FAQs
LOC provides two automobile loan programs to increase loan volume and finance income, and to improve the yield and profitability of loan portfolios.
Please review FAQs for Auto Loan Protection and Super Non-Lease.
Auto Loan Protection
Q. What is Auto Loan Protection?
A. A risk management program applied by lenders on C and D tier loans. LOC purchases vehicles from lenders at pre-stated values that are higher than auctions or bids and provides a principal reduction payment to further reduce deficiency balances.
Q. What are the benefits for lenders?
A. Loan Protection enables lenders to increase loan volume and finance income, and to improve the yield and profitability on auto loan portfolios by reducing losses from repossessed vehicles.
Q. What are the benefits for borrowers?
A. Borrowers qualify for a lower interest rate, establish credit or improve existing credit, and benefit from reduced deficiency balances from repossessed vehicles.
Q. How does Loan Protection increase the profitability of auto loan portfolios?
A. The program enables lenders to increase loan volume and finance income with a significant reduction of deficiency loan balances.
Q. Do lenders change their existing loan policy?
A. No. Evaluating a credit history and using a credit score is sufficient to identify creditworthy borrowers which objectively represent a slightly higher credit risk. Loan Protection is applied to these loans.
Q. How do lenders recover the Loan Protection fee?
A. On direct loans, lenders recover 90% to 100% of the Loan Protection fee by increasing the interest rate 1.5% or by disclosing the fee and adding the fee to the loan. On indirect loans, lenders recover 100% of the Loan Protection fee by short funding the dealer.
Q. Do lenders apply Loan Protection to all loans?
A. No. Loan Protection is applied according to the loan policy established by the lender.
Super Non-Lease
Q. What is Super Non-Lease?
A. Super Non-Lease is an innovative balloon loan program that enables lenders to compete with dealers' leases, improve loan volume, and increase finance income. The program provides low monthly payments and short term financing based on LOC's residual values for vehicles. At the termination of the loan, borrowers choose to payoff the loan, refinance the loan, or turn-in the vehicle to the lender for purchase by LOC.
Q. What are other benefits for lenders?
A. The vehicle is titled in the borrower's name which allows lenders to use their current loan form. Unlike other balloon loans, LOC purchases vehicles turned in to lenders at the termination of Super Non-Lease. If repossessions occur, LOC provides a purchase offer for the vehicle and makes a principal reduction payment.
Q. What are the benefits for borrowers?
A. Borrowers make low monthly payments on short term loans without large "upfront" costs or disposal fees typical with most leases. LOC establishes reliable residual values that allow borrowers to gain equity in the vehicle. As a result, borrowers are able to refinance or trade-in the vehicle at the termination of Super Non-Lease.
Q. How is Super Non-Lease different from a typical balloon loan?
A. Most balloon loans require lenders to sell vehicles turned-in at the termination of the loan. To compound the problem, many balloon loans use inflated residual values on vehicles that create negative equity for borrowers resulting in a large percentage of vehicles turned-in to lenders. If repossessions occur, most balloon loans require lenders to sell the vehicle.
Q. How is Super Non-Lease different from a lease?
A. Most leases require numerous "up-front" costs such as a down payment, capitalized cost reduction, first month's payment, and an acquisition fee. Also required are exorbitant early termination penalties and disposal fees. Typical annual mileage allowances are 8,000 to 12,000 with a $.20 or higher penalty for excess mileage.
Super Non-Lease requires only a small fee that most lenders finance for borrowers. LOC refunds fees on paid off loans and does not charge disposal fees. Annual mileage allowances are 15,000 with an $.12 penalty for lenders using the NADA book and 18,000 with a $.15 penalty for lenders using the Kelley book.