limits: The amount of credit you’re using affects your score. For example, if you had a credit card with a limit of $1,000 and had a balance of $500, you’d be using 50 percent of your credit. However, if you asked your bank to increase your limit to $2,000, you’d only be using 25 percent of your credit. This can raise your score.
  • Debt consolidation: Try to consolidate your debts into one place with the lowest interest rates possible.
  • Pay down existing debt: This will save you money in the long run and help your credit score.
  • Wait: Certain negative factors will fall off your report after a number of years. Hard credit checks stop affecting your score after two years. Late payments, collections, and bankruptcies fall off your report after seven years.
  • Credit monitoring: Many of the major credit bureaus, such as Experian, Transunion, and Equifax, offer credit monitoring and tools for improving your credit. Take advantage of these programs.
  • Check your report: Request a copy of your own credit report and look for errors or outstanding debts you may have forgotten about.

If you initially take out a bad credit auto loan but later improve your credit score, be sure to consider auto loan refinancing. This involves taking a new loan with better interest rates to pay off the existing loan. You may want to refinance your auto loan after your credit score moves above 660 and 780.

To start comparing auto loans for bad credit from multiple lenders, visit AutoCreditExpress.com.

 

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Is it OK to Refinance a Vehicle Multiple Times?

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There’s no limit on how many times you can refinance your car loan, but it may not be a good idea to do it more than once. We cover how refinancing works, and some advice on refinancing your auto loan multiple times.

Refinancing an Auto Loan More Than Once

It certainly is possible to refinance your car loan more than once, since there’s no rule that says otherwise. However, whether or not it’s a good idea to refinance multiple times depends on how you do it. And, you may not qualify for refinancing again once you’ve already done it.

Most of the time, borrowers refinance their car loans to get a lower monthly payment. This is done by either lowering your interest rate or lengthening your loan term (sometimes both). Qualifying for a lower interest rate is a great way to save money on your loan, but simply extending your loan term generally isn’t a good idea without qualifying for a lower interest rate.

Is it OK to Refinance a Car Multiple Times?This is especially true if you refinance to a longer loan term more than once. Extending your auto loan multiple times draws out how long you have a car payment, which increases your interest charges. Auto loans are typically simple interest loans, so your interest charges add up based on your auto loan balance.

If you always extend your loan, you’re always going to rack up more interest charges – the higher your interest rate, the more you pay. This can lead to years of paying off the same vehicle and possibly paying more for it than it’s worth. If you’ve already refinanced your car and extended your loan term, then doing it again means paying more for the same vehicle.

Qualifying for Auto Refinancing Multiple Times

The most difficult part of getting approved for refinancing can be having a vehicle that qualifies. Most refinance lenders require that the vehicle be less than 10 years old and have less than 100,000 miles on it. If your vehicle is older, and/or you drive a lot, refinancing may not be possible – it only gets harder as time goes on and the vehicle depreciates.

If you’ve qualified for refinancing in the past and want to try again, it could be more difficult the second time around. A lender may see that you’ve already refinanced your auto loan and may be hesitant to approve you again. Refinancing the same car loan multiple times could be a sign of overextension – your auto loan may be too big for you to chew and they may take notice.

If you’re not sure that refinancing your vehicle for the second time is possible or you’re concerned you don’t qualify, trading in the car for a more manageable loan could be the next step.

Trading In a Challenging Auto Loan

A very common way to upgrade a vehicle or get a more manageable car loan payment is by trading it in for something more affordable. Most dealerships accept trade-ins, and the money you receive from a dealer could be applied to your next vehicle’s down payment to lower the selling price.

For a trade-in to help you with your next car purchase, it needs to have equity. Equity is when you owe less on the loan than what the vehicle is worth. The actual cash value (ACV) of your trade-in is determined by the dealer after they appraise your vehicle. You can’t find the ACV ahead of time, but you can look up estimated values on websites such as Kelley Blue Book or NADAguides. Once you have an estimated value of your vehicle, compare it to your current loan balance to find out if there’s equity in your car.

If you find that your loan balance is higher than a possible trade-in value, you have negative equity – also called being upside-down. An auto loan in a negative equity position doesn’t help you lower the selling price of your next vehicle.

Additionally, it can be harder to remove the lien from the title in this position, because you have to finish paying your loan before you can trade-in your car. Without equity, you have to come up with the money to pay your lender out of pocket. Often you can combine cash with trade-in equity to come up with the amount you need. However, if you’re unable to do this, you may be able to roll over the negative equity onto your next loan.

Finding a dealership that can take your trade-in may be somewhat easy, even if it requires a little legwork. As we mentioned, most dealers accept trade-ins, and they prep them to be resold on their lots. It’s a good idea to call around to dealerships in your area and get some estimates over the phone, and we recommend calling at least one franchised dealership that sells your vehicle’s make, since you may get a higher offer from them.

Finding a Resources for Your Situation

Finding a lender that can refinance your car loan might prove difficult, especially if you’ve already refinanced before. If you’d like some more resources and information on refinancing a car loan, we want to help you find those here.

Even if most dealerships do accept trade-ins, you may not always be able to work with their lenders. It’s not always easy locating a dealership that can assist with bad credit situations, and qualifying for refinancing can be hard with poor credit, too.

There are dealers that are signed up with bad credit lenders, but they don’t always stick out from the crowd. Here at Auto Credit Express, we aim to make it easier for borrowers to find dealerships that specialize in helping those with poor credit. To get matched to a dealer in your area with the lender resources for tough credit situations, fill out our free auto loan request form.

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