How to Build a Diversified Portfolio

How to Create a Profitable Property Portfolio.

You've been thinking about investing in property. Although investing in real estate can be an overwhelming thought for some people, it can also bring great rewards. You may want to consider investing as a way to create cash flow or build a nice nest egg. Becoming profitable in investing requires a certain degree of skill and know-how, but once you stick your toe in the water, you may become hooked.

Method 1 Planning and Researching.
1. Know why you’re buying. Before you buy an investment property, you need to consider your investment strategy. Put some thought into what type of investment interests you and meets your needs. Perhaps you would like to diversify your holdings besides stocks and bonds. Maybe you would just like to build your wealth or improve your cash flow. Whatever your reasons are for wanting to invest, it is good to be clear on them before you start. A few common reasons for investing in real estate include the following:
You want to increase your current income. Getting a monthly rent check, for example, can give your income a boost.
You're interested in capital gain — buying a property and later profiting from its sale.
You want to take advantage of the tax write-offs that come with real estate investments.
2. Learn about the various types of real estate investments. Ask yourself how much time you are willing to invest in managing the property, and whether you have the necessary skills to manage the property. Different types of investments have different risks and rewards, so it's important to consider which type of investment best meets your needs. Consider these investment choices:
Raw land investments. Raw land requires little management and has the potential for big appreciation if it's in an area that becomes attractive to developers. However, there is limited cash flow from this investment through leasing to farmers/ranchers short term, mineral royalties if included in purchase, or appreciation. Also, government restrictions on how the land may be used can impact its value.
Residential real estate investments. Fixing up a residence and "flipping" it is a popular type of investment. The profitability of this type of investment is dependent on the state of the local housing market; location is very important.
Commercial real estate investments. Investing in commercial real estate, such as an apartment building, office building, or retail building, can yield a steady flow of cash, since you'll be getting a regular rent check from your tenants. However, the property requires significant upkeep to make sure it's up to code. You also run the risk of getting bad tenants who damage the property or do not pay rent on time.
3. Decide whether to flip or hold the property. "Flipping" generally applies to residential properties that are purchased, improved, and sold for higher price. Most real estate requires long term holding, and is not conducive to short-term trading. When considering what type of investment to make, determine which situation works best for you.
Consider whether you need additional income now or in the future.
Review your short- and long-term financial goals and if bringing in income now makes sense for you.
Factor in your income tax bracket and how that could be adversely affected by bringing in more income.
Consider the real estate market and if it is rising or falling at this time.
Evaluate your financial situation and see if you have other income that you can tap into if your rental properties become vacant.
Think about your available time and capabilities to manage or improve properties. Using third parties for such services may decrease expected return.
4. Obtain statistics on the town in which you are considering investing. Check the local state government website about the area you are targeting to see how it compares to other locations. It is important to have as much information and knowledge as possible on property investing before you dive in.
Find out the local median income.
Research the population growth of the area.
See what the unemployment statistics are in the area.
Check to see if the community is continuing to grow.
Find out what the real estate taxes are compared to nearby towns.
See if there is a supply and demand of rentals in the area.
Check out the schools to see how good they are.
5. Research online or take a course. A lot of research can be done online, but you may also check your local directory and sign up for a reputable real estate investment course or seminar. Make sure you bring some paper and a pen so you can jot down notes as you listen to the experts speak.
6. Work with a local realtor, property investor, or developer who also invests in real estate. Someone who has been investing on his own will know the pitfalls from his own first hand experience. A realtor with substantial knowledge in investing can teach you as you go along and help make you feel more comfortable with the process. However, remember the money you are investing is yours, not the realtors, so trust your intuition.

Method 2 Pinpointing your Property Needs.
1. Decide on your location. When you are searching for your investment area, look for a place that has clear signs of growth and economic stability. If you aren’t familiar with the area, take a drive around the town or city and get to know it. Check to see if there is adequate shopping and amenities close by. If you like the area and what it has to offer, chances are your renters will too.
2. Pick the right property. See if the properties you are interested in have desirable features, like a great view or ample parking. If so, take that into consideration. There are other issues to consider when picking your property, as well.
If you're deciding between investing in a house or an apartment, keep in mind that houses seem to have a better capital growth rate and apartments tend to have a better rental yield.
Also, the quality of the neighborhood in which you buy will most likely influence the type of tenants you attract. For example, if you buy near a college, you may be renting to students. There is a possibility of vacancies in the summer when the students return home.
Make sure you find out what the property taxes are. Take into consideration that high property taxes may not be such a bad thing if the property is in an excellent area and suited for long-term tenants.
Check to see if the area has any criminal activity. Go to the local police department to learn about the specific area you are interested in. Things to ask about might include vandalism, gang activity or any recent serious crimes. You have a better chance of finding out the facts from the police department, than from the person selling you the property.
Make sure the property isn't in a natural disaster zone. The insurance on the property can get pricey if you are in a questionable area so it is worth checking into. Many property owners are underinsured for natural disasters which can lead to devastating property loss in the event of a major storm or earthquake.
3. Have your property inspected by a professional inspector. You want to make sure the property is in good shape and has up-to-date repairs. You are looking for a property that, with a few minor repairs, will attract tenants who are willing to pay higher rents. In addition, find a contractor who you trust to give you the right advice on any repairs that may be required, especially for older properties. There are some things that you can check yourself, however.
Check the drains to make sure there are no problems with flooding.
Open and close all the windows to make sure they are in working order.
Turn on all the faucets to make sure they are working.
Light a fire in the fireplace to see if it's working.
Flush the toilets to make sure they flush properly.
Open the electrical panel and make sure there are no loose wires.
Turn on the heat and air conditioning to see if they work.
Make sure there is no basement moisture as this can be a sign that there is a more serious problem.
Pull the carpet back to see if there are hardwood floors underneath.
4. Know your target tenant. If you're investing in commercial real estate, your choice of tenant should influence the type of property you buy and where you decide to buy it. For example, families with children will potentially be interested in different amenities than young, single people.
See if the property is near any schools.
Check to see if there are any parks in the neighborhood.
See if the shops and cafes are within walking distance.
Find out how close the transportation options are.

Method 3 Examining the Finances.
1. Check into your credit history. Make a plan to get your credit in better shape if necessary. Having a good credit score will help you secure a loan with better terms. If your credit is compromised, check your local listings for agencies or nonprofit organizations that can help you clean it up.
2. Decide how you will finance your property. There are several ways to begin investing in your property portfolio. You may consider selling an asset or refinancing a property to get the funds. If you're investing in raw land, it's common to get financing from the seller. You may also choose to take out bank loans to finance your property.
If you have the money, you can pay all cash, or you can put down a percentage and get a loan for the remaining amount.
There are different loan requirements depending on the bank and your financial history.
3. Visit with a mortgage broker or your bank. Find out how much money you can afford to borrow responsibly for your investment. The quickest way to find out if you can afford a loan is to ask the bank. If you get a "no" from your bank, then consider trying another one as each bank is different in their approach. You may also consider looking into a credit union or a smaller bank to get your loan through.
4. Find properties that produce positive cash flow. Unless the property has good cash flow, there is really no reason to consider purchasing it. Examine the financials on the property to make sure it is supplying a good source of income. The rent you receive from your tenants should be enough to pay all of your expenses, including your mortgage payment, utilities, property taxes, and insurance.
This excludes raw land investments, which generally yield no income unless leased for farming or another purpose.
5. Examine your investment expenses. A common mistake first time investors make is underestimating their expenses. Rental buildings are always needing touch ups and repairs. There are several areas of expense to factor in when considering your purchase. The amounts will vary depending on the property.
Water and sewer, Garbage, Utilities, Legal fees and accounting, Evictions, Vacancies, Scheduled maintenance.
6. Consider hiring a property manager. You may want to factor in a salary for a property manager if you don’t have the personality, skills, and availability to manage your own property. There are many benefits to hiring a property manager.
The manager advertises and rents for you and will show your property when vacancies arise.
The manager meets with prospective tenants and handles all of your lease agreements.
The manager collects the rent from the tenants and performs the move-in and move-out inspections.
The manager deals with all the tenants complaints.
The manager serves legal notices in the case of a dispute and starts the eviction process if necessary.
The manager usually has a list of reliable contractors that he or she has used before.

FAQ.

Question : How would I stay up to date on pertinent laws, regulations, and real estate terminology?
Answer : Become a member of an apartment owners association. If they are very large, they will send you magazines that have all the new problems that laws are causing for home owners and what they need to do to avoid these problems.

Tips.
Take your time doing the research. Rushing into a property purchase without significant knowledge may bring unwanted results.
If you are considering buying with a partner, make sure you have a proper partnership or joint venture agreement.
Don’t be afraid to walk away if the deal isn't working out.
Stay up to date with pertinent laws, regulations and real estate terminology.
Understand the risk you are taking when becoming a real estate investor. Success is not always guaranteed.
Find a mentor, lawyer or a supportive friend that has experience in investing to bounce your ideas off of.

April 01, 2020

How to Easy Finance a Car

How to Easy Finance a Car.

You’ve found the car of your dreams. Now what do you do? How do you get the money for it? When an individual decides to buy a new or used car, he or she often needs to finance part of or all of the vehicle’s price. Because cars are such a big purchase, many buyers can't provide cash down for the vehicle, so they choose to finance a car over a period of time. There are two financing routes you can choose to go down — either getting a direct or a dealer loan. Before you choose to finance your next vehicle, you should do your homework to ensure that you get the best deal.


Method 1 Doing Your Homework.

Find out how much you can afford up front. If you know the ballpark value of what you want to pay for a vehicle, and how much you can afford to pay in cash, you will know about how much you will need to finance.

Maximize your down payment. A smart way to finance a car is to get as much of a down payment as you can. The more you can pay at the beginning of a deal, the less you will have to pay in interest. Even if you have to temporarily sell some assets to buy the car outright, that can be a better deal than financing a major portion of the cost.

Know your credit score. Much of the financing offer for a car is based on your credit score. Those with good credit will get better interest rates and cheaper car financing offers. This is important no matter who you finance your vehicle through.

Find out your credit score either through the dealer or online at websites like www.annualcreditreport.com, www.freecreditscore.com, www.creditkarma.com, or www.myfico.com.

If your credit score is higher than 680, you are considered a prime borrower and are eligible for the best interest rates available. The higher your score, the better bargaining position you will be in.

Compare loan rates online. There are many websites that compare deals at no cost. Additionally, it is a great way to get in contact with various companies.

Get the necessary materials together. Most lenders will want your name, social security number, date of birth, previous and current addresses, occupation, proof of income, and information on other outstanding debts.


Method 2 Getting a Direct Loan.

Contact certified lenders. Local and national banks, as well as credit unions can give you the terms and interest rates they are offering on used car loans over the phone and online. Shop around and find the best rate for you. You don't have to apply for financing through the dealer, though you certainly can. Oftentimes you can get a fairer deal when you figure out your financing first before you walk into the dealership. Apply for financing through a bank or an app that connects you to lenders.

Oftentimes, credit unions have the lowest interest rates, especially if you are a member. Check with your employer to see if they have any connections with local credit unions for you to take advantage of.

Many lenders offer 5 year loans on vehicles that are five years old at most. Older vehicles are often only eligible for 1 to 2 year loans. In many cases, the fear is that an older car will break down and then borrowers will default on their loans.

Additionally, lenders often impose mileage restrictions (often 100,000 miles) and will not finance salvage-titled vehicles. Typically, they will only fund loans for vehicles purchased through a franchised dealership, not through a private party or independent dealer. In these cases, you’ll have to get a deal loan. See below.

Solicit rate quotes from several lenders. The interest rates offered on used car loans are generally 4 to 6 percent higher than rates offered on new car loans. This is because lenders are fearful of financing used vehicles.

Be as specific as possible with a lender. Provide the lender with information about the vehicle you choose. You will need to provide the car's make, model and VIN number, among other things. The more detail you can give the lender, the more firm your rate quote will be.

Talk to lenders about any fees or extra charges. Some lenders offer low interest rates and make back the money by tacking on additional fees and charges to a loan deal. You'll want to know about these, as well as any other specific loan agreement aspects like prepayment penalties, which can trigger fees if you pay the loan off early.

Get prequalified. Fill out the paperwork ahead of time. Many banks or lenders will pre-qualify you for a car loan based on your credit score, the type of car you plan on purchasing, and your driving history.

Ask the lender with the best rate offer for a pre-qualification letter. It should outline the terms and conditions of the loan. Bring this letter with you to the dealership when shopping for the car. When you go to the dealer's lot, you can show them evidence pre-qualification from a reputable lender. This will expedite the car buying experience. It will also tell the car dealer you are ready to buy.

If you haven’t prequalified, you can get financing at the dealer's lot for a one-stop shopping experience, but having other lender alternatives helps you to get the best deal.


Method 3 Getting a Dealer Loan.

Get a loan through a new or used car dealer.

In general, interest rates offered by dealerships are higher than interest rates you can find directly from a lender. In many cases, smaller dealerships work with third party lenders to finance your vehicle. Because they play the middleman, they pass off the costs to you. Therefore, you may want to apply for a direct loan first and cut out the dealership middleman.

In some cases, financing lenders like local banks and credit unions won’t take a chance on used cars. For used cars, most dealers will finance used cars they sell, regardless of its age. Therefore, you may want to apply for a dealer loan if a direct lender denies you financing.

Bring leverage. Bring interest rates from direct loan lenders, even if you plan on financing with the dealer. Dealers are more likely to offer lower interest rates, if you show them that you know what other lenders are offering. Make sure you research competitive interest rates based on your credit score.

Offer a down payment in cash or trade equivalent to at least 10% of the vehicle's purchase price. The larger the down payment, the less money you will have to finance and the less interest you’ll have to pay on that loan.

Tips.

If you have a low credit score, consider asking someone with a high credit score to co-sign on a loan. A co-signor with a high credit score may help you to secure a lower-interest loan.

If your loan application gets rejected, don’t feel bad. Most likely, the lender doesn’t think you are able to pay back the loan on time. Reassess your budget and try again or try a different lender.

Warnings.

If you finance a used car, be prepared to pay for comprehensive insurance on the vehicle, which is more expensive than collision insurance commonly applied to used cars. Lenders require that you carry comprehensive insurance to protect their investment. Lenders often fear that if you damage the car, you will default on the loan, so they make you take out better insurance.

Be wary of dealers who advertise financing with "no credit check." Typically, these car lots sell high-mileage vehicles with inflated down payments and interest rates.

November 22, 2019

How to Finance a Used Car

How to Finance a Used Car.

If you need a car and can't afford to buy one with cash, financing is always an option. If you want to finance a used car, you have the choice of getting your own direct financing, or having the dealer obtain financing for you. If you have a low credit score, "Buy Here Pay Here" lots may be your only option, but should only be used as a last resort.


Method 1 Getting a Direct Loan.

1. Request a copy of your credit report. Knowing your credit score will give you a good idea of what kind of rates and terms you'll potentially be offered. In the United States, you're entitled to one free copy of your credit report every year.

Check your report for errors or inaccuracies that could be affecting your credit score.

If you have a credit score of 680 or above, you're a prime borrower and should be able to get the best possible rates. The higher your score, the lower the rate you can potentially negotiate with lenders.

2. Contact local banks and credit unions. If you have had a credit or savings account with the same bank for a number of years, start there when looking for a direct car loan. Your history as a customer may get you better rates.

Branch out to other banks in your area. Credit unions often have more forgiving loan terms and fewer restrictions.

Banks typically won't do a direct car loan for a car purchased from a private owner or an independent dealership. In those situations, you may need to try to take out a personal loan. This is also true if you're buying a collector or exotic car.

3. Try online lenders. If you're not a prime borrower, it's still possible to get a direct loan for a used car. There are a number of online lenders who are willing to finance used cars for people with less than stellar credit.

Since online lenders have less overhead, they typically will offer you a lower rate than you could get from a brick-and-mortar bank or credit union.

These loans may come with more restrictions than the direct loan you could get from a bank with better credit. For example, they may not finance cars more than five years old, or cars with over 100,000 miles.

4. Get rates from multiple lenders. Before you choose a loan, apply for several so you can compare the rates offered. Many banks and lending companies have a pre-approval process that won't affect your credit.

Multiple offers may give you the opportunity to negotiate for a better deal. For example, if you got a better rate from a different bank than from your own bank, you could get your bank to match that rate to get your business.

5. Complete a loan application. Once you've decided which lender you want to use for your financing, you'll typically have to fill out a full loan application. Many lenders give you the option to complete the application online.

You'll need to provide basic identification information, such as your driver's license and Social Security numbers. You also may need to provide basic financial information regarding your income and debts.

If you've had some credit problems in the past, you may want to go into a bank and apply for the loan in person so you can talk to a lending agent.

Your loan agreement will include basic requirements that the car must meet. As long as the car meets these requirements, you can use the financing to purchase the car.

6. Negotiate with the dealer. In most cases, you're going to secure direct or "blank check" financing before you find the specific car you want to buy. Having financing already secured puts you in a stronger position to get the best price from the dealer.

When you bring your own financing, you're saving the dealer a lot of costs. Ask if there's a discount available for that.

Since you're buying a used car, have it inspected before you buy it and go over the car's history. The car is a better buy if it's had fewer owners and never been in an accident.

7. Give the dealer your blank check. Lender policies vary, but in most cases you'll get a check for the exact amount of your car, or a blank check that's worth any amount up to the maximum amount your lender has approved.

When you buy a car using direct financing, you still must maintain full coverage insurance on the car. Your loan agreement will include information on the minimum amounts of coverage you must maintain.


Method 2 Using Dealer Financing.

1. Research interest rates. Dealers have special financing offers available throughout the year. Especially if you're not picky about the make or model of your car, shop around and see who has the best deal.

Know your credit score and how qualified you are for different offers. Typically the best offers are only available for prime borrowers with credit in the 700s or higher.

If you're trading in an old car, look for dealer offers to double the price on a trade-in, or pay a minimum amount for any trade-in regardless of its condition.

2. Choose your car. If you've done your research, you have a few dealerships in mind. You should be able to evaluate their inventory online before you go visit in person. Find the best car for you, looking at overall price.

Dealers may advertise monthly payment amounts rather than total price. This can be a way to charge you a higher interest rate.

Dealers typically will finance any car on their lot, so you may have more variety to choose from if you use dealer financing than you would if you used direct financing. However, this might not necessarily be a good thing – you still need to check the car's history and have it inspected before you buy.

3. Offer a sizable down payment. Cars depreciate in value. If you're buying a used car, you want to finance as little of the total price of the car as possible. A down payment of 10 to 20 percent of the purchase price of the car typically will get you the best rates.

A sizable down payment can help you avoid being underwater on your loan – meaning you owe more for the car than it is worth. This is particularly important to avoid when you're financing a used car, which could develop mechanical problems relatively quickly.

4. Apply for financing through the dealer. You'll need basic identification information as well as information about your income and employment to complete the financing application at the dealership.

It may take a few minutes, but in most cases the dealer will have a financing offer available for you that day. Then they'll call you back into an office to discuss the terms you've been offered.

The finance company may require additional documents from you, such as pay stubs to verify income. If the dealer mentions any of these, make sure you get copies to the dealer as soon as possible so as not to jeopardize your financing offer.

5. Negotiate the deal. If you've done your research and know your credit score, you may be able to get better terms from the dealer than what you're initially offered. Review each term and see if you can improve it.

For example, you typically want the shortest term loan, since it will usually have the lowest interest rates. But dealers often focus on the amount of the monthly payment. Financing for a shorter term does mean a higher monthly payment, but it will save you money overall.

6. Use cash for extras. Dealers tend to tack on extra fees, including sales tax, registration fees, and document or destination fees. You also may end up paying extra for dealer warranties, especially for a used car.

The dealer typically has no problem rolling these extra fees into your financing, but there's no point in paying interest on fees and tax. Pay that out of pocket if you can.


Method 3 Using "Buy Here Pay Here" Financing

1. Exhaust all other options. If you need a car and have had credit problems or have an extremely low credit score, BHPH financing is available for you. However, due to the high rates you should consider this only as a last resort.

There are some franchised dealerships, particularly Ford and Chevy dealerships, who are willing to work with customers who have bad credit. It may be possible for you to get a loan there. It wouldn't be the best rates, but it you would still pay less than you would at a BHPH lot.

If you have a relative with a good credit score, you might find out if they are willing to co-sign on the loan with you. That could get you a better rate or make traditional lenders more willing to work with you. This option can be especially valuable if you're young and don't have much, if any, credit history.

2. Ask if the dealer reports to credit bureaus. Because BHPH lots finance the car themselves, they don't always report to credit bureaus. If you have bad credit or no credit, you want the payments you make for your car reported so you can start to rebuild your credit.

You may have to visit several lots before you find one that reports to credit bureaus, but be persistent.

3. Research the car thoroughly. Any car you buy from a BHPH lot typically is sold "as is." Some of these cars may have mechanical problems, and the lot may not be required to disclose those problems before you buy the car.

Demand a Carfax or similar car history report so you can see how many owners the car has had and whether it's been in an accident. These lots typically have older cars, so they've likely had several owners – but a car that's changed hands several times in the past few years may be a red flag.

Take the car to a reputable mechanic before you buy it and have them conduct a thorough inspection. If there are any major repairs that need to be made, you may be able to convince the lot to make those repairs before you purchase the car.

4. Negotiate with the dealer. BHPH dealers often present the price of a car – and the financing terms – as though they are non-negotiable, but that's typically not true. Even though you may not be in the best bargaining position, you can still try to get a better deal.

The more of a down payment you can make, the better your terms typically will be. These lots often specialize in low down payments, but that doesn't mean you can't pay more.

If you're buying a car at a BHPH lot, your down payment should be as high as possible to keep you from ending up underwater – try to aim for somewhere between 40 and 60 percent down.

5.
Make your payments on time. You typically won't have to make payments for a long term, but it's essential to make every payment on time if you want to rebuild your credit. Some BHPH lots will repossess a car after as few as one missed payment.

Some BHPH lots require you to make a trip to the lot with your payment. Depending on how the financing is structured, you may be required to make weekly or bi-monthly payments. If you have a checking account and the lot offers automatic payments, sign up for them so you won't have to worry about it.

At most BHPH lots, you won't pay any less if you pay the loan off early. Ask about this when you buy the car. If the lot is reporting to the credit bureau and you won't save any money by paying the loan off early, just keep making the payments on time. All those payments will reflect well on your credit score.

November 22, 2019

how to finance a used car

How to Finance a Used Car.

If you need a car and can't afford to buy one with cash, financing is always an option. If you want to finance a used car, you have the choice of getting your own direct financing, or having the dealer obtain financing for you. If you have a low credit score, "Buy Here Pay Here" lots may be your only option, but should only be used as a last resort.







Method 1 Getting a Direct Loan.



1. Request a copy of your credit report. Knowing your credit score will give you a good idea of what kind of rates and terms you'll potentially be offered. In the United States, you're entitled to one free copy of your credit report every year.

Check your report for errors or inaccuracies that could be affecting your credit score.

If you have a credit score of 680 or above, you're a prime borrower and should be able to get the best possible rates. The higher your score, the lower the rate you can potentially negotiate with lenders.



2. Contact local banks and credit unions. If you have had a credit or savings account with the same bank for a number of years, start there when looking for a direct car loan. Your history as a customer may get you better rates.

Branch out to other banks in your area. Credit unions often have more forgiving loan terms and fewer restrictions.

Banks typically won't do a direct car loan for a car purchased from a private owner or an independent dealership. In those situations, you may need to try to take out a personal loan. This is also true if you're buying a collector or exotic car.



3. Try online lenders. If you're not a prime borrower, it's still possible to get a direct loan for a used car. There are a number of online lenders who are willing to finance used cars for people with less than stellar credit.

Since online lenders have less overhead, they typically will offer you a lower rate than you could get from a brick-and-mortar bank or credit union.

These loans may come with more restrictions than the direct loan you could get from a bank with better credit. For example, they may not finance cars more than five years old, or cars with over 100,000 miles.



4. Get rates from multiple lenders. Before you choose a loan, apply for several so you can compare the rates offered. Many banks and lending companies have a pre-approval process that won't affect your credit.

Multiple offers may give you the opportunity to negotiate for a better deal. For example, if you got a better rate from a different bank than from your own bank, you could get your bank to match that rate to get your business.



5. Complete a loan application. Once you've decided which lender you want to use for your financing, you'll typically have to fill out a full loan application. Many lenders give you the option to complete the application online.

You'll need to provide basic identification information, such as your driver's license and Social Security numbers. You also may need to provide basic financial information regarding your income and debts.

If you've had some credit problems in the past, you may want to go into a bank and apply for the loan in person so you can talk to a lending agent.

Your loan agreement will include basic requirements that the car must meet. As long as the car meets these requirements, you can use the financing to purchase the car.



6. Negotiate with the dealer. In most cases, you're going to secure direct or "blank check" financing before you find the specific car you want to buy. Having financing already secured puts you in a stronger position to get the best price from the dealer.

When you bring your own financing, you're saving the dealer a lot of costs. Ask if there's a discount available for that.

Since you're buying a used car, have it inspected before you buy it and go over the car's history. The car is a better buy if it's had fewer owners and never been in an accident.



7. Give the dealer your blank check. Lender policies vary, but in most cases you'll get a check for the exact amount of your car, or a blank check that's worth any amount up to the maximum amount your lender has approved.

When you buy a car using direct financing, you still must maintain full coverage insurance on the car. Your loan agreement will include information on the minimum amounts of coverage you must maintain.







Method 2 Using Dealer Financing.



1. Research interest rates. Dealers have special financing offers available throughout the year. Especially if you're not picky about the make or model of your car, shop around and see who has the best deal.

Know your credit score and how qualified you are for different offers. Typically the best offers are only available for prime borrowers with credit in the 700s or higher.

If you're trading in an old car, look for dealer offers to double the price on a trade-in, or pay a minimum amount for any trade-in regardless of its condition.



2. Choose your car. If you've done your research, you have a few dealerships in mind. You should be able to evaluate their inventory online before you go visit in person. Find the best car for you, looking at overall price.

Dealers may advertise monthly payment amounts rather than total price. This can be a way to charge you a higher interest rate.

Dealers typically will finance any car on their lot, so you may have more variety to choose from if you use dealer financing than you would if you used direct financing. However, this might not necessarily be a good thing – you still need to check the car's history and have it inspected before you buy.



3. Offer a sizable down payment. Cars depreciate in value. If you're buying a used car, you want to finance as little of the total price of the car as possible. A down payment of 10 to 20 percent of the purchase price of the car typically will get you the best rates.

A sizable down payment can help you avoid being underwater on your loan – meaning you owe more for the car than it is worth. This is particularly important to avoid when you're financing a used car, which could develop mechanical problems relatively quickly.



4. Apply for financing through the dealer. You'll need basic identification information as well as information about your income and employment to complete the financing application at the dealership.

It may take a few minutes, but in most cases the dealer will have a financing offer available for you that day. Then they'll call you back into an office to discuss the terms you've been offered.

The finance company may require additional documents from you, such as pay stubs to verify income. If the dealer mentions any of these, make sure you get copies to the dealer as soon as possible so as not to jeopardize your financing offer.



5. Negotiate the deal. If you've done your research and know your credit score, you may be able to get better terms from the dealer than what you're initially offered. Review each term and see if you can improve it.

For example, you typically want the shortest term loan, since it will usually have the lowest interest rates. But dealers often focus on the amount of the monthly payment. Financing for a shorter term does mean a higher monthly payment, but it will save you money overall.



6. Use cash for extras. Dealers tend to tack on extra fees, including sales tax, registration fees, and document or destination fees. You also may end up paying extra for dealer warranties, especially for a used car.

The dealer typically has no problem rolling these extra fees into your financing, but there's no point in paying interest on fees and tax. Pay that out of pocket if you can.







Method 3 Using "Buy Here Pay Here" Financing



1. Exhaust all other options. If you need a car and have had credit problems or have an extremely low credit score, BHPH financing is available for you. However, due to the high rates you should consider this only as a last resort.

There are some franchised dealerships, particularly Ford and Chevy dealerships, who are willing to work with customers who have bad credit. It may be possible for you to get a loan there. It wouldn't be the best rates, but it you would still pay less than you would at a BHPH lot.

If you have a relative with a good credit score, you might find out if they are willing to co-sign on the loan with you. That could get you a better rate or make traditional lenders more willing to work with you. This option can be especially valuable if you're young and don't have much, if any, credit history.



2. Ask if the dealer reports to credit bureaus. Because BHPH lots finance the car themselves, they don't always report to credit bureaus. If you have bad credit or no credit, you want the payments you make for your car reported so you can start to rebuild your credit.

You may have to visit several lots before you find one that reports to credit bureaus, but be persistent.



3. Research the car thoroughly. Any car you buy from a BHPH lot typically is sold "as is." Some of these cars may have mechanical problems, and the lot may not be required to disclose those problems before you buy the car.

Demand a Carfax or similar car history report so you can see how many owners the car has had and whether it's been in an accident. These lots typically have older cars, so they've likely had several owners – but a car that's changed hands several times in the past few years may be a red flag.

Take the car to a reputable mechanic before you buy it and have them conduct a thorough inspection. If there are any major repairs that need to be made, you may be able to convince the lot to make those repairs before you purchase the car.



4. Negotiate with the dealer. BHPH dealers often present the price of a car – and the financing terms – as though they are non-negotiable, but that's typically not true. Even though you may not be in the best bargaining position, you can still try to get a better deal.

The more of a down payment you can make, the better your terms typically will be. These lots often specialize in low down payments, but that doesn't mean you can't pay more.

If you're buying a car at a BHPH lot, your down payment should be as high as possible to keep you from ending up underwater – try to aim for somewhere between 40 and 60 percent down.



5.

Make your payments on time. You typically won't have to make payments for a long term, but it's essential to make every payment on time if you want to rebuild your credit. Some BHPH lots will repossess a car after as few as one missed payment.

Some BHPH lots require you to make a trip to the lot with your payment. Depending on how the financing is structured, you may be required to make weekly or bi-monthly payments. If you have a checking account and the lot offers automatic payments, sign up for them so you won't have to worry about it.

At most BHPH lots, you won't pay any less if you pay the loan off early. Ask about this when you buy the car. If the lot is reporting to the credit bureau and you won't save any money by paying the loan off early, just keep making the payments on time. All those payments will reflect well on your credit score.

November 20, 2019

how to easy finance a car

How to Easy Finance a Car.

You’ve found the car of your dreams. Now what do you do? How do you get the money for it? When an individual decides to buy a new or used car, he or she often needs to finance part of or all of the vehicle’s price. Because cars are such a big purchase, many buyers can't provide cash down for the vehicle, so they choose to finance a car over a period of time. There are two financing routes you can choose to go down — either getting a direct or a dealer loan. Before you choose to finance your next vehicle, you should do your homework to ensure that you get the best deal.







Method 1 Doing Your Homework.



Find out how much you can afford up front. If you know the ballpark value of what you want to pay for a vehicle, and how much you can afford to pay in cash, you will know about how much you will need to finance.

Maximize your down payment. A smart way to finance a car is to get as much of a down payment as you can. The more you can pay at the beginning of a deal, the less you will have to pay in interest. Even if you have to temporarily sell some assets to buy the car outright, that can be a better deal than financing a major portion of the cost.



Know your credit score. Much of the financing offer for a car is based on your credit score. Those with good credit will get better interest rates and cheaper car financing offers. This is important no matter who you finance your vehicle through.

Find out your credit score either through the dealer or online at websites like www.annualcreditreport.com, www.freecreditscore.com, www.creditkarma.com, or www.myfico.com.

If your credit score is higher than 680, you are considered a prime borrower and are eligible for the best interest rates available. The higher your score, the better bargaining position you will be in.



Compare loan rates online. There are many websites that compare deals at no cost. Additionally, it is a great way to get in contact with various companies.



Get the necessary materials together. Most lenders will want your name, social security number, date of birth, previous and current addresses, occupation, proof of income, and information on other outstanding debts.









Method 2 Getting a Direct Loan.



Contact certified lenders. Local and national banks, as well as credit unions can give you the terms and interest rates they are offering on used car loans over the phone and online. Shop around and find the best rate for you. You don't have to apply for financing through the dealer, though you certainly can. Oftentimes you can get a fairer deal when you figure out your financing first before you walk into the dealership. Apply for financing through a bank or an app that connects you to lenders.

Oftentimes, credit unions have the lowest interest rates, especially if you are a member. Check with your employer to see if they have any connections with local credit unions for you to take advantage of.

Many lenders offer 5 year loans on vehicles that are five years old at most. Older vehicles are often only eligible for 1 to 2 year loans. In many cases, the fear is that an older car will break down and then borrowers will default on their loans.

Additionally, lenders often impose mileage restrictions (often 100,000 miles) and will not finance salvage-titled vehicles. Typically, they will only fund loans for vehicles purchased through a franchised dealership, not through a private party or independent dealer. In these cases, you’ll have to get a deal loan. See below.



Solicit rate quotes from several lenders. The interest rates offered on used car loans are generally 4 to 6 percent higher than rates offered on new car loans. This is because lenders are fearful of financing used vehicles.

Be as specific as possible with a lender. Provide the lender with information about the vehicle you choose. You will need to provide the car's make, model and VIN number, among other things. The more detail you can give the lender, the more firm your rate quote will be.

Talk to lenders about any fees or extra charges. Some lenders offer low interest rates and make back the money by tacking on additional fees and charges to a loan deal. You'll want to know about these, as well as any other specific loan agreement aspects like prepayment penalties, which can trigger fees if you pay the loan off early.



Get prequalified. Fill out the paperwork ahead of time. Many banks or lenders will pre-qualify you for a car loan based on your credit score, the type of car you plan on purchasing, and your driving history.



Ask the lender with the best rate offer for a pre-qualification letter. It should outline the terms and conditions of the loan. Bring this letter with you to the dealership when shopping for the car. When you go to the dealer's lot, you can show them evidence pre-qualification from a reputable lender. This will expedite the car buying experience. It will also tell the car dealer you are ready to buy.

If you haven’t prequalified, you can get financing at the dealer's lot for a one-stop shopping experience, but having other lender alternatives helps you to get the best deal.







Method 3 Getting a Dealer Loan.



Get a loan through a new or used car dealer.

In general, interest rates offered by dealerships are higher than interest rates you can find directly from a lender. In many cases, smaller dealerships work with third party lenders to finance your vehicle. Because they play the middleman, they pass off the costs to you. Therefore, you may want to apply for a direct loan first and cut out the dealership middleman.

In some cases, financing lenders like local banks and credit unions won’t take a chance on used cars. For used cars, most dealers will finance used cars they sell, regardless of its age. Therefore, you may want to apply for a dealer loan if a direct lender denies you financing.



Bring leverage. Bring interest rates from direct loan lenders, even if you plan on financing with the dealer. Dealers are more likely to offer lower interest rates, if you show them that you know what other lenders are offering. Make sure you research competitive interest rates based on your credit score.



Offer a down payment in cash or trade equivalent to at least 10% of the vehicle's purchase price. The larger the down payment, the less money you will have to finance and the less interest you’ll have to pay on that loan.





Tips.

If you have a low credit score, consider asking someone with a high credit score to co-sign on a loan. A co-signor with a high credit score may help you to secure a lower-interest loan.

If your loan application gets rejected, don’t feel bad. Most likely, the lender doesn’t think you are able to pay back the loan on time. Reassess your budget and try again or try a different lender.

Warnings.

If you finance a used car, be prepared to pay for comprehensive insurance on the vehicle, which is more expensive than collision insurance commonly applied to used cars. Lenders require that you carry comprehensive insurance to protect their investment. Lenders often fear that if you damage the car, you will default on the loan, so they make you take out better insurance.

Be wary of dealers who advertise financing with "no credit check." Typically, these car lots sell high-mileage vehicles with inflated down payments and interest rates.

November 17, 2019