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What Is a Special Finance Auto Loan?

Perhaps you have seen the term ‘special finance auto loan’ online when you were shopping around for car loans. If you are not familiar with the term, what it means is that auto loans are available to people with poor or bad credit. The most recent statistics tell us that sixty percent of all consumers have less than perfect credit. These consumers are not typically allowed to borrow money from traditional banks because banks check credit ratings and flatly refuse to loan people with bad credit money. People with bad credit are considered to be ‘special’ cases, so hence the term special finance auto loan was contrived.

Special loans for auto finance are widely available today. As the economy has taken another turn for the worse, more and more people are struggling financially. Many people are falling behind on their bills and cannot pay off their credit balances on time. This leads to the fall in their credit rating, making it impossible to buy a new car, as traditional banks refuse to lend them money. However, thanks to the special finance auto loan the typical consumer who is having money troubles can drive the car of their dreams, as many lenders have emerged over the past couple of years offering to lend money to ‘high-risk’ individuals.

While a special finance auto loan may be convenient, it does has its pitfalls. The interest rates for this type of auto loan can range anywhere from 5 to 26% which is quite high and higher than what is charged by traditional banks. Another negative aspect associated with the typical special finance auto loan is the fact that the down payment required for this type of loan can range from 20 to 50%, which is also high.

Another thing that happens with the typical special finance auto loan is the fact some car dealers will inflate the prices of the cars they offer under this type of financing. This type of dishonest dealer will take a car worth $5000 and jack the price of it up to $10,000. The dealer will then require a down payment of 20% and finance the balance at 25%. The unfortunate buyer (who is often quite desperate) will then be tied into a contract with a very high interest rate on a car that is only worth half of what they paid. Plus, quite often this buyer will default on the loan which will ruin their credit even more. If the buyer is able to make the payments on the special finance auto loan they will have paid double the amount of what they would have had to pay for the same car purchased from an honest dealer at a fair price.

For the consumer with very poor credit, a special finance auto loan can seem like a God-send. A person will be able to borrow the money they need to buy a car. However, they will be paying a high rate of interest and will also have to pay a large down payment. The lenders offering this type of loan are making a whole lot of money, lending money to people with poor and bad credit, and they seem to be appearing out of nowhere as more and more websites are being added to the Internet daily.

Hard Money Loans – And Other Non-Traditional Methods in Obtaining Financing For Your Business

A hard money loan allows the borrower to receive a loan based on the value of real estate he or she owns. The real estate is used as collateral. These loans are issued at a much higher interest rate than conventional loans and are not given by any commercial banks but instead are arranged by private investors.

Since the Hard Money loans are made by private investors a borrower’s credit score is not consider due to the fact that the loan is secured by the value of the property that is being put up as collateral. However, with the current state of the real estate market, hard money loans are not that easy to obtain these days since the real estate market has soften and property is selling for far less than what it was a couple of years ago.

Below are a couple of other non-traditional ways to get financing for your business:

Credit card factoring or Merchant advance for small businesses
Credit card factoring also known as a Merchant advance is when a lender gives your business cash upfront based on your future credit card sales. It is paid back by using a percentage of those future credit card sales until the balance is paid in full. The actual amount that the borrower can receive is based upon the business’s monthly credit card receipts.

General requirements for this type of financing:

o You must have owned the business for at least 6 months
o Your business processes a minimum of $2,000 or more in monthly Credit Card sales
o You have no unresolved bankruptcies
o You have at least one year remaining on your business lease

Account receivables or Invoice factoring

Another popular method of business financing is the selling of Account Receivables or Invoices. Businesses that extend credit terms to their customers ie: net 20, or net 30, allows customers some breathing room to pay their bills, however, this arrangement make it necessary for businesses to wait for payments and can sometimes have a stifling affect on cash flow.

A factoring company purchases receivables or invoices by providing you with a cash advance, thus, infusing your company with immediate cash, improving its financial situation. This advanced is any where from 70% to 85% of the value of the invoices or receivables. Most factoring companies charges a fee starting from 2% and it goes up from there.

So, if your business has been decline by traditional lenders, don’t despair help is on the way through these alternative financial sources.

Private – Hard Money Loans For Commercial Properties

Private money commercial loans can be a very smart way to finance a commercial property in today’s challenging market. It used to be private money commercial loans were primarily for borrowers with credit issues. Times have changed. Today, private money commercial loans are being utilized by many different types of borrowers.

Private money commercial loans are often used for properties that a more traditional lender would not lend on. let me talk about a property I recently got funded, and you will see how this hard money commercial loan was perfect for this situation. The borrower bought a beautiful 3 story commercial building from a company that went bankrupt. When they bought the building, the building was vacant. Now, the building needs to be improved to handle multiple tenants. As there were no tenants, no bank would even look at this loan. However, with my private investors, they realized that if the building were occupied, the income would be more than sufficient to handle debt payments, and to pay back the borrowers a nice return. My investors funded this loan in 25 days. This is a perfect example of why to use a hard money commercial loan.

Private money financing for a commercial property is normally easier that a traditional bank loan. Of utmost importance is the fact that the investor simply wants to make sure they are paid their money. To that end, a hard money lender requires that the Borrower have plenty of equity. For instance, lets says a Borrower owns a small 12 unit strip mall, has a 585 credit score, needs a loan of $500,000, and the property is valued at $2,000,000. This Borrower will not find it easy securing financing with a local bank or traditional mortgage source.

Due to the low loan-to-vale ratio of this loan, 25%, I have private investors who are eager to lend on this situation.

Keep this in mind, when looking for a private money loan, the loan to value ratio will always be lower than a traditional commercial mortgage. Normally, and depending on credit and how the property “cash flows”, and the Borrowers capacity to re-pay the loan(income), the maximum loan to value is 70%. In a traditional commercial mortgage, the maximum is 90%.

A private money loan is not cheap, expect to pay 3-7 points, and a rate of 9-15%. In the end, rates and fees are dependent on the risk of the transaction. In general, the roskier the loan, the higher the interest rate.