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Rent to Own Cars vs. Subprime Auto Loans

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Sometimes, when you need a car, you need one now. But borrowers with poor credit scores find themselves hitting speed bumps or have trouble finding a lender that gives them the time of day. Rent to own vehicles could be a temporary solution if you need a car with bad credit, while subprime auto loans can repair your credit.

Bad Credit and Car Buying Options

Rent to Own Cars vs. Subprime Car LoansWhen you have bad credit, it can feel like your vehicle options are limited, but that’s not always true! If you have income and can meet a lender’s requirements, then there are ways to get the transportation you need.

Many people consider rent to own cars as a quick solution. However, these agreements tend to be a Band-Aid on a larger problem: bad credit.

Rent to own vehicles aren’t your only option, though. If you’re concerned about credit repair and you want to leave bad credit behind, then a subprime auto loan could be your answer.

Rent to Own Cars

If you want a car quickly and your credit score isn’t exactly stellar, then a rent to own vehicle could be for you. These rental agreements are usually pretty easy to get into because the dealerships often don’t check your credit reports or score. Rent to own cars are available at certain dealerships with in-house financing, which means the dealer and lender are one in the same.

Rent to own vehicles are also called lease to own cars, but it’s not the same as traditional leasing. The end goal with a rent to own agreement is to complete all your payments and get your name on the title.

After you sign a rent to own contract, your name isn’t listed on the vehicle title until you make the last payment. The dealer has all ownership rights, but you’re responsible for maintaining insurance coverage and paying for any possible repairs that come up during the rental period.

With a rent to own agreement, you sometimes make weekly or biweekly payments – unlike a regular auto loan or lease where the payments are almost always monthly.

The payments don’t come with interest charges, since it’s not a loan, which is a plus. However, since there’s no interest and your credit wasn’t likely pulled, you could end up paying more for the car than it’s worth.

Here are a few other things to keep in mind before you head out to an in-house financing dealership for a rent to own vehicle:

  • Rent to own payments sometimes aren’t reported, which means you wouldn’t get a better credit score for making all your payments on time. However, you can bet any late or missed payments are sure to be reported.
  • Late fees are common for rent to own cars. Additionally, one late or missed payment can break your contract, and lead to getting the vehicle repossessed and you losing your chance of officially owning the car at the end of the agreement. Read the rental contract carefully.
  • All rent to own vehicles are used. Before you settle on any used car, ask for a vehicle history report, and try to learn as much as you can about it before you sign anything.

Subprime Auto Loans

Subprime auto loans are made for borrowers who need a car and want to work on their poor credit at the same time. Generally, they aren’t as easy to get into as a rent to own vehicle, but there’s more opportunity as far as credit repair.

If you take on a subprime auto loan, your timely payments get reported so you can improve your credit. After a while, you can complete the car loan, hopefully have earned equity, bettered your credit score for future loans, and gotten the vehicle you needed.

To get a subprime auto loan, you find a special finance dealership. Subprime lenders are third-party, and they’re signed up with these dealerships. You apply with the special finance manager, who sends your info to one or more lenders, and then choose a car with the dealer if you qualify.

With any auto loan, your name is on the title along with your lenders (or your lienholder). Once the loan is complete, the lien is removed and you have sole ownership rights. The whole time you’re financing and after, you’re responsible for maintaining car insurance and any repairs that come up.

Here’s some more info on subprime auto loans:

  • Expect to need a down payment. Most subprime lenders require at least $1,000 or 10% of the vehicle’s selling price, sometimes whichever is less.
  • You’re charged interest, unlike a rent to own car. Since it’s a loan, the lender charges you to borrow the money.
  • Be prepared to prove you’re able to take on an auto loan. This means having proof of income, residency, valid ID, a working phone, and possibly other items. Since these lenders don’t just use your credit score to determine eligibility, expect to need a few documents that prove you can repay the loan.

The Final Decision

Rent to own vehicles can temporarily solve your no-car problem. However, focusing on credit repair so you can get out of the bad credit cycle is a great way to turn around your future car shopping experiences. A better credit score means a higher chance of meeting a traditional auto lender’s requirements and qualifying for a lower interest rate in the future.

To get on the road of credit repair, start with us at Auto Credit Express. Over the past 20 years, we’ve created a nationwide network of dealerships that are signed up with subprime lenders. Complete our free car loan request form to get matched to a dealer in your local area.

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3 mortgage refinancing options for those with bad credit

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Does a low score mean limited options? (iStock)

Record-low interest rates are dominating the news cycle and homeowners, in particular, are jumping to refinance. Data from the Mortgage Bankers Association puts current refinance activity at 98% higher this year than last year, even amid a global pandemic.

Those with low credit shouldn’t skip rate shopping either as there are still options available in today’s low-rate environment — even for those with the thinnest credit profiles.

Mortgage rates vary by lender. Many non-traditional lenders take other factors into consideration outside of credit score, like earning potential and steady work history. While some of these lenders do advertise their qualification criteria, many borrowers may not happen upon them unless they actively shop for refinance rates and offers.

These days, borrowers can quickly explore their mortgage refinance options by visiting Credible, which allows loan seekers to compare both rates and lenders in one place.

1. Look at FHA loans

FHA loans aren’t just for first-time buyers with small down payments. The benefit to doing an FHA refinance is that this option, backed by the Federal Housing Administration, does consider borrowers with sub-600 credit scores who hold less than 20% equity in the home. In fact, only those with less than 20% are eligible for an FHA refinance.

There’s even better news for those with existing FHA loans. With the newer FHA Streamline Refinance product, borrowers can refinance without an appraisal and with lower out-of-pocket costs, saving both time and money.

HOW TO REFINANCE YOUR MORTGAGE

2. Explore VA loans (if you qualify)

Veterans receive many benefits for their service to our country, and one of those is access to mortgage loans backed by the government via the Veterans Administration (VA). Not only are these loans offered at some of the lowest interest rates available, but they also benefit current and past service members regardless of their credit.

Those with current VA loans can also consider refinancing through the VA with the Interest Rate Reduction Refinance Loan program. The IRRRL program is similar to the FHA Streamline Refinance product in that it does not require hefty out-of-pocket closing costs or an appraisal.

If you’re interested in finding the lowest interest rates around, however, you should consider using a multi-lender marketplace like Credible. Credible allows you to compare rates and lenders to ensure you find the best deal.

HOW TO GET THE LOWEST MORTGAGE REFINANCE RATES

3. Opt for cash-out refinance

A cash-out refinance may make the most sense for those with low credit due to a large amount of high-interest debt. Leveraging a cash-out refinance turns home equity into a liquid asset, which borrowers can then use to pay off outstanding debts. Additionally, refinancing to a lower interest rate will save money on the repayment. With current credit card interest rates above 17%, and cash-out refinance rates at 3.194% APR for a 30-year fixed option, this refinance option makes financial sense for those battling to get out from under their debt.

You can visit Credible to get pre-qualified for such a loan and to shop around for loan options among different mortgage lenders. By providing some basic information, you can find out if approval for a loan is likely and can see what rate you’d pay so you can determine if a mortgage refinance loan is affordable.

IS NOW A GOOD TIME TO REFINANCE YOUR MORTGAGE?

What are today’s mortgage rates?

It’s important when shopping for a mortgage refinance to keep an eye on interest rate changes week to week as even a small increase adds up to thousands saved on interest. Again, Credible is a great place to shop. You can compare rates and complete the entire mortgage refinance application process online. Find your rate today.

HOW REFINANCING YOUR MORTGAGE CAN PUT MONEY BACK IN YOUR POCKET

As of the time of writing, (the week November 19th) the current interest rates are:

  • 30-year fixed-rate refinance average: 2.75%.

In the month prior (Week of October 19th), the average 30-year fixed-rate refinance was much higher at 3.16%.

To illustrate the difference, let’s look at the numbers. A consumer refinances a $300,000 loan at 3.2% in October pays over $167,000 in lifetime interest. Another consumer who waits a month and refinances $300,000 at a slightly lower rate of 2.8% percent will pay just $143,000 in interest over the life of the loan.

The bottom line

Don’t let a bad credit score keep you away from the significant savings to be had with today’s low interest rates. While lower credit may not qualify you for the best rates available, depending on when you refinanced and your credit score at the time, refinancing now could still be a big financial win.

To start, investigate refinance options by shopping with multiple lenders to see potential rates, and then input those figures into a mortgage refinance calculator to visualize savings.

Finding the best mortgage refinance rates takes time. You’ll need to compare rates from multiple lenders. Credible allows you to compare multiple lenders to ensure you meet your personal finance goals. Find out how much you could save on your loan amount by refinancing now.

HOW TO FIND THE BEST MORTGAGE RATES AND FASTEST CLOSINGS

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Can I Cancel My Full Coverage Car Insurance?

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While you’re financing a vehicle, you must maintain full coverage auto insurance – it’s not required by your state, but by your lender. If you don’t have a loan, you still need to meet your state’s minimum insurance requirements to legally drive your car on the road. Here’s what you need to know about full coverage insurance, and your choice in the matter.

Auto Loans and Full Coverage Car Insurance

Financing a vehicle means you borrow money from a lender, and then you pay them back in installments. Until you completely pay off the auto loan, the lender has ownership rights to the car. They’re listed on the vehicle’s title as a “lienholder,” and it gives them rights to repossess it if you stop paying or break the loan contract.

One of the requirements of an auto loan contract is that you have full coverage car insurance until you pay off the vehicle. Since the car is technically the lender’s, they can, and do, require that the vehicle is covered to the fullest extent.

If you cancel your full coverage auto insurance while you’re financing, you’re breaking terms of your loan contract. The insurance company generally contacts your lienholder right away and lets them know that the insurance coverage has lapsed.

Your lender can then put what’s called “force-placed” coverage, and add the cost of it to your monthly loan payment. It’s typically more expensive than if you were to choose the insurance for yourself, since the lender isn’t going to shop for the cheapest rates out there – you’re the one footing the bill – because they just want the car covered.

If you refuse to pay for the force-placed coverage, or you can’t afford it, then the lender hires a recovery company to repossess your vehicle. Your other option is to reinstate your previous full coverage that you canceled, or find another insurance plan that meets your lender’s requirements. Contact your lender to see what their insurance requirements are and what you need to do to remove force-placed coverage.

Types of Auto Insurance Coverage

If you’re not financing, then you can simply opt for personal liability and property damage (PLPD) coverage if you choose. This is usually the most basic level of insurance coverage offered by insurance companies, and it’s required to carry this coverage to drive your car on the road in nearly every state.

Can I Cancel My Full Coverage Auto Insurance?Full coverage is defined as a combination of comprehensive, collision, and liability insurance.

  • Comprehensive – Can cover damage from “perils” such as fire, theft, vandalism, or other single accidents not involving another driver, and carries a deductible.
  • Collision – Covers your vehicle in the event of an accident with another driver, regardless of who’s at fault, and carries a deductible.
  • Liability – Covers bodily injury and property damage if you’re in an accident and you’re at fault. This is the most basic level coverage that’s required in nearly every state.

The consequences of not carrying any sort of auto insurance on your car are usually hefty fines, and possibly other serious long-lasting repercussions. Not having auto insurance could lead to a misdemeanor or even a suspension of your license depending on your home state.

Check with your state’s minimum car insurance requirements so you can be sure that your insurance plan is up to snuff.

Car Insurance Too Expensive? Consider a Different Car!

The price of your auto insurance is also dependent on what vehicle you’re driving. Newer cars are usually more expensive to insure because they have more bells and whistles that are costly to insure and fix.

Used vehicles are typically less expensive, but it also depends on the make and model. Some cars are more desirable than others, which can make some vehicles a higher risk for theft. Your credit score can even be a factor in your auto insurance costs in many states.

If your car is too expensive to insure, then consider getting another vehicle. Sometimes, though, getting into an auto loan can be hard if your credit score isn’t the best. Instead of searching all over town for dealerships that can work with your credit, let us help at Auto Credit Express.

We’ve produced a nationwide network of dealers that are teamed up with bad credit car lenders, so let us look for a dealership for you in your local area. Fill out our free auto loan request form to begin the search for your next vehicle.

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Mark McCown: Eviction is different under land contract – The Tribune

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Dear Lawyer Mark: I have had my old house for sale with realtors for almost two years now, but it still hasn’t sold.

I had a few people look at it, and even make offers, but none of them can get a bank loan because of their bad credit.

I don’t want it to keep sitting empty, but sure as heck don’t want to rent it out and have someone tear it up.

One of the people who had bad credit asked me if I would sell it to him on a land contract.

I’m really thinking about doing it, but need to know what all needs to be in the land contract.

I also want to make sure that he is right when he told me that if he didn’t pay, I can just evict him like a rental agreement.

Is that correct? — WORRIED IN WINDSOR

Dear Worried: Chapter 5313 of the Ohio Revised Code governs land contracts.

Under its sections, the contracts must be executed in duplicate, and must contain at least 16 particular provisions.

Some of those are obvious, such as the sellers and buyer names and addresses (referred to as the vendors and vendees for a land contract), and some not so obvious, such as a “statement of any pending order of any public agency against the property.”

The land contract must also include the legal description of the property, sale price, interest rates, payments due dates, whether there are any other charges, as well as who is to pay for the property taxes, and whether there is a mortgage owed, among other items.

Even though it is not technically required, other provisions should go into the land contract as well, such as who is responsible for maintaining property insurance, and who the beneficiary of any insurance claims would be.

This can be extremely important, for example, if there were a fire that didn’t totally destroy the premises, but the buyer wants to stay.

Who gets the money from the insurance company — the seller for the purchase price, or the buyer for the damage to what will be his house?

Your prospective vendee is partially correct in stating that you can evict him like a rental.

If he is 30 days late on the payment, and the scenario below does not apply, you can evict him and cancel the land contract in a court case fairly quickly, if you follow the correct procedures.

If you do this, you cannot sue him for missed payments, unless he paid less than the fair rental value of the property.

However, under RC Section 5313.07, if a buyer has paid more than 20 percent of the purchase price or has paid on the contract for more than five years, the seller can only get possession of the land by bringing foreclosure proceedings.

This means you would have to bring a lawsuit against him, get a judgment in the lawsuit, and then have the property sold at a sheriff’s sale after advertising the sale, just as a bank would do in a foreclosure.

You can only recover up to the amount still owed to you on the property, with the excess proceeds from the sale going to the buyer.

Thought for the Week: “I have the simplest tastes. I am always satisfied with the best.” Oscar Wilde

It’s The Law is written by attorney Mark K. McCown in response to legal questions received by him. If you have a question, please forward it to Mark K. McCown, 311 Park Avenue, Ironton, Ohio 45638, or e-mail it to him at LawyerMark@yahoo.com. The right to condense and/or edit all questions is reserved.

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