Max legal interest rate?

[UriarteMD]

As a First 86 winner, I have to get the car, no matter what. Sure, sure, I can pass it on and wait later but it wouldn't be the same for me. My credit score isn't the best since I damaged it badly when I was 18 (23 now) and I'm figuring I'll get the max level of finance rate possible. My question, after searching the google sea, is what IS the max rate legally allowed to be set? In my case, the legal rate in CA? I am curious to know other states as well. Thanks guys.

[LSxJunkie]

Originally Posted by UriarteMD

As a First 86 winner, I have to get the car, no matter what. Sure, sure, I can pass it on and wait later but it wouldn't be the same for me. My credit score isn't the best since I damaged it badly when I was 18 (23 now) and I'm figuring I'll get the max level of finance rate possible. My question, after searching the google sea, is what IS the max rate legally allowed to be set? In my case, the legal rate in CA? I am curious to know other states as well. Thanks guys.

I don't know if you're using the Google machine right. This was literally the FIRST result when I searched "Maximum California Interest Rate Loan."

http://law.findlaw.com/state-laws/in...es/california/

The maximum interest rate any contract can state is 12%. California Usury Laws have some exceptions, but New Car Financing is not one of them.

EDIT: I apparently lied.

http://www.yourlegalcorner.com/artic...?cat=biz&id=97

1. Licensed Lending Institutions Are Generally Exempt From Usury.
Most licensed lending institutions engaged in the business of making consumer and/or commercial loans such as banks, savings and loan, credit unions, finance companies, and even pawn brokers are exempt from California’s usury laws. See, California Financial Code §5102, §7675 §15000, §21000, §21200, §22002, §22009, and §22303; Home Owners Loan Act of 1933, 12 U.S.C.A §1464(5)(c)(4)(B) and the Building and Loan Association Act of 1931 (as amended).


5. Time payment contracts a.k.a. retail installment contracts and revolving accounts MAY also be exempt from the usury law.
The Unruh Act set forth in California Civil Code §§1802.1, 1802.2, 1802.6 governs the financing of consumer goods (e.g. appliances, flooring, etc…) under a retail installment sales contract under which a seller finances the purchase of its consumer goods or services and the buyer agrees to pay in installments. The California Supreme Court recently held that if a bona fide retail credit sale is later restructured through the mutual agreement of the lender and borrower/purchaser , the credit-sale debt-restructuring settlement will be exempt from usury.
Similarly, the Automobile Sales Finance Act (Civil Code §§2981 et. seq. ) regulates the maximum finance charges that automobile sellers may charge, although third-party financing arranged by the automobile seller is not subject to the Automobile Sales Finance Act.

[Longhorn248]

Originally Posted by LSxJunkie

I don't know if you're using the Google machine right. This was literally the FIRST result when I searched "Maximum California Interest Rate Loan."

http://law.findlaw.com/state-laws/in...es/california/

The maximum interest rate any contract can state is 12%. California Usury Laws have some exceptions, but New Car Financing is not one of them.

I pulled this from that same website

For the most part there are myriad exceptions to the legal interest rate, which may be tied to the character of the lender, borrower, loan amount, the nature of the contract, or the matter that is the subject of the contract. Effectively, legal interest rates are no more than general guidelines for all transactions rather than the specific limits placed on them. There are so many exceptions in many states that it is often necessary to find a different rate for every conceivable situation.

[Enemies]

5 years is plenty enough time to rebuild your credit. You'd be amazed how fast your score can go up just by avoiding the things that drop your score. Assuming you learned your lesson years ago and corrected your behaviour then you might be surprised if you check your scores now.

[fatoni]

do you know your credit score? if you have to ask that question i think the best option would be to buy a car you can pay cash for or maybe have a cosigner

[Longhorn248]

Originally Posted by LSxJunkie

In some states you can contract around Usury laws. However, California has a bright-line rule on contractual interest rates. The state will nullify your contract and possibly grant the injured party to treble damages. California exemptions apply to insurers, business development firms, and government financial institutions as far as I can tell.

Oh California and their ridiculous laws.

[Mitch]

Check your score.

[2fast4you]

Originally Posted by UriarteMD

In my case, the legal rate in CA?

Max rate in CA for auto loans is 25.99%, otherwise it's considered loan-sharking.

[Draco-REX]

Check your score. But likely, if you think you're going to get a bad rate, you will.

Assuming you have little to no credit history, here's my advice:
DO it if you are sure you can keep up with the payments. Do NOT do it if you aren't sure. The good reason to do it is BECAUSE of your bad credit. Loans do a real good job at improving your credit if you keep up with them. Even if your credit sucks, when you get your car loan, you'll get offers for credit cards in the mail.

Do NOT take any of those offers just yet. They'll have limits that are too low.

Get into some small, limited use cards like gas cards. Use them and pay them off every month. If you have to, set aside the money when you fill up and then use it to pay the cards off. Once you have established you're good at paying your loan and your small cards, look to see if you can get a big general-use card.

If you can get one, put one purchase on it at no more than 20% of the limit, and make slightly above minimum payments. When you pay it off, do it again. Having a card with a high limit ($7000+) gives creditors some reassurance that if you have a rough spot, you can still pay your loans.

To really get this to work for you, you'll have to have the big card for over 3 years, but it'll still help in a few months. Monitor your credit rating. Good credit rating sites will give your recommendations on how to improve your score.

Once you get your rating up to a good or better level, you can go to a bank (credit unions usually have great rates) and refinance your car loan at a lower rate.

Now, this will probably take 2-3 years of good behavior to work. But since you'll likely be on a 6 year loan, it will still save you a lot of money in the long run, and a ton more in the future.

Good luck. Just remember that, like exercise, some pain now will pay off in the future.

[Spaceywilly]

Originally Posted by Draco-REX

Check your score. But likely, if you think you're going to get a bad rate, you will.

Assuming you have little to no credit history, here's my advice:
DO it if you are sure you can keep up with the payments. Do NOT do it if you aren't sure. The good reason to do it is BECAUSE of your bad credit. Loans do a real good job at improving your credit if you keep up with them. Even if your credit sucks, when you get your car loan, you'll get offers for credit cards in the mail.

Do NOT take any of those offers just yet. They'll have limits that are too low.

Get into some small, limited use cards like gas cards. Use them and pay them off every month. If you have to, set aside the money when you fill up and then use it to pay the cards off. Once you have established you're good at paying your loan and your small cards, look to see if you can get a big general-use card.

If you can get one, put one purchase on it at no more than 20% of the limit, and make slightly above minimum payments. When you pay it off, do it again. Having a card with a high limit ($7000+) gives creditors some reassurance that if you have a rough spot, you can still pay your loans.

To really get this to work for you, you'll have to have the big card for over 3 years, but it'll still help in a few months. Monitor your credit rating. Good credit rating sites will give your recommendations on how to improve your score.

Once you get your rating up to a good or better level, you can go to a bank (credit unions usually have great rates) and refinance your car loan at a lower rate.

Now, this will probably take 2-3 years of good behavior to work. But since you'll likely be on a 6 year loan, it will still save you a lot of money in the long run, and a ton more in the future.

Good luck. Just remember that, like exercise, some pain now will pay off in the future.

this is all very good advice.

One more thing I would add is the site creditkarma.com is a great resource for knowing your credit score. They will break down exactly where your score comes from and how you can improve it, and you can even simulate what will happen to your score if you take certain actions, and it's all free. As far affording the car, it's up to you to determine what you can afford for a payment each month. If you can afford it and know that you will be able to afford it for the entire term of the loan, then go for it.

[Calum]

Originally Posted by Draco-REX

Just remember that, like exercise, some pain now will pay off in the future.

I hate exercise.

But yeah, 5 years may put you in a better spot than you think. If not Draco is right on the money.

[Brett]

Originally Posted by Draco-REX

Assuming you have little to no credit history, here's my advice:
DO it if you are sure you can keep up with the payments. Do NOT do it if you aren't sure.

If you sign up for it and end up defaulting, you'll be in MUCH worse shape than now. You're young, you have plenty of time for lots of different cars. Your patience will be rewarded.

Brett

[Dave-ROR]

Yeah you need to check your score to have any chance of knowing what your rates will be.

There are other factors as well but if it's something low like 550 I would not even bother trying to buy the car.

[tachi1247]

I'm not part of the first 86, but I'm assuming you don't have to finance through the dealership so there really is no reason you can't find out what your loan terms will be right now. If you use credit karma to find out an approximate score a credit union or bank should be able to tell you the terms, but be sure they don't run a hard credit check as this will lower your score when you actually apply for the loan.