If you have found the car you have been looking for but the current owner prefers that you take over car payments instead of buying it outright, what can you do? This might be a potential red flag due to the reason that it usually means that he owes a lot more than the vehicle is actually worth. If you have set up your mind to buy the car, you have the possibility to take over the loan payments while trying to avoid a financial meltdown. Here is what you should do:
First of all, set up a meeting with the bank / credit union that issued the original loan for the vehicle. The loan issuer might have the ability to re-write the loan so that it will be in your name and the title will be sent directly to you when you will finish paying off the vehicle. Depending upon your credit score, the terms and conditions of the loan might change.
Before signing any paperwork, you will first need to take the car to a trusty mechanic and have it checked out thoroughly inside and out. You need to know all the details about the state of the brakes, transmission, engine and so on. If you find out that the car must undergo some repairs in the future, you will have to negotiate with its current owner to pay you before taking over his loan.
After that, calculate the total cost you will have to pay for the car, after taking into consideration all of the potential costs of repairs as well as the interest on the loan. If after you draw the line and you find out that it is more than the car is worth, start searching for another one.
In the situation in which you want to take over car payments but the bank cannot rewrite the loan, you will have to write one between you and the seller. Make sure that you state clear what is expected from both parties. A relevant example would be the following: if you will be sending the monthly payments to the seller or to the financial institution that issued the loan. Make sure that you put everything regarding the seller surrendering his rights to the car, unless you default on the payments.
Don’t forget to take into consideration the insurance company which will certainly want to know if that the vehicle is worth purchasing and will verify your credit score as well as the car’s history.
You will need to have the contract notarized and make a couple of copies for all the parties involved, including the aforementioned financial institution.
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