Refinancing a car into someone else’s name is not an easy task. You can’t simply erase the name of the owner, and replace it with someone else’s name.
People associate refinancing with real estate. But autos can also be refinanced. May it be bought from your dad or your moms. Refinancing it to your name is mandatory. For that a person has to follow a couple of steps.
MODIFYING THE LOAN WITH YOUR EXISTING LENDER:
While this option presents you with the least amount of penalties, you need to examine it closely. As it may not be the best deal for your new borrower. When the process is done, the entire loan will be transferred completely out of your name, as if you never had the loan at all. The new borrower will receive the good standing of your loan. And also the credit bonuses that accompanies it. But now he will be responsible for the entire remainder of the balance. The new borrower should have a better credit standing for it to be a win-win situation for both the parties.
USE A NEW LENDER:
The process will be completely different. The new lender will have to essentially pay off the remaining loan and issue a new one to the one who is refinancing.
However this is often better for the new borrower. As the new loans sum would be smaller than the initial. That is lower interest rates and monthly payments. As the original loan owner you may be hit with financial penalties for prepayment which might ding your credit score.
TIPS FOR REFINANCING AN AUTO
- Before going ahead with the refinancing process, it is necessary to ensure that the burrower will meet all insurance requirements. That is the requirements put by the lender. Especially if the borrower is a brand new driver or is under the age of 25.
- Car title should not be forgotten to be changed when refinancing. Title can be changed at a local DMV. DMV is an abbreviation of Department Of Motor Vehicle.
- All the documents related to the car needs to be transferred.
- The lien holder on file also needs to be changed if there are changed lenders.
The bank must be extra careful while refinancing the repossessed vehicle to another prospective customer. It must learn from the previous experience of not carrying out a due diligence of the earlier customer and that is why need arose for repossession.
The first thing to check is the credit worthiness of the new customer. It must be investigated as to how have been his financial dealings with other parties.
A request can be generated on request by the banker to the State Bank of Pakistan, from its Credit Information Bureau (CIB). This request will indicate if this customer has defaulted on any other bank in Pakistan, or has failed to pay his mark up or entered into a compromise or write off or rescheduling of its loan. Once a clean report has been obtained, the bank should proceed to obtain his Bank Statement and ensure that the earnings credited to his account are sufficient to pay the installments and lease charges of the bank.
The tax profile should also be obtained to verify his source of income and the assets declared in the Wealth Statement filed with the tax authorities.
Lastly, the customer must provide at least two co-sureties or guarantors, who can undertake to repay the dues of the customer incase of his failure to repay the bank finance. The guarantor’s creditworthiness and business must be investigated since bank instead of initiating legal proceedings feel safer in seeking the guarantors promise.
The bank after satisfying the credentials of the buyer, then proceed to sign the necessary legal documents, obtain undertakings and then delivers the vehicle to the owner.
Similarly it proceeds to keep documents ready for transfer of the vehicle in its own name. This is usually done after the initial payment has been made by the bank.
As a logical conclusion to the transfer it would be wise for the banker to find out by a personal visit to the assessed residence to assess the life style of the customer.
Bankers make the gravest mistake of not assessing the propensity to pay of the buyer and financing him with a product which otherwise is beyond his reach.
After delivery of the car, the banks responsibility does not end here. It has to keep track that the installments are being paid regularly.
If any delay occurs the customer must be contacted immediately and inquires should be made. It is satisfactory that the bank keep its patience. If the delay occurs a second time it must visit the customer and its guarantor and inform them that the financing is not being paid regularly and the bank will not hesitate in initiating repossession proceedings. For a good customer this threat is sufficient in keeping his commitment and not losing face before other people and his representative guarantors.
A word of advice to the bankers; the bank in its eagerness to collect installments on due dates sometime engages professionals of handling recovery proceedings. These dubious personalities then unleash a reign of terror on the customers by paying a late night visit to his residence creating a situation in the neighborhood or harassing him at his office or work place. The Supreme Court, after a defaulter had committed suicide out of harassment of bank collectors, has debased the bank from undue harassment of the borrowers.
Bankers can in fact play an important role in providing auto financing to the general public. It is not being advocated that they deliver car without first verifying the credentials of the customers. What is being suggested is that in case of repossessed cars the bank must keep the value well below its market value ruling at the time of repossession.
Bankers can have their way and earn handsome profits in new leased cars but in case of repossessed cars they must adopt a lenient policy, enabling customers to buy repossessed cars at cheap price. The customers are able to keep their installment serviced at due date and make rare defaults in payment of the installments.
The phenomenon of resale of repossessed cars is not new to Pakistan. This practice is carried out in almost all countries of the world, where a sound and robust bearing system is in vogue. When they find the plan not working they reform the vehicle and then send it to the manufacturer to reconstruct the vehicle. Once reconstructed, it is almost impossible to make out the differences between new and reconstructed cars. The country then has two plans.
Firstly to offer the car to a prospective customer on their sales waiting list or to export it to a third world country against cash or confined Llcs. Both the options have their advantages and disadvantages.