REVscene - Vancouver Automotive Forum

Bankai · 08-05-2009, 02:59 PM

First of all, anyone who will have negative comments please keep it to yourself. I posted here to ask questions, not to get lectured or scolded.

I am thinking of getting a loan from the bank to purchase a newer car. Reason being is im sick n tired of buying used cars that break down every so often and you have to get it repaired yada yada and so on. I decided i am going to purchase a newer, if not brand new, decent car but of course paying for it is an issue. Unfortunately i had a previous R9 credit rating 9 years ago but so far i still get denied on credit card applications so i think a straight loan through the bank would get me nowhere. I currently bought a house thats already paid for and i was thinking of using my house as collateral to borrow the loan. I know this isnt the best idea and many would probably stay away from this but I am considering this as an option and would like to know more details about it. My home values at around $460,000 and the loan im asking for is $25,000.
If anyone can give me a feedback on this i gladly appreciate it.

Chuck Norris · 08-05-2009, 07:25 PM

I'm going to try and not be an asshole here

Your best bet without a doubt is to have your home in either a HELOC, so you can just take money out whenever you want, or to secure the loan.

The reason is because the loan is secured, you will be paying far less % on the home itself.

Standard car loan rates at banks are usually pretty bad, sometimes 8 or 9%. If you were to get a secured loan variable over 5 years you'd be looking at 3%

Another strategy is to use your home equity to buy into dividend paying securities, and use the dividends to pay for the car or the lease (if you don't have your own business).

That way you can deduct the interest expense against any investment income and use the dividends to pay for your car. Up to you though.

Bankai · 08-05-2009, 08:28 PM

I appreciate the clean answer and information. Thank you, this is definitely the answer i was looking for. I will be talking to my bank tomorrow and bring this matter up regarding HELOC. Also,
As mentioned in my thread, I had an R9 rating back then and even though its been 9 years i still get denied for credit cards. Will this be a problem with asking for a loan even with my home as collateral?

Scudz · 08-06-2009, 12:41 AM

What Chuck Norris has said is also what I recommend. The chances of you being approved is greatly improved with collateral, especially with a home. You will always get the lowest interest rate, that being prime. Currently prime is at 2.25%.

Call equifax or find out from your bank when you do the credit application why that R9 is still there. Is there something that is still unpaid for? Also, have you worked on your credit? Such as paying down debt faster and actually saving money?

Just because you pay the minimum or a little above doesn't mean you have good credit. Nor does having a few hundred dollars saved. If you're in your late teens and have a few thousand save, that's a good indication. If you're in your in your early 60s and have the same amount saved, that's bad. Why? It all depends on where you are at in your life cycle. Hope that helps in illuminating some of the things as to what banks look for. Aside from the all important income level as well, that is.

And also, yes, even if you put up security for a loan, you still may not be approved for it. People are puzzled by it thinking the banks have no risk at all. There is no official answer, but you can think of it as an investment from the bank's point of view. Why invest in something that has the potential the be trouble some just like in the past? If I saw an R9 on your credit, you have a HUGE disadvantage. Usually, I'd end the meeting there and work towards seeing how you can rebuild your credit.

Bankai · 08-06-2009, 04:41 AM

i have already paid off the whole amount of my owing 9 years ago. Basically, i dont owe any money or have any unpaid debts. I am currently clean but apparently that R9 still reflects on my credit even after 9 years. I havent tried re-establishing my credit cuz frankly i am being denied loans or credit cards which of course i understand why but point is, im being denied so how else can i re-establish it?

encomium · 08-19-2009, 11:01 AM

Try getting a secured Visa from TD. Usually, if you have a poor credit rating, they may ask for a 1.5:1 or 2:1 cash collateral. All you really need is a $500 limit. You should charge the card to purchase what you need, and pay the bill when it is due, LEAVING NO AMOUNTS OWING. Within 6 months, you should start to see a gradual improvement in your credit rating.