HELP! Looking for Loan Expertise

PerfectCreature

Looking for some advice or, "how its done" in regards to loans and what not.
Here is the story.
My brother needs a car, I would like to sell him my car. I am going to use the money he gives me for my car as the down payment on a new car. He is giving me $5000 for my car, so I can get the car I have an interest in which is $10,000.

I have a down payment of $1000, but the bank wants more because I do not have "perfect" credit as my history is not established for years and years and years. I have no nicks or anything, everything paid on time...they just want more reassurance I guess.

My issue is this. My brother is 18 years old, has no credit, does not have the full $5000 (He has $213 which he will need for registering the car) , I want to help him build his credit so I am urging him to get a loan from the bank.
We intend to use the car (my car) as collateral so he can get it in his name, but! since I own the car, we are not sure how it can be done?
Can the bank buy the car then sell it him on a loan or?
The car dealer offered to buy the car and sell it to him, but they want a co-signer.

My parents do not want to cosign as they are looking at financing a new house in the summer, and they do not want anything abrupt to show on the credit report.

I want strictly advice on what can be done in terms of loans, and how we can do it.
We live in Maine, if that makes a difference.
Was hoping maybe someone used to, or is a loan officer and knew what can be done.

Thank you.

coolsax

I'm a loan officer at a credit union in Texas. Well he needs to go to any financial institution.. probably try a credit Union if you can... also if he has limited credit he might need a cosigner (at 18 he probably has even more limited credit than you do) - You wont' be able to be the co signor- since you are selling him the car.... let the lender know its a buyer/seller situation (i'm assuming you own it free and clear). Your lender should be able to allow him to apply as the buyer. you'll have to provide the title to the lender when the sale goes through. Its different in every state but that is the general process. since he is buying the car that allows him to use the car as collateral since he will be the new owner when the loan goes through and the lender will make sure to pay you.

at 18 with no co-singer, its going to be difficult though.

cstmar01

coolsax wrote: »

I'm a loan officer at a credit union in Texas. Well he needs to go to any financial institution.. probably try a credit Union if you can... also if he has limited credit he might need a cosigner (at 18 he probably has even more limited credit than you do) - You wont' be able to be the co signor- since you are selling him the car.... let the lender know its a buyer/seller situation (i'm assuming you own it free and clear). Your lender should be able to allow him to apply as the buyer. you'll have to provide the title to the lender when the sale goes through. Its different in every state but that is the general process. since he is buying the car that allows him to use the car as collateral since he will be the new owner when the loan goes through and the lender will make sure to pay you.

at 18 with no co-singer, its going to be difficult though.

agreed.

Seeing he has no established credit, its going to be hard and many don't want to lend in this day and age without some history.

Also if they would lend and there is no record of credit than the interest rate normally is going to increase as its a risk to lend to someone without a history.

The bank would hold the title regardless in case of a default and then would come after the collateral (depending on age, value, loan value, etc) in the case of a default.

Its going to be hard to get it on his own, and they are going to look for a co-signer. The co-signer will normally also need a stable income, job history, etc etc as well.

I can understand with your parents as well as yes it will affect the credit as it will normally still be counted in terms of a debt when taking out a house loan as if he can't pay, then they will have to.

Credit Unions are good places to start and sometimes are a little bit more relaxed on the credit ratings and also good on interest rates. I would suggest however to NEVER take out a loan thru a finance company. You will pay an interest rate thru the nose like sometimes 15-20%. They will normally lend to the "risk" customer's but in the end you will pay sometimes 2-4X the value of the car in just interest.

rpf65

Agree with the above.
One possibility is to remember that the bank/credit union makes the check out to you. Perhaps you could loan your brother a little to get enough for the down payment, and still have enough left over to cover your own down payment. I personally wouldn't go that route, but that's just me.

PerfectCreature

Okay, so the bank would basically "buy" the car from me so my brother could buy it from them.
I plan to get it done today if possible, but we will see.
Thanks for the advice.

coolsax

They "buy" it only in that they will hold the title, but its still your brother buying it from you, while using the financial institution's funds to purchase the car, which he then pays back as a collateralized loan against the car.

devani

if you trust your brother that he will make the payments, transfer title and make him pay to you(means steady source of income and reliable)....otherwise, don't give him your car and don't get your self $10K car.... if all of you wants to save a few hundred bucks...

I don't have a brother(I have a sister BTW) but I wouldn't give him a car if he's can't afford it....insurance, payment, maint.
typical 18 year old will have peer pressure and will drive like a teenager(I said typical!)

PerfectCreature

The urge is so he can build some credit. The bank said they would approve the loan for only $3000 when my car is worth $4700 in the books. The also said they need the title, and need a co-signer as well.
So, I do not think they really want to give out the loan.
In anycase, I appreciate the help. The thread can be closed now.

cstmar01

PerfectCreature wrote: »

The urge is so he can build some credit. The bank said they would approve the loan for only $3000 when my car is worth $4700 in the books. The also said they need the title, and need a co-signer as well.
So, I do not think they really want to give out the loan.
In anycase, I appreciate the help. The thread can be closed now.

they would probably give the loan but they are going to have to have title. Otherwise its unsecured. How else would they recover their loss if he wouldn't pay?? They could sue for a money judgment and could try to wage garnish but in the end you spend normally 1-2K doing that to recover 3K? Also file BK and get out of it all together and that is why they want collateral.

Like I said, it is going to be natural for them to want a co-signer.

If he wants to build credit have him get a simple credit card and make some small purchases and pay it off right away. It will help show he can manage his money and also then not get charged interest on the purchase. Over time this will help. Make sure not to exceed the limit or pay late and it can help establish credit.

We all have to start somewhere.

Also the bank has to take into consideration for lending the loan value (normally lower that retail price of the car), lending limits, age of the vechile, etc.

If the car is worth 4700 and he's getting a loan for 3K that is really not too bad as its around 64% LTV. Also even if he would be able to show credit on his own he needs a stable income, and also other debts such as rent etc all are taken into consideration.

tonyb

PerfectCreature wrote: »

The urge is so he can build some credit. The bank said they would approve the loan for only $3000 when my car is worth $4700 in the books. The also said they need the title, and need a co-signer as well.
So, I do not think they really want to give out the loan.
In anycase, I appreciate the help. The thread can be closed now.

It's not that they don't want to give out the loan, it's they need to lower the risk involved. No cash....no credit, no co-signer, 18 years old, would you loan 5 g's to a stranger under those conditions ? I think not.

PerfectCreature

They gave him the loan for $3750, with a cosigner and the title. He is going in tomorrow to get it finished up. Hopefully this will help out his credit score so he won't have to has as much hassle as I did when I went for my first loan alone.