Loan, Mortgage Finance
and Credit Card FAQs (2)
Frequently Asked Questions and Myths

•		Payment strategies	•		Two smaller loans vs. one larger loan	•		Low APR credit cards
•		Transferring loans	•		Equity loans instead of regular loans	•		Getting loans when you have lots of credit cards

Transferring loans from one person to another...
Question: How do I transfer my friend's car loan (or other loan) and the contract to my name so that I may take ownership of the car (or other possession)?

In short, that is not how loans are handled. There are 2 reasons that loans are not transferable:

• Your friend (or previous owner) bought the car under special promotional terms that are non-transferable.

• The main reason is that everyone has a different credit rating and you may or may not qualify for the same APR or loan amount. If you have lots of existing debt, you may not be able to assume anymore loan credit. The upside may be that you may in fact qualify for better rates. If you do qualify for better rates, why limit yourself to the existing loan terms.

Two smaller loans vs. 1 bigger loan...
Question: I'm having trouble getting the loan amount that I need. How can I get around this?

Loans to help you out

If you are having trouble with banks or other types of lenders not allowing you to borrow the amount that you need, try applying for 2 smaller financing amounts from 2 separate banking or lending institutions totaling the amount that you need. Of course you do not want to over extend yourself by going too far into debt.

Use equity loans to buy a car or other major item...
Question: I want to buy a car, but would like to be able to get the most advantageous loan possible. What types of loans might be recommended?

When purchasing high ticket items (cars and other purchases that fall close to or into the 5 digit price range), see if you can get a home equity loan. You'll need to have enough invested into your home so that the bank or lending institution knows that the value of your home is worth more than the total of your existing mortgage and proposed home equity loan.

Fortunately, homes usually raise in value over time and if you have had the home for 6 years or more, your house is likely to have enough surplus value to get substantial home equity financing. Another benefit of the equity loan is being able to write-off the interest paid into the loan on your yearly tax returns for the state and federal income tax returns. You can't do that for any other loan types.

Question: Home equity loans could be a very good way to consolidate, right?

The previous question touched on the major benefits of going with the home equity loan and yes, it would be one of the best ways to consolidate debt especially with multiple high interest VISA and MasterCard charge cards, short term higher interest personal loans, and the remaining parts of your auto loans. Right now (year end of 2002 to early 2003) is the best time to get home equity loans as APRs are still very low even if they are a little bit higher than in the past.

However, equity loans are not an option for everyone even when they have a house. If your debt is already very high, your only option to consolidate is to get a consolidation loan where you are expected to pay off your other loans and credit cards with consolidation debt financing.

Low APR credit cards...
Question: Do really low APR credit cards exist?

Short answer: Yes! However, you won't get them automatically if you don't ask about lower rates. The credit card companies can give you whatever rate they want above prime rate which means that they can assign you a really low rate of just 7% if the prime rate is below that percentage. However, many people will not qualify for that rate if their credit history is marred with frequent late payments or if you have defaulted on loans and credit bills in the past few years.

You will need to have an excellent credit history for several years before being eligible for such low rates. Also, young individuals tend to be more risky as a group and therefore have a harder time getting great rates. The best that you can do is build yourself a great credit rating and periodically (perhaps yearly) request that your interest rate be lowered. Eventually, you'll get the APR the proud few do get. However, if you are finding that your current credit card company is not helping you to lower your APR, it may be time to look for another credit card company willing to help in this regard.

Lots of credit cards—applying for a loan...
Question: I have several credit cards in my name. They are all paid on time and I don't owe much. I should be able to get any loan I want right?

Yes, it might stand to reason if you have them all paid up, that you would easily qualify for any loan you want. That, however, is not necessarily true. The bank issuing a loan may take into account that if you have 7 credit cards in your name and the combined spending limit is in the neighborhood of $20,000 or more, you could effectively run up a huge tab. With that, you might not pay off the loan reliably or worse default on the loan once you found yourself under financial stress. They may consider you a higher risk if you have too many credit cards.

It's best to get rid of your highest interest rate cards and perhaps only keep 2 or 3 that total a spending limit of $10,000. When you get rid of the cards, don't simply cut them up and forget to cancel them officially. To not officially cancel your cards is like having them even if you don't have the physical plastic in your hand. Call the credit card company and ask them how to cancel your cards. After a successful cancellation, apply for your loan. You'll be more likely to get the loan or a larger loan if necessary.

Question: I have several credit cards in my name and have pretty high balances riding on each credit card. I need to get another loan to cover a new necessary expense but the banks won't provide the needed loan. What can I do?

First, you need to get a debt consolidation loan for the MasterCard and/or VISA credit cards and other personal loans if you have them. Pay off your loans and credit cards with the consolidation loan. One monthly payment is lower and more manageable. The cards that are paid off should officially be cancelled (you may want to hold onto one or 2 of them for wise usage). You can then get the loan that you need.

A home equity loan would also be a good choice if applicable for consolidating your debt, but may be harder to get if you are already having trouble getting a loan to begin with.