Americans Are Borrowing More To Buy Cars – But Should They Be?

Tiffany Franc, an attorney in Towson, Md., was surprised when she and her husband had no trouble getting a car loan last October. They had completed a short sale of an investment property in June, and short sales typically damage credit substantially.

They were purchasing a used 2013 Dodge Avenger. They went to their credit union and were approved for an auto loan at 5%. Franc says the 5% rate was “phenomenal” since their credit tanked after the short sale. Yet, they got an even better rate in the end.

“At settlement, our loan ended up being 3.74%,” Franc says. “We received a 0.25% interest reduction with auto debit from my checking account.” The average 60-month new auto loan cost 4.08% when she was in the market, according to Bankrate.

Franc’s story isn’t unusual in today’s market. Credit has become easier to obtain, even for borrowers with lower credit scores. And according to a Feb. 25 report from TransUnion, a credit and information management company, consumers have been taking on increasing amounts of auto loan debt for almost three years straight. The average borrower had an auto loan balance of $16,769 at the end of 2013. Auto loan debt hit a low point in early 2010 at just $14,764 per borrower, and has been increasing ever since.

Why Consumers Are Taking out Larger Auto Loans

Average interest rates on 60-month new car loans are 4.2% right now, according to Bankrate. At this time last year, the same loan cost 4.09%. But back in 2009, this loan cost consumers 6.91%.

Lower interest rates make it less expensive to borrow more money. On a $17,000, 60-month new auto loan at today’s 4.2% average rate, you’ll pay $315 a month and a total of $1,877 in interest over the life of the loan. Back in 2009, at 6.91%, the monthly payment would have been $336 and the total interest expense would have been $3,154, a difference of $21 per month and $1,277 overall.

Consumers aren’t just taking out larger auto loans, they’re also taking out more of them. The number of loans increased by 3.5 from 57 million to 60.5 million last year. One reason for the increase in loan volume is probably the increase in auto sales, which increased to 15.6 million last year. That’s a 7.6% increase from 2012, and a 50% increase from 2009, when annual sales were just 10.4 million. Edmunds predicts even higher sales in 2014. The increase in sales could be increasing both the number and average balance of auto loans.

“Higher prices of both new and used vehicles make for larger car notes,” says Terry Anderson, partner and manager of Auto USA, which consists of two used car dealerships in the Dallas/Fort Worth area. “The new car business is not quite as generous with rebates as a few years ago,” he says, and manufacturers such as GM are no longer flooding the market with inventory, then discounting heavily to make sales. “The price stability has trickled down to the used car business,” he says.

Consumers may also be taking on more auto loan debt, because they’re feeling better about the economy. The unemployment rate fell from 7.9% in December 2012 to 6.7% in December 2013, and consumers are feeling more optimistic. US consumer sentiment has averaged 71.0 since 2008, according to Thomson Reuters/University of Michigan’s overall index of how consumers feel about their personal financial situations and the overall economy. February’s 81.6 measurement is significantly above that average and about 10 points higher than one year ago. Consumers tend to spend more when sentiment is up.

With improvements in the economy, consumers who were finally able to refinance their mortgages gained enough breathing room in their budgets to afford car payments, and consumers who couldn’t afford cars over the last several years finally started buying.

Hacking & ID Theft: Are you next?

At least 110 million consumers were affected by the hack involving Target and Neiman Marcus retailers. Whether or not millions more will have their identities manipulated and finances ruined within the coming months due to more breaches of security at other stores is anyones guess, says identity theft recovery expert Scott A. Merritt, CEO of Merritt amp; Associates and author of Identity Theft Dos and Donts.

Before you become a victim of identity theft, Merritt offers this tip to guard against it:

bull; Understand how and where it happens. Identity theft is like being robbed when you are away from home; most thefts occur in places where you do business every day. Either a place of business is robbed, a bad employee acts improperly or a hacker breaches the office through the computer.

FCA regulated brokers could be missing out on full advice

Secured loan packager, V Loans, has reminded brokers that even though they might have full authorisation for regulated mortgage contracts, they must apply for interim permissions with the FCA in respect of consumer credit activities.

According to Operations Director, Marie Grundy, there are circumstances that could stop a regulated broker from providing the right advice.

She said:

In discussing a consumers financial position, particularly in relation to consolidating debt as part of a remortgage application, it might become apparent that it would be better for the client to retain the existing mortgage and look at a second charge loan. However, without interim permissions from the FCA, introducing a client to a second charge lender or a specialist packager like us will not be possible.

GroupMe Founder Gets $3.4M to Make Small Business Loans More Accessible …

In the past five years, the number of bank loans under $1 million has dropped by more than 20 percent. This puts small business owners, arguably the driving force of our economy, at a severe disadvantage when it comes to starting a business.

But Jared Hecht, co-founder of startup success story GroupMe, alongside cofounders Rohan Deshpande and Andres Moran, is today launching a totally new service called Fundera, built specifically to facilitate small business funding through alternative lending.

Fundera has received a total of $3.4 million in funding from Khosla, First Round Capital, Lerer Ventures, SV Angel, and various angel investors including Strauss Zelnick, Rob Wiesenthal, David Rosenblatt, and David Tisch.

Fundera is an online marketplace for small business loans. Once SMB owners are on the platform, they can fill out one common application with information on how long the business has been in place, annual revenue, approximate credit score, accounts receivable, among other data points.

Once theyve filled out the necessary information, it only takes seconds to be pre-approved and matched with potential lenders.

Instead of harassing big banks, getting rejected, or (in the best-case scenario) getting approved and waiting months for the cash, Fundera allows entrepreneurs to secure the funding they need in days.

It all started when Hecht saw his cousin-in-law, Zach, struggling to raise funding to open a third restaurant in his thus-far successful Fusian chain of restaurants. After multiple attempts, Zach still couldnt secure a loan from a bank, despite having a profitable business.

Once Hecht started investigating the situation, he realized that the alternative lending space is growing rapidly, but has yet to be touched by the efficiency and transparency of the internet.

And so, Fundera was born.

Unlike the traditional model, which taxes between 5 percent and 15 percent on the borrower side, Fundera only receives a 1-3 percent origination fee, from lenders only. But where does the money come from?

In small business lending, alternative lenders source capital through a variety of sources: credit facilities from banks, institutional investors, hedge funds, private equity, family offices, and accredited investors, explained Hecht. The higher risk that lenders assume is reflected in their respective pricing.

In beta testing, the company has matched 200 business owners with lenders and facilitated nine loans.

Big bank loans to Santa Cruz County small business down 60 percent

Editors Note: This is the first of a three-part series on small business lending in Santa Cruz County. Today: Loans from big banks down 60 percent.

SANTA CRUZ — Three years after the worst of the recession, lending by the nations largest banks to small businesses in Santa Cruz County has grown at a snails pace, similar to the state as a whole, prompting the California Reinvestment Coalition to call on regulators to allow banks to make good loans.

Alan Fisher, author of the coalitions report, found bank loans to California small businesses in 2012 were off 60 percent from 2007, before the economy crashed.

In Santa Cruz County, loans to businesses with annual revenue of less than $1 million totaled 2,440 in 2012, compared to 2,389 in 2009 and 7,237 in 2007.

Women and people of color owning a business found it difficult to get a loan guaranteed by the US Small Business Administration. Only 14 percent of SBA loans were made to women, only 11 percent to Latinos, according to national statistics for fiscal 2013.

Credit needs of the smallest businesses are being ignored, according to Fisher, noting the average SBA loan grew from $165,723 in 2007 to $498,971 in 2013.

In Santa Cruz County, banks made 5,441 business loans for less than $100,000 in 2012, compared to 17,696 in 2007 and 5,759 in 2009.

In low- and moderate-income areas of the county, banks made 1,170 loans in 2012 compared to 3,413 in 2007 and 1,019 in 2009.

Business owners have been turning to merchant cash advance firms, some of which take 25 to 30 percent of the borrowers credit card sales, charging the equivalent of 60 percent interest on an annual basis.

Small businesses normally create two out of every three new jobs in our country but, without banks lending again, we wont see a strong recovery, said Fisher.

He analyzed loan data filed by the nations largest banks with the Federal Financial Institutions Examination Council. As a result, his report did not include Santa Cruz County Bank, which made the most SBA loans in Santa Cruz County in 2012 and 2013, or Santa Cruz Community Credit Union, a significant SBA lender locally.

REMEDIES

Fisher offered several remedies. He suggested regulators focus on the community credit need rather than compare a banks small business lending to its peers. He urged the Consumer Financial Protection Bureau to write regulations required in the Wall Street Reform Act to collect small business loan data including race and gender and make it accessible to the public.

In Santa Cruz County, Wells Fargo made 972 small business loans in 2012 for less than $100,000. That was more than any other national bank, but down from 2,004 in 2009 and 2,630 in 2007.

Bank of America led the national banks in boosting loans to Santa Cruz County businesses with less than $1 million in revenue, from 882 in 2007 to 1,671 in 2012.

In that same category, loans to county businesses with less than $1 million in revenue, US Bank reported increases from 69 in 2007 to 209 in 2012.

Lenders are wary of making long-term loans at fixed rates when interest rates, which have been at historic lows, are expected to rise.

Wages locally have been stagnant, consumer spending flat and many business owners have been, not surprisingly, cautious.

Wells Fargo

Were still post-recession, still digging our way out, said Sandi Eason, Wells Fargos business banking manager for Santa Cruz and Monterey counties, noting business owners have been cautious about borrowing. But things are getting better.

She said her team posted a record year for business loans, SBA and conventional, in 2013, a year not covered by Fishers study.

SBA loans of less than $150,000 are more affordable now, she noted, because the SBA is waiving guarantee fees, a policy that began in November.

Wells Fargo is stepping up its commitment, Eason said, by offering a SBA loan with a fixed interest rate and 25-year term, geared for business owners who want to stop paying rent and buy their building. Its more common for business owners to be offered a shorter term with a balloon payment that must be refinanced, a risky choice when interest rates are expected to rise.

Bank of America

Bank of America does not lend to startups, requiring a business to be in operation for two years and gross $250,000 in annual revenue.

However, practice solution loans can be tailored for doctors, lawyers, accountants and dentists who run their own business, according to Whitney Chen, Bank of America small business relationship specialist.

Weve actually expanded in last two years, she said, noting three small business teams are working in California.

Much of the work is done over the phone, with a toll free line, 866-953-2481, dedicated to small business inquiries rather than at brick-and-mortar branches.

For those seeking a loan of less than $25,000, Chen recommends a business credit card with no annual fee, no interest for the first seven months, and rates after that ranging from 11.24 to 21.24 percent.

Teri Charest, spokeswoman for US Bank, said, We have made a special emphasis on increasing the number of loans, focusing on increasing the number of smaller dollar loans we approve through our SBA Division.

Follow Sentinel reporter Jondi Gumz at Twitter.com/jondigumz

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GroupMe Founder Gets $3.4M to Make Small Business Loans More Accessible …

In the past five years, the number of bank loans under $1 million has dropped by more than 20 percent. This puts small business owners, arguably the driving force of our economy, at a severe disadvantage when it comes to starting a business.

But Jared Hecht, co-founder of startup success story GroupMe, alongside cofounders Rohan Deshpande and Andres Moran, is today launching a totally new service called Fundera, built specifically to facilitate small business funding through alternative lending.

Fundera has received a total of $3.4 million in funding from Khosla, First Round Capital, Lerer Ventures, SV Angel, and various angel investors including Strauss Zelnick, Rob Wiesenthal, David Rosenblatt, and David Tisch.

Fundera is an online marketplace for small business loans. Once SMB owners are on the platform, they can fill out one common application with information on how long the business has been in place, annual revenue, approximate credit score, accounts receivable, among other data points.

Once theyve filled out the necessary information, it only takes seconds to be pre-approved and matched with potential lenders.

Instead of harassing big banks, getting rejected, or (in the best-case scenario) getting approved and waiting months for the cash, Fundera allows entrepreneurs to secure the funding they need in days.

It all started when Hecht saw his cousin-in-law, Zach, struggling to raise funding to open a third restaurant in his thus-far successful Fusian chain of restaurants. After multiple attempts, Zach still couldnt secure a loan from a bank, despite having a profitable business.

Once Hecht started investigating the situation, he realized that the alternative lending space is growing rapidly, but has yet to be touched by the efficiency and transparency of the internet.

And so, Fundera was born.

Unlike the traditional model, which taxes between 5 percent and 15 percent on the borrower side, Fundera only receives a 1-3 percent origination fee, from lenders only. But where does the money come from?

In small business lending, alternative lenders source capital through a variety of sources: credit facilities from banks, institutional investors, hedge funds, private equity, family offices, and accredited investors, explained Hecht. The higher risk that lenders assume is reflected in their respective pricing.

In beta testing, the company has matched 200 business owners with lenders and facilitated nine loans.

Ohio Nissan dealership specializes in bad credit car loans

BOARDMAN, Ohio, Feb. 26, 2014 /PRNewswire-iReach/ — Having a reliable vehicle is essential to everyday life for most Americans. But for people plagued with bad credit, securing a loan for a trustworthy automobile can seem impossible. The professionals at Boardman Nissan take pride in offering car loans to individuals in bad credit situations.

(Photo: http://photos.prnewswire.com/prnh/20140226/MN72581)

By simply getting in touch with someone at the dealership or applying online, individuals in the township of Boardman, city of Warren and the surrounding Ohio communities can be on their way to getting a new or used car. Boardman Nissan also offers the New Chance program which focuses on getting people behind the wheel of a reliable vehicle no matter their credit situation. This program helps people out that have been affected by foreclosure, judgements, collections, repossessions or other situations.

The professionals at Boardman Nissan are proud to offer their services to a wide area of consumers as well. This is why people searching for car loans in Warren, Ohio oftentimes make the short drive to Boardman Nissan. The staff on hand excels in getting people in the right vehicle for them, and getting an affordable rate that isnt going to put them back in a difficult situation.

Boardman Nissan offers the full lineup of new Nissan vehicles, in addition to a large selection of pre-owned automobiles as well. The dealership has a full service center and stocks or can order parts for customer vehicles.

To get in touch with one of the professionals at Boardman Nissan, consumers are encouraged to call 866-879-5141. The dealership can also be reached online at www.boardmannissan.com.

Media Contact: Matt Wickwire, Boardman Nissan, 866-879-5141, mwickwire@boardmannissan.com

News distributed by PR Newswire iReach: https://ireach.prnewswire.com

SOURCE Boardman Nissan

Car loan: Top 10 frequently asked questions

Most of us prefer to get our car purchases financed. Car loans can be easily availed through either your own bank or even other banks. However, there are a number of frequently asked questions regarding car loans. Here are top ten of those answered.

1) How to get a car loan?

You can compare the best offers from various banks and apply online within no time. You will be approached by the bank staff later to process the loan as per your eligibility.

2) How much loan will I be eligible for?

A lot of financial institutions offer up to 90 per cent of the car value as auto loan. However, the final value might vary with lender. They check factors such as vehicle cost, type and value in second hand market while deciding the amount of loan to offer. Some banks might even lend 100 per cent of the car value.

3) What are the documents required and what is the processing time?

Like any other product, you would require to submit your identity, address and income proofs along with the loan application. After submission of the documents, it takes about 3-7 days for processing the loan and getting it sanctioned.

4) Can interest rates be negotiated?

Yes, interest rates for car loans are not fixed. They can be negotiated. If you are loyal customer to a bank and have made regular payments for previous loan(s), they might consider and revise the existing interest rate for you.

5) Is there an option in choosing type of interest rate?

There are two types of interest rate offered – fixed and floating just like a home loan. You can choose the bank which offers the one you need.

6) What is the tenure for car loan?

Typical tenures for car loans range from 1-5 years. You can opt for a lower tenure loan if you can service a higher EMI (equated monthly instalment) or a higher tenure loan if you cannot afford high EMI. Some lenders also offer loan tenure up to 7 years.

7) Will my loan application be rejected?

There are chances of your loan application getting rejected if you have a bad credit score. This might happen if you have applied for loans/credit cards multiple times, defaulted on EMI payments, etc. If this is the first loan application, other factors such as income, organization, etc. will be considered.

8) How to pay EMIs? What about pre-payment?

You can pay EMIs either through post-dated cheques or request the bank to debit your account every month through ECS (electronic clearing system) option. In car loans, though you are not allowed to make part payments, you can pre-pay the entire loan after 6 months to 1 year. However, make sure you check with your bank upon this rule. If you pre-pay before this period, there will be a penalty of 2-4 per cent on the outstanding amount.

9) What if I dont pay EMIs on time?

You need to make EMI payments regularly. Most of the banks allow you to miss one or two payments. However, beyond that you may be treated as a defaulter. They would have the authority to seize your vehicle. Also, in case you default on the payment, your credit score will also take a hit and reduce your chances of loan eligibility in the future.

10) Can I get loan to purchase a used car?

Yes, financial institutions offer loans to purchase used or second hand cars. However, interest rates would be slightly higher for such vehicles. Other factors such as repayment capacity, car value, etc. would be considered as they do for a new vehicle.

InvestmentYogi.com is a leading personal finance portal.

Disclaimer: All information in this article has been provided by InvestmentYogi.com and NDTV Profit is not responsible for the accuracy and completeness of the same.

Spring Clean Your Auto Financing With MONEY FCU

If youre looking for a car loan this spring and you live in upstate New York, youll need to look carefully, because a lot of banks are raising their rates and charging more interest than you need to pay. MONEY Federal Credit Union, on the other hand, is keeping its auto loan rates low and offering a number of incentives that will help you save money.

If you live or work anywhere in Onondaga, Oswego, Cayuga or Madison counties, MONEY FCU is ready to help people save thousands of dollars this spring with a variety of offers and options.

Low Rates With Discount Opportunities

The best asset MONEY FCU has to offer is its extremely low rates on auto loans, starting at just 1.99% APR for a wide range of terms. Because MONEY FCU is a member-owned non-profit credit union, it can beat most larger banks when it comes to saving you money on your loans.

Members of MONEY FCU can lower their auto loan rate further still with the credit unions royal members discount. Qualifying members with a three-year-old account with the credit union  and more than three products with the credit union, beyond a regular savings account, can qualify for a 0.25 percent rate reduction.

Available Long-Term Loans

MONEY FCU offers car loans for any period of time from one to six years, while many banks wont offer loans that last longer than 60 months. With a full 72 months to pay off your loan at such a low rate, you can keep your monthly payments affordable. These lower payments might also help you afford a nicer car than you thought you could purchase.

MONEY FCU can also be flexible about down payments, lease buyouts and other options that can make your car purchase or refinance much easier.

Fast Approval Times

To get a loan with MONEY FCU, you can start the application process online or call their loan officers for help if you have specific questions. Since the credit union prides itself on efficiency and approving as many applicants as possible, MONEY FCU helps consumers navigate the loan process every step of the way to make sure everything is done right the first time.