What To Know About Title Loans in 2017

For consumers in need of immediate financial assistance, title loans have long been one of the most common solutions. In June 2016, the Consumer Financial Protection Bureau (CFPB) proposed several new regulations to make it less likely that consumers would end up trapped in a continually worsening cycle of debt. If you’re considering a title loan, here’s what you need to know about them and what’s new about them as of 2017:

Title Loans: How They Work

The title loan process is simple and quick, which are two of the main reasons these types of loans are so attractive to consumers facing financial hardships. To obtain a title loan, you bring your car to the title loan company’s location, where the lender inspects it. After determining the current market value of your car, the lender can issue you a loan based on that amount (usually anywhere from 30 to 50 percent of your car’s trade-in value). You provide the lender with your car title to obtain the loan.

Many title loan companies offer an online application process where you enter a few basic pieces of information and get preapproval for a title loan. Since the lender needs to examine your car before issuing you the loan, you still need to go in to a title loan company’s office. However, some online applications can provide you with an estimate of how much you could get with a title loan, based on the vehicle information that you provide.

Each title loan has a repayment period specified in the contract. You keep your car throughout the repayment period, and you get your title back when you repay the balance on your loan. Title loans have interest charges and sometimes fees, and if you’re unable to repay the loan in the designated time period, it rolls over and incurs further interest charges and fees. If you default on the loan, the lender can repossess your car.

Title loans don’t require a credit check, making them a popular option among consumers with bad credit. When you repay your title loan on time, you can improve your credit score.

New Regulations

The CFPB’s new regulations impose several restrictions on the title loan industry and the payday loan industry, as both types of loans tend to have high interest rates that can leave consumers facing more and more debt.

Title loan companies must now check whether the borrower has sufficient income to repay the loan within the designated time frame, while also having enough for any other bills and living expenses. One issue for many consumers that are unable to pay is that the title loan company debits their account, and then they get stuck with overdraft fees, in addition to their outstanding title loan debts. Lenders now have to provide consumers with written notice prior to debiting their bank accounts. If the payment fails on two separate occasions, the lender needs the borrower’s written authorization to charge the account again.

The regulations also put a cap on how many short-term loans, including title loans, that borrowers can have. Lenders can’t issue title loans to consumers who already have another short-term loan with an outstanding balance, and they can’t issue title loans to consumers who have spent more than 90 days over the last 12 months in debt for a short-term loan.

Title loans have their supporters and their detractors. The former point out that title loans provide a form of financial assistance for borrowers who are unable to get other types of loans. The latter criticize title loan companies for the high interest rates and fees they charge. Whether or not to apply for a title loan depends entirely on your own financial situation. While interest rates won’t be as low as they would for a bank loan, they’re much easier to get, and can be an excellent option when you need cash right away.

What You Should Know About Reverse Mortgages

canstockphoto7870503Have you been thinking about paying off your mortgage and you’re over the age of 62? Consider getting a reverse mortgage. Reverse mortgages are a way to pay off your current mortgage plus a few added benefits such as supplementing your income or paying for healthcare expenses. This type of mortgage will allow you to convert a portion of the equity in your home into cash without giving up your home.

If a reverse mortgage sounds right for you need to know that there are several types of reverse mortgages available. Below is an explanation of each one to help you decide which type is best for you.

Single-purpose reverse mortgages– These types of mortgages are the cheapest option. They are usually offered by state and local government agencies however not all states have this type of mortgage. Nonprofit organizations also have these mortgages but again they are not available everywhere. A single purpose mortgage can be used for just one purpose which the lender usually specifies. Let’s say a lender states the loan can be used home improvements or repairs or even property taxes. Homeowners that have moderate to low incomes will qualify for this loan.

Proprietary reverse mortgages-These loans are backed by the same companies that develop them. If your home has a high market value you may be able to get a bigger loan advance with this type of mortgage. So if your home has been appraised at a higher value and your mortgage is small, you may be able to qualify for more funds.

Home Equity Conversion Mortgages-These loans are also known as HECMs and are federally insured reverse mortgages which are backed by HUD or the US. Department of Housing and Urban Development. These loans can be used for a variety of purposes.

Both proprietary reverse mortgages and HECMs tend to be more expensive than other traditional home loans plus the costs upfront tend to be high. This is important to consider especially if you are planning on staying in your home for a certain amount of time or are planning to borrow a small amount. There are several factors to consider that determine exactly how much you can borrow with a proprietary reverse mortgage or HECM:

  • the age of the borrower
  • the type of reverse mortgage that is chosen
  • the appraisal value of the home
  • what the current interest rates are
  • a financial assessment that determines the borrower’s ability to pay homeowners insurance and property taxes.

HECMs do not have specific income requirements. However, all lenders will conduct financial assessments which will determine whether to approve or deny your loan. A financial assessment determines your willingness and your ability to meet your financial obligations in addition to the mortgage requirements. The results are what lenders look to decide whether funds should be set aside from the loan proceeds to pay items such as property taxes, flood insurance or homeowners insurance. If the lender does not require money to be set aside you can agree that the lender will pay all items.

Is there such a thing as Guaranteed Car Finance?

If you have a poor credit record and have repeatedly been turned down for loans, credit cards or a mortgage, then you might think that you aren’t going to be able to get finance for a new or second-hand car.

Yet getting car finance, even when you have an impaired credit record, is not as difficult as you might think. If you have lived in your house for more than 12 months, have a job with a regular income or a pension and are making efforts to correct the mistakes you may have made in the past, then having a bad credit record should not prevent you from driving a new car.

There are now a large number of lenders who are willing to offer car finance to people with poor or even bad credit records. Even people who have already been turned down for a personal loan at the bank or declined finance by a car dealership should be able to find a lender who has a finance package tailored to their particular circumstances.

To qualify for credit through one of these sub prime financial organisations, a borrower will need to be able to prove his or her identity and that means be able to provide a copy of their passport or driving license. They will also need to be able show their income and many lenders will ask to see three pay slips before considering them.

When it comes to choice of car, the market for sub prime car finance is now so large that a borrower will not be restricted to a few low-spec models: he or she will be able to choose a car separately from the finance package and then find the finance to suit their needs.

If you do suffer from a poor credit record and are looking to buy or finance a car in some way then it’s very important that you shop around. There are many hundreds of car finance packages on the market and so the rates of interest charged can differ widely. People with slightly impaired credit ratings may find finance packages with APRs of less than 10% while those with a history of late payments or defaults may have to pay significantly higher rates – sometimes up to 25%. Even those with CCJs will probably be able to find a lender willing to finance a new vehicle.

If you are concerned you have a poor credit record, you should find out exactly what is making you unattractive to lenders before starting to look for a car. Apply to the three main reference agencies – Experian, CallCredit or Equifax – for a copy of your record or sign up for one of their online subscription services that allow you to see an updated copy of the report every month. When you’ve got your credit record, you will be able to see where the black marks are, how many there are and then apply to the lenders who cater for your particular circumstances.

Because car finance is for shorter periods than some personal loans or secured borrowing, some lenders view it as a lower risk and offer lower interest rates to sub prime borrowers than with other forms of credit.

There are three main types of car finance:

Personal Contract Purchase (PCP)

With PCP, you make a down payment on a car followed by a series of mostly repayments over a set period – two, three, four or, sometimes, five years. Before you have to make the final payment, you can decide whether you want to keep the car – in which case you have to make a larger final payment – or to hand the keys back and use any value that is left in the vehicle as a deposit for a new car.

PCP is popular with people who want to be able to tailor their finance package to their particular needs. It allows you to make a bigger deposit in order to keep the monthly payments down or to make a smaller one and to make up the difference with larger repayments each month.

One thing to watch out for with PCP is that these packages usually enforce annual mileage limits that are agreed up front. The lowest mileage is usually 10,000 a year but these can be tailored according to your needs. Should you exceed the mileage limit during the life of the agreement, you will be charged a penalty for every mile that you go over it so it’s very important that you agree a limit that is realistic before signing the agreement.

Personal Contract Hire (PCH)

With PCH, you’re actually renting a car over the long term. While it is, to all intents and purposes, your vehicle, you don’t own it at any point. The finance company always retains ownership – you are paying it a monthly amount to continue to be able to use it over the life of the agreement.

When the agreement comes to an end, you don’t get the option of making a final larger payment and taking ownership but simply hand the keys back. This means that the monthly repayments with PCH are usually lower than with PCP or a loan and so you might be able to afford to drive a higher spec car than with these options.

PCH packages will often include the costs of maintenance, servicing, road tax, tyres and, in many cases, insurance.

Loans

You arrange a personal loan separately from the purchase of a car and so will be able to drive a better bargain with the garage or car dealership because you are, in effect, a cash buyer.

Those suffering poor credit records will find it harder to arrange a loan than those who have excellent ratings. Nonetheless there are plenty of lenders offering bad credit loans to finance car purchases and these fall into three main groups:

Unsecured loans which have higher interest rates and larger monthly payments than either PCP or PCH but mean that the borrower owns the car from the start and is not restricted by mileage limits or having to have it maintained by a particular garage.

Secured or homeowner loans come with lower interest rates than unsecured loans. The borrower puts their house up as security that means that should he or she get behind with repayments, the lender might take action to repossess the property.

Guarantor loans are a popular way of financing a new car because they allow borrowers to use the credit record of a third party – the guarantor – to secure finance and so benefit from lower interest rates and bigger lump sums.

Article provided by Mike James, an independent content writer working together with technology-led finance broker Solution Loans; a company with many years experience in advising clients of their most suitable types of credit.

Seven steps to get your guarantor loan

apple-589640_640You may have slipped up with your finances in the past and are now struggling to get a loan because your credit record is impaired. Or perhaps you are new to borrowing and you having difficulty demonstrating a history of responsible financial management. Either way, you could be left facing rejection after rejection when applying for a loan.

This could be because many lenders, and especially those who specialise in personal loans which are not backed by any kind of security, view you as a greater risk than somebody with a good record of managing credit. But don’t despair, there are other options – particularly guarantor loans – which could help you to still make that big purchase, redecorate your house, take a holiday, finance a car or consolidate your existing debts into one.

Guarantor loans make up the fastest growing sector in the UK credit market currently and provide a good way for those who have made financial mistakes to get back onto the credit ladder and repair their records. If you have been turned down for a loan by your bank or one of the other mainstream lenders, guarantor loans could offer you a way to avoid the particularly tight credit scoring systems used by the big banks to exclude people who may only have a few relatively minor slip ups on their records.

A guarantor loans works by using the good record of a third party to act as security for a borrower when he or she takes out a new loan. While the term ‘security’ infers some degree of risk, it’s important to note that this does not mean the guarantor having to put up their home to back the borrowing. It simply means that this person guarantees that the loan will continue to be repaid in the event that the borrower gets into trouble and is unable to make repayments.

This is not a new form of credit, even though the name may be unfamiliar and despite its recent surge in popularity. Until the liberalisation of the UK’s consumer credit market in the early 1990s, it was standard practice for a lender to ask for a third part to guarantee the borrowing of a new applicant, particularly where that person did not have a long record of borrowing money. Guarantor loans work on exactly the same principle, and often come with lower interest rates, larger amounts and longer to repay than other forms of credit including personal and payday loans.

 

But how to do you go about getting a guarantor loan?

  1. Find your guarantor. This is not as difficult as it might sound. You need to find somebody who trusts you and who you are happy to disclose your financial affairs to. That person will also need to have a good credit record because the lender will not be worrying so much about your financial history but will be interested in that of the guarantor. The loan company will want to see that he or she has a good credit history, has paid their bills on time regularly and does not have anything adverse registered against them like defaults or county court judgements (CCJs).
  1. Make sure you aren’t in an existing financial relationship. The lender won’t care whether your chosen guarantor is a friend, a family member or even somebody you work with. But it will be concerned about any financial links between you. The guarantor cannot be somebody you have hold a joint financial product with (like a bank account or mortgage) and they cannot be your partner.
  1. Make sure the guarantor is happy. The guarantor is putting their record of sound financial management on the line so that you can get access to the credit you need. That means that they are going to want to be satisfied that you can afford the loan and that you are committed to keeping up with the repayment schedule. Where family is involved, financial problems can wreak havoc with relationships so while it is only natural for a parent to want to help out a son or daughter in difficulty, the guarantor should still satisfy themselves that the borrower is committed to being open about their finances. If the borrower cannot keep up with repayments, then this will pretty quickly impact upon the guarantor. He or she will have to act rapidly to make good any shortfall to avoid finding their credit record suffering. In cases where the guarantor does not step in and the borrower makes no attempt to put matters right, then the lender will be able to chase the guarantor for money. As a last resort, this might include ordering the guarantor to repay the entire loan and any interest due on it.
  1. Make sure you have an agreement with the guarantor. This is not an arrangement to enter into lightly so it makes sense to set out what is expected of each party in the relationship. Some lenders advise that the applicant and guarantor draw up a written agreement which lays out exactly what is expected of each. A guarantor might want the applicant some to make some form of full financial disclosure which shows a complete breakdown of income and expenditure before they sign the agreement. The guarantor may also need a commitment from the borrower to provide updated financial information for as long as the loan’s lifetime so that he or she gets early warning that a repayment might get missed.
  1. Make sure you are up to date with everything else. While the lender may not be so concerned with your credit record, as a borrower it makes sense to ensure your other loans and credit cards are up to date so that there is not a last-minute hitch with your application. There is a small possibility that the lender will look at your credit record and you may encounter problems if you have a particularly poor history of CCJs and defaults.
  2. Do your homework. While it’s not that different to any other loan, it’s worth doing thorough research to find the loan that you want, offering the amount you need, at an interest rate you can afford and with a repayment schedule that suits you. Making sure you shop around before applying will help prevent problems later on.
  1. Apply! When you’ve settled on the right loan, make the application and you’ll know – in most cases – whether you’ve been accepted within hours.

Article provided by Mike James, an independent content writer working together with Solution Loans, a technology-led finance broker with many years’ experience in advising clients of their most suitable types of credit.

The Difference between Installment Loans and Revolving Credit Loans

canstockphoto9993217The two major types of credits are installment credits and revolving credits. While these two types of loans do account for almost any type of loan there is, they are not one and the same. In a general sense, installment credits are unique in that they have a structure and periodic payment system. This makes them a popular choice for people looking to finance substantial purchases like a car or wedding. Installments provide a gradual reduction of principal upon each payment, eventually ending the contract.

In contrast, revolving credits are more loosely structured, and when funds are repaid they can simply be borrowed again if desired. A credit card is the most popular example used today.

When considering what type of loan is best for you, learning a few more details about each type can be helpful. That is why we’ve provided a description of both here to get you started:

The Installment loan

The most important feature of an installment loan is its structure. These loans have a start and end date that is contractually binding, which explains the popular name ‘term loan’. For the average loan amount, the contract can last several years. However, some loans can total as much as 100,000 dollars and can have a payment schedule that lasts a decade or more. The contract will bind you to an agreed amortization schedule, in which the total amount that you borrow will eventually be paid off through a series of monthly payments.

Some good examples of loans with this structure are car loans, a student loan for college, and a mortgage for your home. These loans work in such a way that you already know the amount that you will pay, and for how many years you will be in debt. Each new loan will require a unique application, regardless of how many installment loans you have taken in the past. A good resource to learn more about installment loans is InstallmentLoans.org.

Revolving Credit

Two of the most popular forms of revolving credit are the beloved credit card, and lines of credit. The limit on your credit does not actually change when you payback revolving debt. These types of loan provide people the power to keep borrowing more and more money, so long as they do not break the credit ceiling set out in the contract.

It may all sound great, but exercise caution. A revolving line of credit is more financially dangerous than an installment loan is. This is because it temps borrowers into overspending. This is well-worth noting because 30% of your credit score consists of what is called your “utilization rate”. This rate is a measurement used to gauge how responsibly you are managing your revolving credit. Remember that if you carry a high balance, this will hurt your credit score.

Paying off credit card debt might just be the easiest way to improve your credit score. It is quite telling that many people actually get an installment loan just to pay off their credit card debt, it really is that important. Not to mention, revolving lines of credit tend to have much higher rates of interest.

The decision should ultimately come down to your financial health and goals. If you have no major purchases worthy of a large loan, perhaps you should cautiously choose a credit card.

Short term loan Positives and Negatives

Payday loans also known as payday advances, short term loans and cash advance loans are small short term unsecured loans. These loans are also referred to as cash advances however this term can be confused with a line of credit such as those with credit cards. Payday loans rely solely on the borrower having employment and can provide proof of income such as check stubs. The legislation regarding these types of loans varies widely from country to country.

In order to prevent high rates of interest many jurisdictions have placed limits on the APR or annual percentage rate that any lender especially payday lenders can charge.

There are several ways that the APR can be calculated on these types of loans. Depending on the method that is used the rate can differ dramatically. For example for a £15 charge for a £100 payday loan lasting 14 days the APR could be anywhere from 400% to 500%

Some lenders have stated that payday loans can carry significant risk for them, however, it has been recently proven that there is no more risk with these types of loans than any other type or credit.

There is a process involved with payday loans where the lender provides a short term unsecured loan that the borrower has to repay on their next payday. Usually the borrower’s employment or their main source of income must be verified, however,some sources have state that some lenders don’t run credit checks or verify income.

There are two ways to apply for a payday loan either visit the lenders retail location or apply online. When a borrower visits the retail location they must provide a postdated check that the lender can cash for the amount of the loan plus fees in the event the borrower defaults on the loan. For borrowers that wish to apply online the process is similar except the application and other documentation such as proof of income, bank statement or voided checks must either be emailed or faxed to the lender. Upon approval the funds are direct deposited into the borrowers primary checking account. When the due date approaches (which is usually the next payday) the payment plus any finance charges are electronically withdrawn from the borrowers checking account.

Under the right circumstances payday loans can be very useful and many times have been a relief when an emergency occurs such as car repairs or even an emergency medical bill. But be careful since these quick loans do have what some consider high rates of interest. These are best used for those situations where you know you can pay them back quickly.

What Is An Unsecured Loan?

Father and teenager signing loan contractThere are two types of loans secured and unsecured. To understand the difference between the two is to describe each one.

A secured loan is one where the borrower uses collateral to secure the loan. The collateral  is something the person already owns such as a car or a house. The lender can use the collateral as an asset in the event the borrower defaults on a payment. The lender can then sell the asset for the amount due on the loan. A good example is a mortgage which is a type of secured loan in which the borrower’s home is used as collateral. Should the borrower default on repaying the mortgage loan, the lender can foreclose on the house and resell it for the amount due on the mortgage

An unsecured loan is one where the borrower doesn’t need collateral to get a loan. All the borrower needs to do is sign an agreement promising to repay the loan. The interest rate is determined and agreed upon by the borrower before any documents are signed. The interest rates for signature or unsecured loans are much higher than secured loans since no collateral is used.

Good examples for which unsecured loans are useful can be medical bills, payday loans and credit cards. Credit card companies require certain personal information when applying for a loan. This information includes your address, place of employment, the amount you make and whether it’s weekly, bi weekly or monthly and your social security number. They take a close look at your employment history and how long you have worked at your current place of employment and how much you make. This is a determining factor in considering you for a loan since how much you make determines if you can repay the loan. They also review your credit report to ensure there are no outstanding debts that would prevent you from repaying the loan.

Medical bills are another form of unsecured loan. When you receive services or treatment you sign an agreement to pay for the costs. Most people have insurance which pays for most of the costs for services and treatment. However, there are many items that are not covered under insurance and that is the part the patient has to pay. They sign an agreement which states they are responsible for paying those costs and agree to pay them.

Payday loans are also unsecured loans. These companies pay you the amount you apply for upfront without any collateral. Payday loans usually have very high interest rates again since there is no collateral involved. They collect the same personal information that credit card companies and hospitals collect to determine if you are able to repay the loan. Both the interest rate and the amount you can borrow are discussed before an agreement is signed. Once all the paperwork is completed you receive the money.

Any company that pays a loan upfront without any type of collateral is offering you an unsecured loan. Another type of unsecured loan is called a person to person loan. This type of loan is usually done online through websites where one person agrees to lend money to another. The borrower agrees to repay the money at an interest rate determined by the lender. This type of loan has gained popularity in recent years due to the reason that the loan can be done completely anonymous. These loans are also very popular with people that have bad credit since a credit report is not required.