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07-22-2009 12:32 PM - edited 07-22-2009 12:58 PM
I am looking for an small auto loan for 1- Improving my credit score and having different types of accounts in my history, 2- to cover my small shortage of money. The problem is I dont like to get a big loan and purchase an almost expensive car, I am student and prefer to keep my life simple and manageable.
My credit scores are between 665- 690, no late payment or no negative problem is in my account. I have stable job in university and earn 2000$ each month.
I am trying to purchase a used car, some thing about 4k- 5k. I can put up to 2500$ in cash as down payment, so looking to an small 2500$ or even 2k loan. I can afford 200$ monthly payments too. But the problem is most of banks and lenders do not offer such small loans. How can I find such a loan for myself? As I know some auto dealers themselves are offering such small loans to the buyers, and then they report it to the credit unions. But as I know dealers are charging a lot of doc fees for such loans, and also they increase the auto price too, so I prefer to find a small loan myself. Can I find lenders offering such an small loans, or auto dealers are my only chance?
07-22-2009 01:34 PM
07-22-2009 02:06 PM
Most banks will not bother with a $3000 loan
it simply is not cost effective for them in terms of actual interest generated and costs associated with running a car loan/lien
You MAY find a solution by financing the whole amount with a "no prepayment penalty institution" and then the following month making your $3,000 down.
$2000 most banks would do as an unsecured loan.
07-22-2009 04:38 PM
Oh man, really? I did not know this! I thought that for TU, EX, and EU scores having loans that are paid in full and on time is a very good and it boost credit score. On the other hand what is all advertisement of auto dealers claiming that they report payments and build the credit?
07-22-2009 04:50 PM
Sorry, I did not get you, I am a bit slow in financial concepts
You mean I get a 5000$ loan from a bank that does not have prepayment penalty, next month I pay 3000$ and the remaining in next months?
The question is "is there such a bank that gives zero down loans?" I thought hat down payment is a very positive point that increases my chance in getting loan? The fact is although my credit scores are almost good, I do not have a long histoy of credit, and also my credit limits are not high, so do I have chance to find such a loan?
07-22-2009 05:09 PM - edited 07-22-2009 05:10 PM
There's a lot in those last two posts, I'll try to cover everything. Yes, it's great for your credit file to have any on-time paid off credit transation reported, future lenders will be more comfortable extending you credit as you've proved you can responsibly handled different types of credit. However, also understand that not all types of credit affect your FICO score equally, as the formula weighs revolving credit more heavily than installment credit. That being said, the score is just one factor in a credit decision, there have been several threads this week alone of people getting denied credit with 760+ scores. What's in your credit file, good and bad, is just as important as the score itself.
As far as the loan goes, usmc58555's point was that banks are in business to see a return on investment, and most lending institutions won't recover enough return on a secured loan that small (i.e., $2000) to make it worth their while to lend it. In other words, with a loan that small, it will probably be repaid fairly quickly, with little interest paid. This is why we brought up unsecured personal loans. When he mentioned a prepayment penalty, sometimes lenders put prepayment penalties into loans, again basically to secure a return on investment, where you pay a predetermined amount in addition to the early payoff. Your described scenario was correct, you get a loan for the whole amount, pay what you would have used for the down payment as your first month's payment, and then pay the rest as you planned. That being said, even finding a lender that will do a $5000 used car loan will be difficult, many have a $7500 minimum. Unless you have a pressing need for the car, I would suggest just continuing to save, and buying the car with cash.
07-22-2009 05:21 PM
Thank you joeBjay, yes, great information. it was very helpfull.
After a lot if research I got to these conclusions:
1- Save money for one or two month more and pay car in cash,
2- Or I could find some dealers that leaves an small amount of money for next two or three months and also they put a loan paid report in my credit account
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