Originally Posted by hallstevenson
How does it typically work on car loans (I guess for any loans) where the dealer pads the interest rate ? As I mentioned above, a lender offers 5% interest and the dealer tells the prospective buyer "we can get you financed at only 7.5%, sign here", when does the dealer get that 2.5% "extra", month by month (I doubt) or in a lump sum ?
In mortgages, if you could get the borrower to agree to a higher rate, you got paid a higher rate for the loan. You'd sometimes use that money to pay off their closing costs so on mortgages, people sometimes focus on just the interest rate when it's the fees and interest rate that really matter. You can have a higher interest rate and low fees/no fees or a lower interest rate and more fees. You got paid points on the loan depending on what the interest rate was. Say you normally make 2 points on the loan, if the interest rate is higher, you could get 3 points or 2.5 points or whatever. They would just have clawback provisions where you didn't get the money if it was paid off within a couple months. But if you told the borrowers that and they liked you, they wouldn't refi it or pay it off til after your clawback period had expired.
Originally Posted by hallstevenson
Originally Posted by WagonWheel
Mentioned the borrower can still legally be liable for any amount that the lender can't recover by reselling the car.
Something is missing there. How do you sell a car that you don't hold the title (free and clear) to ? I mean, you can take the person's money and you can 'give' them the car but they won't own it if you still owe money on the loan for it.
Your question doesn't really make sense in the sense in the flow of the thread. The dealer just tells the buyer not to make a payment on his old car so it gets repossessed. Dealer doesn't take it in trade and the borrower doesn't sell the car, the bank takes it back. No selling takes place by either dealer or borrower, the bank takes it back. It's a bad way to go because the back typically tacks on repossession charges, late fees, etc so that the borrower is worse off than if they just tried to sell it on their own even if it was upside down. It's never a good idea to just let the bank take it unless you're going to declare bankruptcy anyway.