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[bankomatic]

I never knew how to spell that damn word.

[onthefence]

Here is what I don't understand. Why are used/new car loans at such low interest rates while personal loans are at 8% or higher? Is this because they put a lien on the car if you get a "car loan".

Yup.  That is exactly why secured loans have much cheaper interest rates.

I don't want a lien on my car because that requires me to get a lot of insurance coverage such as collision/comprehensive which I don't want to pay for because it's expensive.

Well, you are just going to have to make a choice then aren't you.

Break out the spreadsheet, and computer the costs.

A) Sell $15,000 in bonds
B) Sell $15,000 in stocks
C) Get a personal loan at 8% interest +  finance charges
D) Get a auto loan @4.5% interest (+ costs of comprehensive coverage - normal coverage) for the life of the loan.

Do the math & figure out which is the better deal & do it.

[Flying Missle]

Here is what I don't understand. Why are used/new car loans at such low interest rates while personal loans are at 8% or higher? Is this because they put a lien on the car if you get a "car loan". I don't want a lien on my car because that requires me to get a lot of insurance coverage such as collision/comprehensive which I don't want to pay for because it's expensive.

Yes, that's why.

When the bank files a lien on the vehicle, it is then a collateralized loan (at least partially). This helps to protect the institution if you default (they can sell the car and get some of the prinicpal back, maybe even all of it plus interest).

A personal loan is not collateralized at all. It's much easier for deadbeats to walk away from that loan also. The interest rate on products is generally priced at such a way as to realize the risk associated with them. (i.e. an HR on prosper paying 30%, while an A may only pay 7.5%)

[bankomatic]

Here is what I don't understand. Why are used/new car loans at such low interest rates while personal loans are at 8% or higher? Is this because they put a lien on the car if you get a "car loan".

Yup.  That is exactly why secured loans have much cheaper interest rates.

I don't want a lien on my car because that requires me to get a lot of insurance coverage such as collision/comprehensive which I don't want to pay for because it's expensive.

Well, you are just going to have to make a choice then aren't you.

Break out the spreadsheet, and computer the costs.

A) Sell $15,000 in bonds
B) Sell $15,000 in stocks
C) Get a personal loan at 8% interest +  finance charges
D) Get a auto loan @4.5% interest (+ costs of comprehensive coverage - normal coverage) for the life of the loan.

Do the math & figure out which is the better deal & do it.

Those options just really scratch the surface. I am weighing everything to figure out what I want to do, including just driving the POS dented car I have until I save enough to pay in cash without having to borrow anything.

[bankomatic]

Here is what I don't understand. Why are used/new car loans at such low interest rates while personal loans are at 8% or higher? Is this because they put a lien on the car if you get a "car loan". I don't want a lien on my car because that requires me to get a lot of insurance coverage such as collision/comprehensive which I don't want to pay for because it's expensive.

Yes, that's why.

When the bank files a lien on the vehicle, it is then a collateralized loan (at least partially). This helps to protect the institution if you default (they can sell the car and get some of the prinicpal back, maybe even all of it plus interest).

A personal loan is not collateralized at all. It's much easier for deadbeats to walk away from that loan also. The interest rate on products is generally priced at such a way as to realize the risk associated with them. (i.e. an HR on prosper paying 30%, while an A may only pay 7.5%)

That's kinda what I thought.

[Beerbud1]

I never knew how to spell that damn word.

That's not the only thing you can't spell.

[noworries]

Prosper has always charged borrowers an origination fee, in addition to the servicing fee charged to lenders.  It used to be considerably smaller, especially for the upper credit grades.  The current flat 3% origination fee was added when Prosper briefly re-opened in CA, IIRC.  They also jacked the minimum fee to $75, IIRC, versus $25 (I think).  So on a $1,000 loan, the origination fee is a whopping 7.5%     Anyone who would take a smallish loan on Prosper is obviously desparate for the money (and so is a terrible credit risk).

What are those idiots at prosper thinking. They are making it uncompetitive when compared to taking out a loan from a bank if you have good credit.

In the same boat here - was trying to take a small $1000 loan yesterday, being rated AA I have plenty of options. It was a short term loan for a small cash shortfall due to paying taxes on my properties and taking a recent vacation. $50 service charge immediately killed it as an option for me. Prosper is not going to get any A or AA borrowers with upfront origination fees like that. I've taken and paid off $9000 loan with Prosper a few years back and I remember it was only 1% origination back then.

It seems that 3% origination fee is same for everyone. I remember before it used to depend on the grade?  Is Prosper ahead of the curve in making credit more expensive for everyone because of the new CC laws?

[Risk_Reward]

Not only does the collateral limit the lender's loss given default, it also lowers the odds that the borrower will default.  

[NewHorizon]

Good thread.
Nominate for lobby.

[bankomatic]

Good thread.
Nominate for lobby.

Fine with me.

[bamalucky]

People who aren't gonna repay don't care about fees.

The AA that just hit the Scorex lottery & is about to quit paying his bills anyway will just ask for a bigger loan.

[lenderguy]

My credit union is loaning for new cars at 3.49%

I don't want a lean on my car. I would be buying a used car.

http://www.fortmcclellancu.org/rates.asp

48 Months   New Auto, Used Auto, 09, 08, 07, 06 and 05 Models   4.00%

Here is what I don't understand. Why are used/new car loans at such low interest rates while personal loans are at 8% or higher? Is this because they put a lien on the car if you get a "car loan". I don't want a lien on my car because that requires me to get a lot of insurance coverage such as collision/comprehensive which I don't want to pay for because it's expensive.

Exactly.  But back in the day, anybody who wanted to borrow money here (at a higher rate) was automatically a deadbeat, because people would only voluntarily pay higher interest rates than they have to if they are going to walk away from a loan.  FWIW, I'm in your camp -- I'd rather have a lien-free vehicle so that I'm not making compulsory collision/comprehensive payments.  (I found out that depending on the lender, "mandatory" collision/comp isn't quite so mandatory...)

I'm used to paying origination fees on student loans; I don't know what the standard is for unsecured personal loans.  For kicks and grins, I looked at an old credit union I used to use, and their rates are as follows:

Debt Consolidation: 14.75% (36 mos)
Personal Loans: 9-15% (exact rate depends on repayment term and credit worthiness)

[Mtnchick]

Here is what I don't understand. Why are used/new car loans at such low interest rates while personal loans are at 8% or higher? Is this because they put a lien on the car if you get a "car loan". I don't want a lien on my car because that requires me to get a lot of insurance coverage such as collision/comprehensive which I don't want to pay for because it's expensive.

Is it as expensive as 1. Paying off a Prosper loan for a car you no longer have and 2. having to get money out of pocket to pay for another car?

[lenderguy]

Here is what I don't understand. Why are used/new car loans at such low interest rates while personal loans are at 8% or higher? Is this because they put a lien on the car if you get a "car loan". I don't want a lien on my car because that requires me to get a lot of insurance coverage such as collision/comprehensive which I don't want to pay for because it's expensive.

Is it as expensive as 1. Paying off a Prosper loan for a car you no longer have and 2. having to get money out of pocket to pay for another car?

When I first got my car, my full coverage insurance was as much as my car payment... and I financed the thing over 60 months.

[bankomatic]

Here is what I don't understand. Why are used/new car loans at such low interest rates while personal loans are at 8% or higher? Is this because they put a lien on the car if you get a "car loan". I don't want a lien on my car because that requires me to get a lot of insurance coverage such as collision/comprehensive which I don't want to pay for because it's expensive.

Is it as expensive as 1. Paying off a Prosper loan for a car you no longer have and 2. having to get money out of pocket to pay for another car?

Well, if I had crystal ball and I knew I was going to get into an accident I would certainly buy the insurance, but I have never caused an accident in my 10 years of driving. Also, I can afford to total the car and buy a new one which is why I don't want to pay someone premiums to take on that risk because I can afford the risk on my own.