- October 29, 2023
- Posted by: legaleseblogger
- Category: Related News
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IÔÇÖm in the process of purchasing a 2020 Kia Sportage, which is valued at around $17,000. However, there’s an interesting twist to this situation. The car actually belongs to my father, and I have been driving it and making payments for his loan and insurance for several months. In essence, it feels like my own car, but unfortunately, that doesn’t hold much weight when it comes to applying for a loan.
I initially applied for a car loan at my credit union about a month and a half ago, but unfortunately, I was rejected. The reasons they listed were primarily related to my credit age and my existing debt. Surprisingly, the length of time I’ve spent at my job wasn’t mentioned as a factor.
Let me provide you with some background information about my financial situation. I am 22 years old, earn an annual salary of $63,000, and have a credit score of 730. I have been employed at my current job for nearly six months and have plans to stay for an extended period, especially considering I receive quarterly raises during my first year of employment. My only existing debt consists of $27,000 in student loans, which I will start repaying in January. However, I will be able to reduce this amount to $22,000 soon thanks to an inheritance. Additionally, I have a credit card that I consistently pay off in full every month.
Given my circumstances, I am unsure about the best course of action. On the one hand, I am already driving and paying for the car, proving that I can afford it based on my salary. However, I cannot convey this to the credit union. Should I simply wait until I have spent more time at my job? Is it necessary for me to reduce my student loan balance? While my parents are open to cosigning if absolutely necessary, I would prefer to avoid that option. One of the primary reasons for wanting to buy the car rather than continue paying my father is that I currently pay him $300 per month, and with a decent interest rate, my monthly payments should be lower.
I am feeling quite frustrated as I simply want the car to be officially mine. Any advice in this situation would be greatly appreciated.
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****** just grabbed a
*”The biggest reason for wanting to buy the car instead of just continuing to pay my dad is that IÔÇÖm paying him $300 a month right now, and if I get a semi-decent interest rate, that payment should go down.”*
You are 100% wrong about this. Just keep doing what you’re doing until you have a better credit score, less debt and more of a credit history and then re-apply.
Problem is, you arenÔÇÖt going to get a semi-decent interest rate if you were straight up declined for that loan because of your debtÔÇöeven with your credit score. YouÔÇÖre wanting to increase your debt to $37k on $63k in income. ThatÔÇÖs high when credit is tightening, rates are high, and housing costs are high as well.
If you can afford the current situation, itÔÇÖs probably better than the alternative *if* you could get approved. YouÔÇÖre in a good situation with a good car. Pay down your debt, work on establishing a longer credit history, and be patient.
> My parents would be willing to co-sign if absolutely necessary, but IÔÇÖd rather not do that.
Maybe reconsider this option? Because your current situation – you making payments on your father’s loan – is essentially the same thing, isn’t it? Dad is responsible for the loan if you’re unable to make payments for any reason. And that’s the same basic situation if he co-signs a loan with you as well.
Confused why your dad doesn’t keep it in his name, you continue to pay, then he “sells” it to you for a nominal fee once the car is paid off.
A lot of lenders have tightened up their lending requirements because the auto bubble is about to pop. ItÔÇÖs probably a combination of age and credit history or lack thereof. ÔÇö wait it out. Meanwhile save more money and potentially buy it outright or have a larger down payment.
Even with a great credit score, interest rates are high right now. FYI
Any chance your father and you could continue your arrangement? Assuming he doesn’t need a lump sum – just continue paying for the loan until it is completed and then transfer ownership. Provided you trust him, seems like the best outcome.
Is the vehicle currently being financed by your father? Does he want out of his loan? I would guess that if it’s still financed by him, his current rate would be lower than what you qualify for. Rates have been 7-8% for used tier 1 credit which it sounds like you don’t have. So expect a 10%+ even if you qualify.
If your father isn’t in a rush to get off the loan or owns it out right. Just come up with some sort of buyers agreement and keep paying him what you already are. Just ensure that the title will be handed off when payments complete. Take a hundred out of that 7k a month to help offset your monthly owed. Or pay it immediately and continue the $300 to really pay it off quickly. 17k owed at $300 a month ends in 5yrs. 10k owed at $300 month ends 3yrs.
The loans you’re not paying yet may be affecting calculated DTI. Lenders may use their own formula to (over) estimate your monthly payments.
The new payment will be higher than 300 for sure
If you have $7k, and are looking at a $5k windfall, can you save up the other $5k and just pay it off in cash and have your dad transfer the car to you? If you can save that much in a year that would save you the hassle of qualifying for the loan and paying the fees and interest.
Just pay your dad the $300 a month.
Try another lender. I’m skeptical you’d be able to get a better interest rate though.
Among the factors that other commenters made, used car loans are riskier for lenders.
You should apply with a different lender. Just cause one girl doesn’t like you doesn’t mean no one will ƒÿë
You can likely get a car loan but if you only have 1 credit line on your file (besides student loans) you should expect to pay around 12-20% interest because you essentially have no history. Time at the job is a factor but if you’ve got continuous work history it won’t be too relevant
I assume your dad has a new car loan on it? New car loans are always a better interest rate than used car loans. But if you’re putting $7k down, I assume you just need to borrow $10k? You might be better off just getting an unsecured personal loan instead of an auto loan. I’ve had luck getting decent rates on ~$10k loans from Lending Club and Marcus.
To me its a bit crazy you didnt get approved. Thats a decent credit score and a sizable down-payment. Not much you can do to improve your credit score faster than you are i think.
Keep paying as you are.
To build your credit: Get a credit card in your own name. Use it for gas. Pay it off in full every month.
A few options I see:
1. Shop around other places for a loan; credit unions can have weird requirements or underwriting for loans. Somewhere else may not ding you as hard for the young credit age.
2. Wait until the inheritance money alters your debt to income ratio and re-apply; this will also get your credit a little older and allow you to save up more for the down payment.
I know you want your payment to go down and to own it yourself but interest rates suck horribly right now, so it may be better that you are fake leasing it from your dad until you can get a deal that’s right for you. Good luck!
$63k income
$27k student loans
$17k ÔÇ£car loanÔÇØ
$7k in savings.
Do you still live with your parents and do you have any other non-retirement savings beyond the $7k?
DonÔÇÖt buy a Kia. Even if this isnÔÇÖt one of the affected models, the idiot criminals who steal them donÔÇÖt care enough to check beforehand. They just see the Kia badge and go for it.
Will your car get stolen? No. Will it constantly get broken into? Yes
Insurance will also be more expensive because of this reason. (Hyundai is a similar story but not as bad)
How much is the car actually worth? private sale?
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Was it denied because of your credit history or because it’s a $17k used kia sportage?
TheyÔÇÖve done you a favour, donÔÇÖt buy a Kia!
You can afford a 7000 dollar car. Buy a 7000 dollar car. Car loans and leases are for people usually living beyond their means. DonÔÇÖt start that crap now, you are already 27k in the hole.
isn’t this one of the kias that can be stolen easily ?
lender might have done you a favor.
For real, why people even take loans for cars…
Switch to a bike. Healthy, save environment, problem solved.
You can try taking out a personal loan for $10K. You can also check out light stream; they do loans for private party purchases, which is essentially what youÔÇÖre doing. Most banks do not do loan on private party purchases. Alternatively, you can payoff the car entirely, then transfer it to your name, and then take out a loan. Oddly enough, banks have no issue lending on a car you already own.
What interest rate is it currently on?
Buy a cheaper car or put more down
What interest rate were they gonna give you? Did they mention or just flat out reject you? My girlfriend got her car from the dealership financing. They use a system that checks with a lot of banks and finds one that’ll give out the loan for an okay ish interest rate depending on how good your credit it.
I don’t think lenders have any way to know how long you’ve been at a job, I didn’t ever provide any documentation of that so unless something weird is going on, that isn’t a factor. The lack of credit history and the debt to income ratio is more likely the real issue. Also, what percentage of the credit card you use each month can affect the score, so getting a higher limit or another card could help. (A hard inquiry will temporarily drop your score a couple for a few months, but if you’re using most of your available credit, it will help overall.) Aside from that, don’t bank on low interest rates. Even 5 years ago, refinancing a used car for under $10,000 had fairly high rates, used cars and lower amounts tend to have higher interest rates for whatever reason.
You dad could just put the car if you name, you can pay him to continue paying for the loan if you want the car to be “yours”
You got one quote for a loan and got rejected. So what, apply somewhere else. You do not need to be loyal to any financial institution, because they sure as hell have no loyalty to you. Apply around and take the best terms you possibly can.
You’ll have to put your own insurance policy on the vehicle once its switched over in your name. Have you checked rates there? it could be another car payment in itself.
As much as you want to put ownership on the car, i would ride the wave if you can making monthly payment to your father, maybe do the maintenance & keep it clean as if it was your own.
What interest rate is your dad’s loan currently? Chances are you will not get anywhere near that. You may be better off just letting your dad carry the loan he has.