September 2nd, 2010
Traditionally, the companies mentioned earlier do not even contact or go through the lien holder. The seller still remains liable for the payments, whether or not an application is submitted. This arrangement allows the owner to monitor his own payments so he is actually more secure, as is the lien holder.
The companies contend that under the Uniform Commercial Code, Article 9. Section 311, the owner of a vehicle has the right to assign his property regardless of provisions in the original purchase contract by the lien holder (which might claim such a transaction to be in default).
The lender will always hold the original owner primarily liable for payments. Even though the payments are submitted by the buyer, the lender will still acknowledge the seller as the driver and owner of the vehicle. This is because the assignment agreement is between the assignee/buyer and assignor/owner, and not between the assignee/buyer and the lender.
When you have identified several cars that you have an interest in, you are ready to make the initial contact with the owner. Throughout this conversation your goal will be to find out if the owner is in a negative equity position (or upside down) on their vehicle. Best results are obtained if the owner is just asking for what he owes on the car. Be sure to project a professional telephone personality.
You will typically have to make twenty or more phone calls to find a vehicle owner willing to assign his vehicle. One very important thing to remember, be persistent keep calling. There are thousands of desperate people needing to get out of their vehicles in every area of the country. It’s also a good idea to call the owner back a week or so after your first contact. The longer he sees that he can’t sell his vehicle, the more eager he will be to work with you.
The owner will normally want the car out of his name. His credit is riding on your making the payments. You will need to show him that he is secure and protected in dealing with you. When meeting face to face, it is extremely important that you present yourself in a professional manner. Treat this meeting as you would a job interview. This person is essentially giving his approval of you to assume his investment.
Once you have seen the car and feel that it is what you want, you are ready to make a proposal. Explain to the owner that you earn more than enough income to afford this car payment, but you cannot get financing from a bank because of some credit problems that you had in the past or because you dont have enough credit.
Tell the owner strengths about yourself that show your stability and credibility. That should include:
The length of time youve resided in your house or in the area
The length of your current employment
Your job description or job title
Home ownership if applicable
The reason for your credit problem
If you paid back past creditors
What your income level is with bonuses, future pay raises or possibly a job promotion
Describe what makes you a good risk. Let the owner know that you are building his equity in this vehicle, until you pay it off. The more payments you make, the less will be owed on it.
Give him a copy of your credit report, personal references and a copy of your driver’s license. Allow him to verify your employment and that you make your rent or mortgage payments on time.
Show them a copy of the suggested Assignment Agreement which we will give to you at the end of the book. You want to make them feel as comfortable as possible when dealing with you and having an agreement such as this could give them that security. This agreement would be a legal and binding contract with the two of you, so having it ready is a huge advantage for both of you.
Once you have satisfied all the owner’s questions, and have subdued all fears, you need to get a commitment. If the owner will not commit and wants to think about it, find out when the due date is for the next payment. The closer he gets to the next payment, the more flexible he will become.
If the owner remains undecided, you may try offering him concessions. You could offer to make a whole payment or two payments in advance. He may request some kind of security deposit, which would be held for damages. At this point, be creative and willing to empathize with the owner’s concerns.
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August 26th, 2010
The Financing Fell Through
This is the oldest trick in the scam book, increasing in 2005. How it works is you buy a new car, the finance manager says you got a low APR, hands you the keys, and you drive home. Some time later after youve been driving the car happy about your great interest rate, the dealer calls you saying “Sorry, you didn’t qualify for that low interest”.
This is where “subject to financing” clauses on contracts bite you in the butt. Everyone thinks that you sign papers it’s a done deal. The dealer knew exactly what you qualified for before you signed, unless you lied about your income. They knew your credit score when you applied.
There is a phrase on most sales contracts stating “subject to loan approval”. This means that the deal is not final, even though you signed this contract. They’ll tell you that you must produce an additional $1000 AND your payments would go up. They pull this scam on people with bad credit, because it’s believable and they figure youll just pay up somehow so you can keep your car.
To avoid this scam, DON’T FINANCE AT THE DEALER if you have bad credit. Line up your own financing and compare to dealer’s financing. By using your own financing, you won’t endure monthly payment scams, and the deal will be based on the selling price of the car, not monthly payments.
If they start negotiating the car by monthly payment, it’s time to leave. If they keep trying to shift your APR up or down depending on whether you buy a warranty or VIN etching, it’s time to leave. But if you do finance through a car dealer, leave a deposit on your credit card, and do not take delivery of the car until the loan has been approved in writing a few days later. Then you know the lender has approved your loan.
If this scam happens to you, youll have to decide whether or not you feel you got a good enough deal on the selling price of the car. If you got a good price on the car, your best solution is to preserve your deal and get your own instant financing online.
If the dealer refuses your online check, you should try to get out of that deal. File a complaint with the Better Business Bureau at BBB.com, and file a complaint through your state’s Attorney General web site. They are all aware of Spot Delivery Scams.
The Straw Purchase
This type of scam has increased in recent years. Incidences of this typically increase when interest rates go up, and fewer people qualify for loans as lenders tighten their belts. Even though we touched on this scam earlier under the section on co-signers, it bears repeating because this type of scam can happen before you know it has.
A straw purchase traditionally refers to handgun sales. When one person buys a handgun for a person who is ineligible to own one, it’s called a Straw Purchase, carrying stiff penalties. That’s how the Columbine High School student shooters got their guns.
With car buying, the dealer tells you that with your horrible credit score, you can’t qualify for a car loan so you need to get a co-signer, plus they tell you that it will help build your credit again. The dealer knows your horrific credit score could not possible ever qualify for a loan, even with a co-signer.
So you find a co-signer who is duped by the dealer during the paperwork shuffle, and is tricked into signing as the primary borrower. Later, you find the dealer did not process a co-sign loan, the entire loan is in your co-signers name!
Obviously, this does not help your credit, even though you are paying the monthly payments, because the loan is in someone elses name, and the car dealer lied to you. State laws are vague but some states like Texas have laws against Straw Purchases on cars.
You can avoid this scam by having both signers there at the same time when the papers are being presented. Both signatures should be on the same contract. NEVER sign separate contracts. There should be a separate line item for co-signer.
A notice to the cosigner is required by the Federal Trade Commission’s Trade Regulation Rule on Credit Practices. The cosigner should ask for a copy of that before they sign it.
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August 19th, 2010
We Forgot To Pay Off Your Trade-In
You trade in your old car which you still owe money on, and the dealer is supposed to obtain a payoff figure and payoff the loan for you and add that payoff amount to your new car purchase. But something horrible happens. Some time later, you are shocked to hear the new car dealer did not pay off your old car loan as promised.
With this scam, dealers effectively pay you less for your trade than they promised or steal it altogether. When the bank calls, YOU are responsible for the loan, not the dealer. The car loan is still in your name, until the dealer pays it off. As far as the bank is concerned, they have a loan with YOU, not a dealer and it’s in your name until paid off.
Then, your credit gets dinged with late payment alerts from your bank. If you try to sue the dealer, the judge will ask to see your contract with the dealer obligating them to pay off your old car loan. Of course there will be no contract and you are making twice the payments or ruining your credit.
To avoid the scam, it is recommended first that you not buy a new car when you still owe money on your current car. If you pay it off yourself first, you can get your title from the bank, and then trade it in or sell it privately. Then you can pay off your loan with sales proceeds.
When you trade in a used car on which you still owe money in order to buy a new car, make the dealer put in writing that he will pay off your car loan in 10 days, or theres no deal. Then the dealer is liable in court for that payoff. You don’t want to end up in court without proof that the dealer was supposed to payoff your trade-in.
If the dealer refuses to put these promises in writing, it means they will probably pull this scam on you, and you need to leave immediately, taking your business to a more reputable dealer. It’s the same with houses and cars, if you call for a payoff figure, you typically have 10 days to pay off that loan or interest will accrue. Most dealers are good, but a dealer who pulls this scam should know better.
Lying To You About Your Credit Score
This scam begins with the finance manager lies to you about your credit score, telling you it was really low, so you now have to pay a much higher car loan interest rate than you thought. This scam is pulled on people with good credit too, as it works well because most people do not know their own credit score.
Avoiding this scam is actually quite easy. No salesperson should know more about your credit history than you. You need to obtain a copy of your credit report and bring it with you to the dealership. If they try to pull this scam, pull out your credit score and put a stop to it.
Oh yes, and enjoy the look on the face of that finance guy when you pull out that credit report and show him you know hes trying to scam you. Then walk out of the dealership with a grand flair!
Your Financing Check Bounced
This scam is pulled on people who have taken the time to obtain their own financing and are able to go to the dealer with a check in hand from their financing company. The dealer sees your bank draft from a credit union, or online car finance sites. Not wanting to lose the extra gravy of selling you the car dealer’s own financing, they refuse your bank draft, lying to you that “online lenders bounce checks.”
They will say “their checks always bounce, so we don’t take them”. But by golly, the dealer is more than willing to provide you financing, at higher APR. Some financing companies are almost household names and many car buyers would immediately doubt the salesperson’s lies. So the dealer may also tell you “well, they take too long to pay us”.
Some salespeople stop at nothing. If your lender was bouncing checks, you’d certainly hear about it. There’s nothing wrong with dealer financing if they can beat your best APR. If not, use your online financing.
Unless you qualify for a manufacturer’s 2.9% financing, online banks will beat the local banks used by dealers most of the time, and online lenders often beat credit union rates.
If a dealer spews out this scam and refuses your online financing, you the customer need to retain control and refuse to buy from that unethical and slanderous dealer. There are plenty of ethical dealers who eagerly accept online loans without the lies.
Tell the finance manager you’re onto their scam, and that online lenders have been in business for years and fund loans without bouncing checks. Then get up to leave.
You should also file a complaint with your state Attorney General’s office because this scam needs to be made illegal for dealers who force you into higher APR financing. if the state attorneys do not know this is going on, they can’t help consumers.
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August 12th, 2010
Well Pay Off Your Loan No Matter What You Owe
These are common ads on the radio and newspaper all the time. They rely on your brain to trick you, as if the obligations of your current lease or loan just magically vanish. You can’t just dump a lease or loan, it’s a contract. By breaking the contract, penalties are stiff, in the thousands.
When a dealer offers this to you, they do get you out of your current lease or loan, but payoff penalties must be paid to your leasing company to end the contract. The dealer is not doing any favors at all for you; they just want your trade in so they can give you far below market value for it, while selling you a new car at a high profit. Then they resell your trade in for a high price, while you are stuck paying off the debt load of 2 cars.
With this scam, if you are upside down on your car loan and you still owe $10,000 for it, the dealer pays off your loan, and then you owe that $10,000 to the dealer. This gets financed along with the $15,000 car you are buying; now you are financing 2 cars for $25,000! Your payments are spread out over 60 or 72 months so you don’t notice what just happened.
The more months they add to the loan, the lower the payments so you don’t notice. In fact, it’s possible that the payments could be less than your current loan, so you think you’re saving money when you just got shafted!
Their ad made you think that trading in a car relieves you of your obligation to that car. It does not! This gets many, many, many people deeper into financial trouble. You are actually taking on double your current debt, when you thought you were dropping one debt for another and buying a new car. They misled you.
Sure they did get you out of the lease or loan and into a new car, but you are not really out of it. They dipped you out of it and then dipped you right back into it under their umbrella of debt.
If you are in a lease or a loan now, it’s best to stay in it until the end. If you are upside down on a loan, now is not the time to trade in the car. You need to wait until the car is worth more than what you still owe on it. Try selling it privately.
By mixing a trade-in with a new car purchase, you will lose the maximum amount of money possible. Don’t ever think you walked away ahead on a trade in. No one ever has. No one ever will. If you really need to get out of your lease, shift your strategy from terminating a lease early to a strategy of transferring your lease to another buyer via an auto lease trade. You can find reputable companies online willing to do this.
Previously Wrecked Car Being Sold As Is
In this scam, the dealer tries to sell you a car that has previously been wrecked, only they tell you it’s in great shape, they lie about the wreck, or in some cases, they were honestly unaware the car was wrecked. The car has the federally required Buyers Guide sticker with the words “As Is, No Warranty” on it, which means you are buying this used car and assuming all risks, and cannot return the car, because you agreed to all accept any damages that accompany your “As Is, No Warranty”.
Even “Certified Used Cars” can be previous wrecks. Many people believe the dealer when they are told the car was never wrecked, and then they find out a few weeks later when they bring it in for service, or they run a CARFAX vehicle history report showing that it was wrecked.
When the scammed customers confront the dealer, they are reminded that they signed an “AS IS” paper, and have no recourse, because they can’t prove anything. The As Is paper is the best alibi the dealer has to fall back on. You however, have nothing to fall back on.
You really should never ever buy a used car from a dealer “AS IS” with no warranty. When you buy a used car from a private person you have no choice, it’s “As Is”. But from car dealers, try to get at least a 30 day warranty. If the car really is the cream puff they make it out to be, let them back that up with a 3 month warranty, otherwise they are just blowing smoke.
You should always run a Carfax report on any used car before you buy, and get it inspected by a mechanic. That’s the best way to find out complete information about your car. Do this at www.carfax.com.
Always have a mechanic put the car on a lift BEFORE you buy. They can tell you in 30 seconds if the car was wrecked. Many people fail to perform these crucial 2 steps. If you don’t do these steps, then DO NOT buy that car!
Fake Vehicle Escrow Service
This is actually not a car dealer scam, but it is a huge epidemic. Its a growing e-bay scam as well. Sometimes the scammers steal images from a car dealer and pose online as the car dealer. But mostly, these internet scams appear online as the seller of a used car. They place ads on Yahoo Motors, Auto Trader, Craigs List, eBay Auctions, eBay Motors. Every known vehicle and motorcycle classifieds site on the internet has been hit.
The scam begins with you buying a used car (or other product) online and you see a hot car with a selling price that is much lower than other listings for the same item. So you ask the seller a question. The seller replies with a “Dear Sir” form letter, rarely do they mention your name, it’s all scripted. It usually has poor grammar and spelling too, and the seller claims to be in Europe and cannot keep the car.
Via email, they have you outside the eBay safe harbor, or whatever site you are using. He wants you to use a particular 3rd party escrow site, “he’s used them many times already.” Unknown to you, he just created that fake escrow site only a few days ago and he’s lying. Plus, he is offering to pay shipping for the car! Do you know how much shipping is on a car across the U.S.? It’s usually about $900. That’s a big Red Flag.
They convince you to register on the “escrow” site, and you get payment instructions to Western Union or Money Gram the funds to the escrow company, then you never see your money again. No undo on the Western Union either, once your cash is wired, they can pick it up anywhere in the world in minutes.
There are many twists to this scam. They often trick you by telling you they are signed up for escrow with Yahoo Motors, or eBay or Square Trade, none of which in reality do escrow or collect money for cars. You then receive official looking spoof phishing emails that appear to be from Yahoo, Square Trade, eBay, etc., with instructions on how to pay their “payment agents” via Western Union.
The scams have the same goal, to trick you into thinking you are sending thousands of dollars to a trusted escrow company. These fake escrow sites pop up at the rate of at least a dozen per day, with thousands of scam listings and auctions running all over the internet at any time. Now that you know what to look for, they are easy to spot.
NEVER EVER use cash wiring services such as Western Union, Money Gram, E-gold, etc, to pay for purchases online. They are all dangerously unsecured networks.
Don’t use any escrow other than Escrow.com, recommended by eBay, and don’t ever believe even the most realistic looking emails sent to you, as legit institutions would never send you sensitive payment instructions, you would login to get instructions. And never use the site recommended by the seller.
When you have no credit or bad credit, its easy for people to take advantage of you, so be careful and trust your instincts. There are some guidelines for you to follow, too, when you buy a used car.
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August 5th, 2010
When you have bad credit, it can keep you from realizing your dreams. Its more difficult to buy a house, get a student loan, and get a car. When you can get credit from someone, the interest rate is usually exorbitant and you end up paying a considerable amount more than the purchase price of whatever you are buying.
The key to repairing your credit is to take an aggressive pro-active approach. It will take some time, but in the end, it will be well worth it.
The first step is to get a copy of your credit report. As we told you in a previous chapter, you are entitled to one free credit report per year when you request one at www.freecreditreport.com. Once you have the report, go over it and make a plan.
Begin by trying to resolve the outstanding debts that are showing on the report. The idea here is to make as much restitution you can toward settling the bills that have caused you to get bad credit in the first place. A horrible but old and closed bad credit item most often gets viewed better than an open current bad credit item.
How do you resolve these issues? Contact the creditors and ask about making a re-payment plan. If you have huge credit card debt, for example, often the companies will work with you to make a payment plan just so they can recover some of the bad debt.
If theres any way you can pay off the credit card entirely, that would be the best option. Ask if they are willing to settle for less than the entire amount due. They will be more likely to do this if you can offer them an amount of money that would be acceptable. In other words, if you owe $3,000 and can offer them $2,000 to discharge the debt, they are more likely to accept this than if you offered them $500.
After a certain period of time, some companies will charge off the debt owed to them. A charge off does not mean that a forgiveness of debt occurs, it only indicates the creditor has made an accounting notation that they do not believe that the debt will ever be repaid. A charge off represents a significant black mark on ones credit report.
Another viable option, although it is often thought of as extreme, is to file a Chapter 7 bankruptcy. In this context the bankruptcy paves the way to the first step of credit repair by putting an end to the old bad credit items. While bankruptcy adds its own significantly terrible credit reporting item, bankruptcy by definition will be resolved when the case ends.
In terms of a credit report a bankruptcy is not a clean slate. A bankruptcy remains a nasty item on ones credit report for as long as ten years. On the positive side, however, the bankruptcy is a clear time or line in the sand, from which the debtor can begin to rebuild. With open unresolved charge offs there is no such point in time where rebuilding can start. Open unresolved charge offs remaining glaring poor credit cavities on ones credit report.
A bankruptcy is certainly not a favorite resolution by the creditors but it shows that the debtors have recognized there is a problem and has taken some action. When you have open items or charge offs left on your credit report, it indicates that you were/are apathetic about the charges and dont care to try and make resolutions of the problems.
Once youve tried to make resolutions on the outstanding debt you have, the next step is to assess how much damage has been done and how you can go about reversing that damage. After youve paid as much debt as you can, you should get another copy of your credit report from one or all of the major credit reporting agencies. Well give you contact information at the end of the book for these companies.
You can only receive one free credit report per year, as weve said, so requesting additional copies will probably cost you a small fee, but we highly recommend this so you can better understand where you are after youve attempted to mend the past due balances.
Its very important to pay particular attention to any items that may be incorrectly reported. Many of those unfamiliar with credit reports share a mistaken belief that credit reports display a near perfect accuracy. In reality errors on a credit report occur with alarming frequency. Reporting agencies rarely verify or cross check information unless they have a specific reason to do so.
Inaccuracies on a credit report may take several forms including reporting of credit information on items which were never associated with the individual in question, items which may be related to an individual but are reported improperly or items which may be attributed to the individual but should no longer be reported on a credit report. Important personal items are often miss-reported as well including ones address, social security number and employment history.
If you discover inaccuracies on your credit report, responsibility lies with you to begin the corrections process. Letters must be written explaining exactly what the problem is and the remedy you feel is warranted.
Especially when dealing with inaccuracies, remember that each credit reporting agency maintains its own database of information. Therefore one agency might report an item properly while others report it improperly and vise versa. Furthermore, if a common inaccuracy exists with multiple reporting agencies the repair process must take place with each agency reporting the item inaccurately individually.
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July 29th, 2010
In many cases this means to remove an item that has made its way onto each bureaus agency report, you must write three sets of letters and follow the process through with all three different agencies in order to be sure an item comes off from the reports. Depending on how many incorrect items you have on your credit report, this could mean writing and sending out many letters, but you must be persistent. You deserve to be treated right!
Once notified of a problem an agency will contact the creditor or reporter of the item in question and seek a response regarding the accuracy of the item. Under the Federal Fair Credit Reporting Act if the agencies do not receive a reasonable proper response within 30 days they are obligated to follow your directives on proper treatment of the item.
Should a proper response be received the bureau may well request more information on why you believe your position be the correct one. Many people advocate dealing with only one item per correspondence.
Once you find you have completed this task follow up once again or check the report again. Just because a letter has been written and a creditor has not responded within a given time frame does not mean that the agency will remove the report without further follow up and an additional correspondence.
On the other hand keep in mind changes may take a month or more to appear on a report. While the process for proper credit reporting is in place, assuring accuracy of your own credit report rests with you.
Improving your credit score is one of the few areas of life where doing nothing can be tremendously productive. Once the items causing negative impact on the credit report have ended, the simple passing of time does wonders for your credit score.
While the advantage of improving your score with the passing of time comes in the form of non-existent effort, the disadvantage comes in that time must take its own course. Even those with the best of credit cannot buy more time or speed the passing of time. Generally the date used to trigger the passing of time in this context starts with the date of the last activity of the account.
Your strongest tool for rebuilding your credit is staying current on your payments and not defaulting on any debt repayment plans. Even though weve said doing nothing helps tremendously in rebuilding your credit, repeating poor credit habits can make things much worse. Creditors can be somewhat understanding of a bad credit incident, if it is corrected.
This can be particularly true when the bad credit originated with problems outside of the debtors control such as emergency medical bills. Repeated bad credit behavior indicates a problem with deeper roots and looks to be a stronger indication that future credit worthiness looks shaky. If you want your credit to improve, be perfect with your new credit, as well as old credit where accounts remain open.
To accelerate the rebuilding process try to have at least three active credit lines open, and be perfect with them. Car loans or mortgages count if you still make payments, as well as old credit cards if they can still be used.
If you need to obtain new credit, store cards or gas cards can be easier to obtain than major credit cards. However, if those fall beyond reach, any one can be accepted for secured credit cards. We touched on that subject earlier in the section regarding establishing credit.
Make sure when taking a new credit for rebuilding purposes that the creditor reports to the major credit agencies. Not all creditors submit information to the credit bureaus, and almost no debit card or check card issuers do, even ones with a MasterCard or Visa logo.
Use the credit you have obtained and make your payments on time. On time means never being 30 days late. At fifteen days you may pay a late fee, but late items must hit 30 days overdue before they will be reported.
Using credit does not mean abusing it; you need not run the card up to its limit. On the other hand, leaving the card in your wallet will not help rebuild your credit as much as positive usage. So, go ahead and use the credit card, just dont overspend and pay off the entire balance every billing period.
There are several companies out there who claim to be able to rebuild and repair your credit. There are also numerous debt reconsolidation companies offering their services. Are these viable solutions to your credit problems?
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July 22nd, 2010
Are you a tuner? A true tuner that isor, are you a rice boy? Yeah, you know what I mean. Serious tuners bring out the power in their cars while rice boys slap on every imaginable part to make their car look like a racer when in fact they are not. So, what does it take to bring out the power in your engine? Not a whole lot! Lets examine some helpful performance enhancing parts for your vehicle to give it a truly tuned edge.
Sorry for the pejorative term. Enhancing ones car is a very personal thing and no everyones tastes vary. Still, some enhancements add little to the cars value and can, in fact, take away from its performance. So, here are a few things you can do to add some zap to your engine:
Go Green — Yep. Environmentally sound air filters are where its at. For between 40 and 65 bucks you can get the last air filter your car will ever need. Reusable, green air filters like those made by K&N bring out the performance in your car. Made of cotton gauze material, performance air filters increase acceleration and power as it provides excellent filtration. Youll never have to buy another air filter again!
Chips n Tuners — Get the most out of your engines performance by swapping out the power chip that came with your car for one that is truly enhanced. Jet Chips can go a long way to tune your car while a Hypertech tuner can do the same thing. With the latter product, you simply plug the device into your cars under dash diagnostic connector and follow the instructions on the unit to raise performance. Later, if you want, you can detune your car quickly. Both products are street legal in all fifty U.S. states and will not void new car warranties.
Cold Air Intake — Installing this product will allow your engine to eat the air that it wants to eat. Cold air is thicker and denser and just what your engine needs to perform optimally. Install a cold air intake and your car will be tuned to accelerate and perform with much more freedom. Youll like the improvement in looks too as cold air intakes are a real stand out in any cars engine bay. Oh, yeah, get a load of its cool intake sound too!
Amazing Exhaust Systems — A crowd favorite are some of the performance exhaust systems on the market. Borla, for one, offers cat-back exhaust systems and headers made of aircraft durable A-304 stainless steel. This product will help free up your engines performance resulting in horsepower gains from 5-15%! Yeah, youll have a real edge on the road now! Check out the cool exhaust sound too.
Best of all, all four products I mentioned not only give your car more power, but they will help to increase fuel mileage. Thats right a poorly performing engine actually acts as a drain on fuel economy, so you are actually helping to jack up fuel mileage by installing parts that really can make a difference!
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July 15th, 2010
First, let us say that there are definitely reputable companies out there who can help you with bad credit and overly huge debt hanging over your head. For some people, debt consolidation may be more attractive to you when youre in trouble with debt.
Basically, debt consolidation entails taking out one loan to pay off another. The advantages of doing this include securing a lower interest rate or simply for the convenience of making just one payment per month.
Debt consolidation companies can assist by discounting the amount of the loan. If you are in danger of major default or even bankruptcy, these companies will buy out the loan at a discount and then pass the savings on to you.
If you are in serious financial trouble and bankruptcy might be your only option to recover, be aware that consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.
Debt consolidation is often advisable in theory when you are paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank.
Keep in mind that consolidation loans are dangerous for impulsive people because all you are really doing is shifting all your debt from one place to another, effectively opening another channel of credit while freeing up your credit cards.
Some people then proceed to fill up their credit cards again making double the debt they started with, and paying up to 22% on their consolidation loan because they weren’t paying attention to the APR when they signed up. Some loan companies are real unscrupulous and make it look like they are eliminating your debt, or they hide the APR from you.
The best way to consolidate your debt is to use a debt reduction program, not a consolidation loan. There are plenty of reputable companies out there who can help with this.
Try the non profit American Consumer Credit Counseling for more info. With their program, they don’t lend you money, they work with your creditors to negotiate lower APR, and you combine all of your unsecured payments into one manageable payment.
You get a reduction in your interest rate and monthly payment, which pays off your balances much quicker than you ever could on your own, because interest is either eliminated or greatly reduced.
People with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner. This will incur less interest.
In practice, many people are in credit card debt because they spend more than their income. If that habit continues, the consolidation will not benefit them much because they will simply increase their credit card balances again.
Because of the advantage that debt consolidation can offer a person that has high interest debt balances, some companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan.
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July 8th, 2010
Sometimes these fees are near the state maximum for mortgage fees. Plus, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If they do not refinance, they run the risk of losing their house, so they are willing to pay almost any fee to complete the consolidation.
Another possible scenario is that the person does not have enough time to shop for another lender with lower and may not be fully aware of them. This is known as predatory. Many, if not most, debt consolidation transactions do not involve predatory lending, but it does happen.
So what about those companies that offer to repair your credit for a fee? Some of these companies will legitimately help to repair erroneous items on your report others fall into the category of con artists and crooks.
This evil group starts off with the out right thieves – companies, which offer the world, take your money and do nothing. Avoid these by checking references including organizations such as the Better Business Bureau when applicable. Question how long they have been in business and pay attention to what theyre telling you.
If their claims sound too good to be true you may wish to be on the defensive. When possible attempt to verify answers they have given you with independent sources. Ask how much time credit repair takes. No one telling you credit repair happens instantly should be trusted.
Some organizations claim they will issue you a new social security number or create a completely new credit profile for you. Organizations of this type fall into one or two categories, those who are scam artists and liars and those who are operating illegally.
Even if an entity some how could create a new credit profile for you such an action would be completely improper under the law. Any organizations making claims of new social security numbers or new credit profiles should be avoided.
Some credit repairs organizations do follow the rules and understand the system. Even with those who are attacking items on a credit report using the proper procedures can sometimes go too far.
Either at the request of the debtor or the suggestion of the credit repair agency some companies will wage a war with the credit bureaus concerning legitimate items in the hopes that the creditor either ignores the correspondence or gives up on the paperwork required with the result that legitimate bad credit items end up removed.
Companies such as this should be avoided as well. This type of credit repair could constitute fraud and might very well be illegal. The last thing you want to do is get caught up in some type of improper activity when you are trying to get back on your feet.
The thing about credit repair companies is that everything they do, you can do yourself. All they can offer you is a way to take the burden of contacting the companies with which you have bad debt off of you. You have to decide for yourself whether or not its worth the fee youll have to pay. In most cases, it probably isnt.
In general, you should probably avoid credit repair companies although the decision should be yours entirely. If you are thinking of hiring one of these companies, be sure you do your research and dont get caught up in empty promises. There are no quick fixes in credit repair. It takes time and patience to correct your report, and more time for accurate negative items to be removed from your report.
When it comes to credit repair, you are the expert because you know your financial history the best, and can spot mistakes more easily. Instead of spending money to repair your credit, spend your money to pay down your debt. You’ll kill two birds with one stone as paying down your debt will improve your credit score, and it will save you money you would have spent on interest.
So, now that weve addressed the credit issue, what about that car you want to buy?
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July 1st, 2010
Ideally when you buy a car, you want to pay cash to avoid having payment that you cant afford. Unfortunately for many of us coming up with enough cash to buy a car simply isnt possible. When you have credit issues, this can be a huge problem to car ownership. But it doesnt have to be.
The obvious solution to this problem is to save up your pennies and buy a car once you car afford it. But what if you cant wait for a few years to save up that money? There are still some solutions!
You should first and foremost try to apply for a car loan yourself. If you go to a car lot that does self-financing, they will ask you to apply for credit with them. You will have to fill out a credit application, but dont stress out about it. They specialize in getting people with less than perfect credit financing for cars.
The downside is that you will pay a high interest rate as weve talked about before. Plus, you are limited to just the cars that they have on their lot. The upside is that you will be on your way toward getting credit established or re-established.
You may also want to consider finding your own financing. There are plenty of places that you can go to that cater to people with little credit, no credit, and bad credit who are willing to loan you money to buy a car.
The good news is that buying a car isnt a huge expenditure like buying a house is. More companies are willing to lend you money for transportation. But you will probably have to pay more in interest. The trade off is necessary when you have no credit or bad credit.
Your best bet is to apply online to a company that specializes in credit problem loans. Over the last 10 years the amount of money being loaned to people with poor credit has tripled.
Even with bad credit, you can probably still get approved for a car loan. Applying online will save time and money. There are companies on the internet that will offer you auto loan quotes from more than one lender in order to ensure that you get the most competitive quote you can qualify for.
If you are looking for an auto loan online, remember to use primarily vehicle loan companies that will help you compare quotes and offers from more than one lender. This will help you get the lowest interest rate and best terms possible. Also, make sure to fill out your application as accurately as possible in order for the lender to give you the most realistic offer they can.
Many online car loan companies have programs to finance people with bad credit history. Whether you have a recent bankruptcy, foreclosure or another adverse credit blemish, you may still be able to qualify for a car loan. Having poor credit nowadays will not keep you from getting financing. Even if you have no credit, you may still be able to get approved.
Do your homework with these companies and ask questions. They benefit by lending you money and you can benefit by being able to purchase a car! Be honest with them when communicating and you will end up in the best situation they can possibly offer you.
Poor credit auto loans make it possible for people with bad credit to buy a car. Poor credit auto loan lenders expect to be approached by people who have poor credit so they don’t set strict requirements for their loans.
With a poor credit auto loan, people with bad credit can obtain a car without all the hassle of worrying about their credit or being repeatedly turned down. Despite some benefits, though, there are also disadvantages to getting a poor credit auto loan. Both should be considered before any driver tries for poor credit auto loans.
As a plus for poor credit auto loans, they are fairly easy to obtain. Poor credit auto loan lenders tend to require that you have steady employment and a decent debt-to-income ratio.
Although they will usually look at your credit, it isn’t a major factor in the loan approval process. It does, however, dictate your interest rate as weve already told you. The poor credit auto loan lender will look at your credit history to determine how great of a risk you are. The worse off your credit is, the higher your interest will most likely be for poor credit auto loans.
Consider trying your own bank for poor credit auto loans. Since they know you better than other lenders, they may be lenient with you.
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