Expert Advice: Spencer Stevens

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Expert Advice: Spencer Stevens

Spencer Stephens, Financial Planner, Rooted Interest, LLC

“One tip on avoiding payday lenders that might often be overlooked is getting an auto loan on an existing vehicle that has been paid off. If the car is new enough (usually less than 10 years old) someone with good credit shouldn’t have a problem qualifying for a loan at around 3 percent, which is much less than the insane interest payday lenders charge!

“Accomplishing this is a simple and relatively quick process. The first thing to do is shop around for the best rate. Some institutions offer lower rates if you sign up for auto pay, electronic statements, or a checking account.

Once you have found an institution with a low rate, contact them to understand the details to qualify for the rate and what documentation they need. You typically need your car title, the last two paychecks of anyone on the loan, and proof of address. Beyond those items, they will need other information to run a credit check. Typically anyone with a credit score of 700 or above should be able to qualify without any problems.

Once you have gathered the required documents, set aside an afternoon or morning to open the loan with the lender you have chosen. Through the process, the lender will determine the current value of the car and will allow you to borrow up to 100% of the value. You should determine how much you need to borrow based on the monthly payment you can afford and the minimum amount that is needed.

The lender will keep your car’s title and will add themselves as a lien holder. They can write a check to you for the full loan amount that you can then use however need.

With the birth of a new child, my client was in need of a new car. They had saved $5,000 but wanted to spend about $10,000 to get something more reliable. They found a great minivan, but it was over 10 years old so the loan rate was increased. Rather than borrowing at a higher rate on the older aged car, they took out a loan on their other younger car that was only 5 years old, then used the money to purchase their new van.”

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