Best answer from question by Danielle B:
Answer by greasymadness
That’s just the way the credit markets are right now–very slow. I have a friend who was turned down for a 3000 dollar dental loan. She has a credit score of 760 and makes 85000 a year. If credit markets were normal, she would have had no trouble getting this kind of loan.
A lot of banks are holding bad assets right now. However, nobody knows who is holding what, so any one of them could go bust at any time. As a result of this lack of information, banks are lending very warily to each other right now. As a result it’s tough to get traditional financing for anything other than a first-time home purchase right now.
You might want to try going through prosper.com. Tell your story and see if you can raise the cash. Otherwise, you may just need to find a second source of income until credit markets improve.
My friend, why do you have a loan at over 20% interest if you have a good credit score and excellent payment history? I have a couple of suggestions:
1. Avoid going to multiple places looking for credit. Too many hard inquiries on your credit bureau will damage your score.
2. Read the book The Total Money Makeover by Dave Ramsey. You will find out that debt is NOT a tool, it is designed to make banks rich.
3. Sell this vehicle, rid yourself of this ridiculous loan, and buy yourself a good used vehicle for a couple thousand dollars. Then continue making “car payments” into a savings account, say $ 300 per month for the next year. At the end of one year, you’ll have $ 3600 in cash. Sell your used beater for about $ 1700, add in the $ 3600, and you can now go buy a car for $ 5,300 in CASH.
If you like, continue saving the $ 300 per month for another year. Take that $ 3600, sell your existing car for about $ 5000, and you can now go looking for a vehicle worth close to $ 9000, and pay CASH for it. No interest, no stupid payments, no refinancing. Do that for as long as you like.
Think about it, in four years you could be driving a $ 15-16,000 car you paid cash for, instead of fighting interest payments on something that starts to lose value the moment you buy it.
Sounds like you have been taken advantage of by a disreputable car dealer. They really take advantage of people who are not in a habit of negotiating; sadly most Americans are not in the habit of negotiating.
Go to a credit union and see if you can get the car refinanced. I have had extremely good experiences with credit unions over banks for car loans, interest paid on deposits, etc. You will find the banking experience more compatible there than with other financial institutions.
You’ll have to look for a credit union that you can join, as many have certain qualifications, like union membership, school teachers, federal employees, military personnel, etc. But look, ask, etc. because many have exceptions to the rule and are happy to have new accounts.
Good Luck, you deserve a break!!!
First of all, it appears that you have been applying all over the place to various companies to get refinanced. Every time you do this, they run hard inquiries on your credit profile and each of those inquiries causes your credit score to go down. If you’ve done many of these applications then your credit score is likely to be a lot lower now than the range you quoted. Each lender that you apply to will be able to see that you’ve been applying to all these other places for credit and that you’ve been declined. That will raise a red flag and cause them to decline you also.
The other thing you should realize is that you recently financed a car at a 20% interest rate and the loan is only 7 months old. This and the depreciation means you are way upside down in that car right now and owe the original lender far more than what the car is worth. It is unlikely that any lender is going to touch that loan. There is too much negative equity because you haven’t been paying on the car long enough.
I also don’t understand why you took a 20% interest rate on an auto loan when you have such decent credit scores. Hopefully you realize that you could have done much better than 20%. Did you shop around before accepting that financing offer?
I’m afraid you’ve put yourself in a tough situation by buying that car. The banks and credit unions all now have more strict requirements for loan applications, and the fact that you now have all those other inquiries on your credit will not work in your favor if you apply with them to get a loan right now. I suggest that you stop applying for more credit for the time being and give your credit some time to recover from all these inquiries. Sell the car and use the cash to pay off the loan early and start over with a cheaper used car. Hopefully there are no prepayment penalties on this loan, but given the shady person that the car dealer obviously is, it probably does. Sorry to have to tell you this but that dealer gave you the royal screw.
Most likely you are being rejected because you are upside down in the loan, and the loan amount you are needing exceeds what the car is worth, and what they could sell it for if they had to repossess it. You have only been paying 7 mos (not even a year!) on a 6 year loan…that isn’t even long enough to make a dent.
I would say you aren’t going to get refinanced at this time, and by going and having multiple places running your credit you are actually hurting your credit score.
Obviously you got a car loan with 20% interest because of your credit rating. It hasn’t changed that dramatically in 7 mos to warrant a reputable place financing you.
You should have started with banks/credit unions and bypassed the online “lenders.” One factor is how old the car is, how much your current balance is and what the current market value of the car is. If you put little down, depreciation may make the car worth less than your current loan balance.
Well for one your car is most likely worth less than you owe on it and at 20% interest over only 6 months you owe very less than what your loan was for. Next your rating has dropped because of you applying for loans
Your best bet is to go to a credit union first- they tend to be more lenient and offer better rates, usually. What you are describing about your situation does not add up at all. If you really have 650-700 for a score, been at your residence for 3 years, had a STABLE employment history for at least 2 years and make more than enough money- you sould have a much lower interest rate.
Also, a good place to check is…
http://www.knowledged.info/go.php?link=auto
Hope that helps.