How Much Can a Family Member Help?

HOW MUCH CAN A FAMILY HELP?

QUESTION:
Hello,
I will try to make this question simple! I have bad credit & will be filing bankruptcy soon.  I need to get a used car and my budget is less than $13,000.  I would definitely be able to make the monthly payments.  My younger brother who is 26 years old does not have a license or a permit but is willing to finance the used car under his name and he would let me drive it. Is there any alternative solution than this?  Any kind of suggestions would help.

Thank you! –Yumi (From Pennsylvania)

ANSWER:
Well you are in luck- It is possible to file bankruptcy and still get a car!!! I would NOT recommend using your brother for a couple of reasons…#1 you need to reestablish some good credit and if you let him buy your car then no one will know that you have made all the payments (financing a car is a great way to re-build your credit score). #2, it’s illegal. The lenders want to know where the car is and who the real owner is. Don’t feel bad because I do have a lot of people ask me that same question. Something worth considering is having him be a cosigner on the loan. You are very lucky to have a brother that is willing to help you with re-establishing your credit!
Remember, to a bank or lender everything is based on “risk”. If you lower the risk, they (the lender) will be willing to take a chance on you!!!  By coming to the table with a down payment, this will lower the lender’s “risk” and improve your chances of getting a loan approved. So hopefully you can convince your brother to help lower the risk of the car loan.

Keep in mind that to get a car loan while you are in bankruptcy, there are some rules you need to adhere to. For example, you must have done your “meeting of the creditors” before most lenders will let you borrow money.  You also must keep in mind that you may not be able to buy you DREAM vehicle. $13,000 will buy you a reliable car or an unreliable car. Make sure it is as reliable by doing research on the brand and vehicle history. Rebuilding your credit is a long road, but it is easy if you take smart little steps at a time. Doing things correct now will make your life easier in 4 to 5 years from now when you want to upgrade to a better car.

Hopefully I didn’t complicate things too much for you and gave you a little information that you can use to help your car purchase be more understandable for you!!!! Good luck and let me know how things go!!!

Sincerely,
Todd Helmick
Royal Automotive/Lexus of Tucson
Phone 520-795-0760

Preparation

CAR SHOPPING SURVIVAL: PREPARATION

“The man who is prepared has his battle half-fought.” –Miguel de Cervantes

Okay, so maybe comparing car shopping to a battle is slightly melodramatic, but it is important to recognize that a prepared shopper is a smart shopper.  Before stepping foot into a dealership, prepare yourself by doing the following:

Know what car you’re looking for

Not only know what car you want, but know everything about it.  The key to knowing what you’re looking for is researching the vehicle’s value, appropriate pricing for add-ons, and what other dealers are pricing the vehicle at.

                Research, Research, Research…

Kelley Blue Book (www.kbb.com) and NADA Guides (www.nandaguides.com) are great resources for vehicle values.  If shopping used cars, Kelley Blue Book will likely be your best resource.

When comparing vehicle pricing at different dealerships in your state, Edmunds (www.edmunds.com) or Auto Trader (www.autotrader.com) provide several vehicle options at different dealerships.  This is a great way to compare prices and get a feel for the value of the car you are looking to buy.

At Royal, we price our cars based on the market. With the power of the internet, we research the competition daily, so you can be sure that our vehicle prices are very competitive.  This means you do not have to be a good negotiator just to get a fair deal.  Royal has created a Fast, Fair, & Simple process that keeps the customer in charge at all times.  (Click to learn more)

Research local dealerships

Perform some background research on your dealership options:

Know what they stand for and how they do their business

Will you get the answers you need without getting a headache?

Look at customer reviews online

Do they have a good reputation?

Are past customers satisfied with their experience and the price they paid for their vehicle?

A great places to look at customer reviews is DealerRater (www.dealerrater.com)

Do some further research on their service department

How well was the vehicle reconditioned before you bought it?

Did they replace any worn out parts?

If so, did they use the top of the line, or cheap aftermarket parts?

   (*note: Royal is meticulous about using only the best quality parts)

Selecting your Dealer

A vehicle is one of the largest purchases you will make in your life.  For that reason, it is important to select the right dealer for you.  Here at Royal, we focus on being a trustworthy dealer by using our Fast, Fair & Simple process.

Our Fast, Fair, & Simple process means…

 

 

Here is a list of questions that you should ask each dealer before choosing where you will go.  For each question we have provided Royal’s answer to the right.

 

Making the Purchase

MAKING THE PURCHASE

When you’re getting ready to buy, there are a couple more points to consider…

1.       Do you like the sales person?

When deciding whether to buy your car, consider whether you like your sales person.  Purchasing a car is the perfect time to whip out your first impression skills.  If you don’t like the impression they give you, move on to another sales person or dealer.

2.       Avoid sales pressure!

Make sure the car is right for you!  If you’re torn between a certain make and model, feel free to go to the other dealership to look at the other car.  Don’t be pressured into buying a car on your first visit.  Remember, you want to do business with a sales person who wants to cater to your requests and has your best interest!

3.       Do the price, payment, and terms fit your budget?

Purchasing a vehicle is a big commitment.   Be sure to select a car and payment that fits your budget.  We would never want our customers to ruin their credit score by going into debt after purchasing their car.

4.       Decide if you will trade in your current car

After researching what your car is worth, have an idea of how much you would like to get for it. Knowing what the fair price would be for your trade is important.  Some dealerships inflate the trade value to mislead you and make you think you are getting a better deal for your trade.  But in actuality, they are adding that extra amount that they are “giving” to you to the purchase price of your new vehicle.

Also remember that the value of your trade-in should never change according to the vehicle you want to buy.

5.       What is the MSRP (“market value”) of the vehicle?

Be sure that the price of the vehicle you are buying is at a fair price.  Get the bottom-line price without haggling back and forth!

6.       How much money should you put down?

The amount of money you put down will affect your payments.  Ask your sales rep for clarification on the payments.

7.       You don’t have to buy a vehicle at your first visit to the dealer. 

Know your exit strategy so that you don’t make any quick decisions that you feel pressured to make.  SHOP WHERE YOU ARE TREATED THE BEST AND GET THE MOST INFORMATION.

 

 

6 Keys to Improving your Credit Score

6 KEYS TO IMPROVING YOUR CREDIT SCORE

1.      Never miss a payment (can save you up to 160pts!)

This is the easiest way to kill your credit.  If remembering to pay your bill is your problem, ask your credit card company about signing up for their automatic bill pay program.  If you cannot financially pay your bill, talk to the credit card company about setting up a payment program.  Also be sure to stop purchasing things with your credit card, and set up a strict budget to outline your spending and to plan your credit card payments.

2.      Instead of getting a new credit card, extend your credit limit on cards you already have

If you are someone who is likely to be tempted to go on a shopping spree if you were given a new credit card, then entirely avoid getting a new credit card!  Instead, extend your credit limit on the cards you already have.  And remember: now that you have more credit available after extending your credit limit, this does not mean you can, or should, buy on that additional credit!  Instead, reserve that amount for any emergencies that may come up (e.g., a home or car repair, a doctor bill).

3.      Never use more than 20% of your Available Credit

Not only does keeping your spending down help you avoid paying interest in the long run, but keeping spending down also shows that you have extra credit available.  This could help you get approved for a loan faster down the road and also qualify you for a lower interest rate in the future!

4.      Get credit cards that have cash back rewards to contribute to your balance

Cards that have a cash back rewards program are very helpful. As long as you responsibly purchase only necessary items with your credit card, you are essentially being rewarded for shopping!  Your cash back rewards can be put towards your balance, which helps you pay off your bills.  But again, be very careful!! A cash back rewards bonus can make it very easy to start spending just to increase your cash back rewards.  So be cautious

5.      Finance a vehicle (or any big ticket item)

Making payments on a large priced item shows that you are able to manage and pay off debt.  Financing your purchase for as long as possible will also help, as it shows that you can pay off a long term debt.  This way will make you pay more in interest, but you will have lower monthly payments and increase your credit score.

6.      Take out a small personal loan and repay it over a year on time

This is a great way to boost your credit score.  It shows banks and loan companies that you are able to pay off a loan, too, which can help you get approved for a loan with a lower interest rate down the road.

Credit Cards: Are they good or bad?

CREDIT CARDS: ARE THEY GOOD OR BAD?

The average American carries 3.5 credit cards.  While experts agree that having a large amount can be one of the easiest ways to rack up debt, they also note that there is no right or wrong regarding how many credit cards any one individual should have.

Credit cards can be wonderful: they can build your credit score, give you rewards points, and qualify you for warranties and other bonuses.  However these benefits are only truly beneficial when you pay off most, if not all, of your balance every month. The moment you neglect to make a payment on your credit card, credit cards become extremely horrible. Not only do you start owing more because of interest rates, but your interest rate can go up! Not making payments lowers your credit score.

What about store credit cards?  Applying for a store credit card is especially tempting when they promise 10, 15, or 20 percent off of your purchase.  But experts say that when you apply for a store credit card, 20 points are taken off of your credit score. So, if you really must, limit yourself to one store credit card, perhaps to a store you shop at frequently.

Conflicting Credit Scores

CONFLICTING CREDIT SCORES

Conflicting Credit Scores
QUESTION: For several years I have been signed up for a credit monitoring tool so that I can keep track of my credit. I was recently very surprised when I went into a dealership and I found out that the credit score they told me I have was different than what my credit monitoring tool said I had. Why is my score different?

ANSWER: When you are talking about your “credit” you are really referring to the financial history and information about you that is recorded within the three main credit bureaus.  They are: Experian, TransUnion and Equifax.  Generally the information is the same between all 3 bureaus, but what many people don’t understand is that lenders don’t all look at this history the same way. Whether you are talking about a home loan or an auto loan, each of these industries uses different criteria and assigns different weight to the data within your credit history.

For example, a customer that recently visited us found out that his score pulled by the dealership was actually 100 points lower than his credit monitoring tool. This was because the criteria used for purchasing an automobile was different than the criteria that was being used by his credit monitoring tool. While the credit monitoring programs that exist are wonderful for monitoring issues such as identity theft, it is important to realize that the score they assign to you will not always be the same if you decide to take a loan for a large purchase.

Businesses that make financial assumptions each use different methods or ways to evaluate your credibility as a person (your “credit worthiness”) and some lenders may not care as much about specific transactions or types of activity on your credit report as other lenders do. If you have concerns about what information was used by a lender to determine your credit score, a great tool take note of is the “risk based price notice” form that should be given to you by any dealership that pulls your credit.

If you ever feel that your credit history contains erroneous or inaccurate information, it is very important to get it corrected. Remember, a better credit score can have the potential to save you thousands of dollars in interest. For examples of how credit score can affect your finances, read more at www.ineedcarfinancing.com.

Unestablished Credit

UNESTABLISHED CREDIT

Question: I am 22 years old and have recently landed my first job out of college, I want to purchase a new car and know I will need financing. During my first few trips to various dealerships I have been told that I have a very low credit score. I have no idea why my credit score is low because I have never taken out a loan before and always pay my bills on time. How can I improve my credit score?

ANSWER: Many people face this same situation in which they are told they have low credit upon investing in their first large purchase such as a vehicle or house. One of the reasons you are having a hard time is not because you don’t pay your bills on time, it is actually because you just don’t have enough credit history established; we call this unestablished credit. The most important thing to understand is that good credit does not just magically happen, it must be built. Unestablished credit is very common amongst recent grads and there are in fact specific programs that are available to students within 6 months of graduating and help students receive good deals and good rates even without a cosigner. Many new car manufacturers have these programs and they are often called “new grad incentives”. Having unestablished credit is much better than redeeming oneself from bad credit, so you are in good shape. The fastest way to build credit is to open a credit card and use it! The more frequently purchases are charged AND paid off on time, the better. A second good way to build credit is to raise the limit on existing credit cards, this alone makes us appear more credible to lenders. The idea of “holding credit” is basically being credible or trustworthy with money. If the credit card company trusts you with a larger sum of their money, so will the auto lender. So talk to the bank and see if any of your credit cards can be raised to a higher spending limit, just doing that should improve your credit score automatically. When you do take out a loan be smart about it. If this is your first loan, it is important to make sure you are able to make the payments now and in the future. One mistake many people make is not considering their changing lifestyles and unexpected expenses when deciding exactly what they can afford. Remember if you can pay this first loan off successfully you will be well on your way to establishing excellent credit.