The lender then approves any withdrawals from that account by the company and controls when the company pays down the line of credit balance.

And to encourage lenders to approve such loans, which have traditionally been considered risky, Fannie Mae has agreed to buy them.

The consequence of a negative credit rating is typically a reduction in the likelihood that a lender will approve an application for credit under favorable terms, if at all.

If a lender has approved a loan, he said, it is unlikely the applicant is as marginal as the board might suspect.

BTC's strategy includes creating leverage to allow lenders to approve significant discounts on debt.

Mr. Edwards said that he had to threaten to withdraw the application before the lender finally approved the loan.

But consumer advocates dispute that, noting it is almost impossible, short of litigation, for consumers to find out the rates at which lenders approved them for dealer-arranged credit.

Before the lender will approve such a loan, the tenant-shareholder must get the approval of the co-op corporation in the form of a "recognition agreement."

That becomes the rate the dealer quotes to the customer, who has no way of learning that the lender approved his loan at a lower rate.

The lender usually approves the transfer, he said, though the parents are usually required to retain the ultimate repayment responsibility in a default.