When you purchase a vehicle, you have a couple of financing options available to you. You can pay cash for the car, or you can finance it. Most people don’t have a lump sum of money to pay for a car in full, so they are in the position of financing it. When financing your new vehicle, you can turn to a bank, or get financing from the dealership. You want to have all the information needed to decide whether a bank or dealership would be the better option. The information below will help you decide.
Bank Financing
Going with bank financing has a lot of benefits to it. Not only is it a very convenient way to finance your car, but it’s also fairly easy. You’ll have a loan officer who helps you through the entire process. Since this is the majority of what they do every day, they are very well versed on how to help you while keeping you informed of all your options and the terms of the loan. Before you go to purchase a car, you’ll want to go to the bank and apply for a loan. After looking at your financial situation, employment, credit history and other factors; you’ll be pre-approved for a certain amount. This way, you know what your budget is while your car shopping and helps you avoid an awkward situation when you try to purchase a car that’s more than you can be approved for.
Why it May be More Convenient
Your bank may be able to get you a lower interest rate, especially if you are a current customer of the bank you choose to get a loan from. A lower interest rate means smaller monthly payments or a shorter loan term. In the long run, this means you’ll be paying less for your car. If you obtain a car loan through your own bank, you can add the loan to your banking account, making it simple for you to pay on the loan each month by logging into your online account and paying directly on the loan.
Dealership Financing
Going with dealership financing allows you to obtain financing directly through the same dealership you’re buying the car from. When you obtain financing through a dealership, you need to exercise caution. A car dealership gets commission from loans they are able to sell to those buying cars from their dealership. This means you need to be sure you pay very close attention to all the terms of the loan and read all fine print for yourself before signing anything. Make sure you are familiar with the actual lender and don’t agree to a loan from an unknown lender. Going with an unknown lender can lead to problems with your loan later on.
Things to Be Aware Of
You also want to verify the interest rate and make sure you are well-aware of all the fees being included, as well as the final cost, monthly payments, etc. If you don’t have excellent credit, you may find yourself paying a much higher interest rate than you would have if you went through a bank. However, if you have good credit, you can get some good interest rates from a dealership, especially when they’re clearing out their inventory.
While each person will have to look into which option is the best for their own individual needs, banks offer pre-approved loans with the assistance of a qualified loan officer. There are generally no surprises and no worries over whether or not things are being glazed over in order to make a deal happen. For these reasons, a bank loan tends to be the best way to finance a car for many.
It is all too easy to make a debt consolidation error. In the end, it’s much easier to fall into a debt trap than it is to get out of one. Being in debt can be extremely stressful and many people find that their options are limited when it comes to debt relief. The good news is that by understanding all of your options and knowing what debt consolidation mistakes to avoid, you can ensure that you make the right decision when it comes to your debt and avoid any consolidation loan pitfalls.
Not Shopping Around
When you consolidate your debts, it is extremely important to take the interest rates into consideration. Don’t just consolidate your debt at the first consolidation company that you locate. Instead, look around for the best interest rate possible. On top of this, look at your credit report for any errors before going to a lender. If you do find an error then you should immediately dispute it in order to give your credit score a boost and qualify for a better interest rate.
Choosing a Longer Term
When thinking about making a monthly payment many people don’t consider their loan term. By extending your repayment term, it does in fact lower your monthly payments, however it comes at a more expensive overall cost due to the fact that you have to make an increased amount of payments. When it comes to refinancing, it is important to calculate the complete cost of your loan, which includes interest. Pick a consolidation loan that has a repayment schedule that is short enough that the total cost of your loan is lower than what you would originally pay if you didn’t consolidate.
Raising Your Interest Rate
If you are dealing with a debt that has a low interest rate then you shouldn’t refinance it by consolidating with an increased interest rate. This makes no sense when it comes to your finances, as it will increase the overall cost of your debt. When it comes to consolidating debt, it is important that you compare your debt consolidation interest rate to the rates of all of your individual debts. Only consolidate the debts that will get you lower interest rates as a result.
Consolidating Unsecured Debt into Secured
There are two major types of debt—unsecured and secured. Unsecured debt is the type of debt that is not attached to any asset. This means that if you are unable to repay the debt then the lender can attempt to collect it through other means. A secured loan, on the other hand, is one that is attached to a property. This means that if you miss a debt payment then the lender has the right to take your property from you. When it comes to debt, a secured loan does come with a lower interest rate however it also puts you at risk of losing your property. Unless you are completely confident that you can keep up with your loan payments, you should avoid consolidating an unsecured loan into a secured one.
Replacing Your Debt
After you consolidate your debt, especially if it is credit card debt then it is important that you do not make the mistake of replacing the debt right away, as this can lead you to be in an even worse situation. Instead, you should ensure that you put down your credit cards after you have taken the debt off of them. If you cannot trust yourself than hide your credit cards or close your account completely in order to avoid putting yourself back into the same situation you were in before consolidation.
Student loan debt now surpasses credit card debt and is topped at over $1 trillion. Knowing this you might ask yourself, is attending college worth the thousands of dollars of debt? Arguably yes, as a college education is now usually the minimum requirement for a majority of jobs. That being said, many recommend that you do everything in your power to stay away from private student loans. Here are four reasons why you should think twice before taking out a private student loan.
No Guarantee That You Can Pay the Money Back
A bank or other financial institution usually handles private loans and their number one job is to make money. When these institutions give out a student loan it isn’t to help you get an education, it is to make even more money in interest. Unfortunately student loans are even worse than other types of debt as you cannot discharge them through bankruptcy unless you are in extreme hardship, such as a terminal illness or disability. Even if you do default on your student loan, the government guarantees the loan and will make sure that the bank is effectively repaid. This means that the bank has absolutely no reason to deny their borrowers a loan based on anything but need. However, as a borrower you should consider very carefully how much money you borrow as well as how much money you’ll realistically be able to earn. If you don’t think you’ll be able to repay your loan in a reasonable length of time then you should reconsider taking out a hefty private loan. Remember there is no guarantee that you’ll graduate with a job.
Private Loans Have Extremely High Interest Rates
When you apply for a private student loan, like most other loans, you are charged with interest. This interest is determined by a percentage, which is called an interest rate. For state and federal loans the interest rate is fixed at somewhere between 4 and 7%. On the other hand, private student loans have a much higher interest rate. This makes it much harder to pay it back in a reasonable amount of time, as you have to pay more in interest for every dollar you borrow.
Private Loans Don’t Offer the Same Repayment Terms as Federal or State Loans
Federal and state loans give their borrowers plenty of repayment options. You can decide to repay these loans in 10, 15 or even 20 years, which allows you to spread out your payments and sacrifice less. You can also choose to repay you loans based on your salary each year. However, this protection and flexibility is not offered with private student loans. Private lenders do not give their borrowers a variety of repayment options, and instead stick to a rigid repayment schedule that can be extremely difficult to follow right after college.
You’re Putting Others at Risk
The majority of private student loans require that a cosigner sign with the student. This means that the cosigner, who usually is mom or dad, is putting their credit at risk in the case that you default. As stated previously, defaulting is more common with private loans as repayment options are limited. In fact, even if you pass away prematurely, your cosigner will still be liable for your student debt as private lenders aren’t required to discharge debt in the case of death. Unfortunately, private student lenders are known to be one of the worst types of loan lenders as they have a tendency to harass those that owe them money. This can come in the form of annoying collection calls and even personal visits and can leave the cosigner frazzled.
Getting a cash loan approved is usually a fairly simple process in most cases. Cash loans are typically short-term loans that are usually obtained in order to get you through a rough financial situation. In order to get approved for a cash loan, using these five tips can help speed up the process and increase your chances of getting the cash you need.
Know Exactly Where You Stand
Knowing your credit score and your financial history will ensure that you know where you stand with cash loan lenders if your credit score is necessary to obtain a loan. You can get a free credit score from a number of different credit score sites. If your credit score is lower than 580, you may have a harder time finding a cash lender who will be willing to let you borrow the money you require. It is a good idea to make sure that your credit score is accurate, as one study found that almost 80% of all credit reports contain an error, and one in four errors are so severe that they could cause a denial of a loan. In order to avoid this make sure that there are no inaccuracies in your credit report.
Ask Questions
Once you have decided on the company you want to obtain your cash loan from, it is recommended that you go to your lender with any questions that you may have pertaining to your cash loan. If your questions are extensive then making an appointment with a lender to discuss the loan terms and any materials that you require will be beneficial. Different cash lenders have different loan terms and requirements and so fully understanding these will ensure that you know exactly what you’re getting yourself into and that you meet all of the requirements in order to obtain a cash loan.
Know What Your Cash Loan Entails
A cash loan can provide you with an almost instant solution to any financial trouble that you may be having. The best part of cash loans is that you will not have to go through a huge amount of hassle in order to obtain one. However, because cash loans are short-term loans it is important that you know exactly what will be required from you in order to pay off one of these loans. It is not a wise idea to get a cash loan if you are not sure you will be able to repay it on time.
Come Up With a Checklist
From the information that is provided to you by a cash lender, it is a good idea to come up with a checklist of things that you need to do in order to get your loan application approved. This includes the required documents that a cash lender will need to review in order to determine your loan eligibility. Keep in mind that if you turn in your loan application incomplete then you could potentially be denied from obtaining the money you need.
Have the Right Type of Expectations
It is important that you find the time to sit down and carefully review your loan application before applying. Lenders must follow a set protocol in order to approve a cash loan and ensure that you get the money. It is a good idea to know the loan process thoroughly so that you know what to expect when it comes to obtaining your cash loan. Keep in mind that some cash lenders will pre-approve you upfront, others may not approve your loan for a couple of days. Coming into the cash loan application process with the right mindset and expectations is a good way to maximize the chances of you getting your cash loan approved.
Many individuals may find that they are at a standstill when they are in financial trouble. This may be due to not having a great credit score. Typically, credit scores fluctuate throughout the year depending on an individual’s payment history. It is never suggested to carry a balance of more than 30% on any credit card that is held. Now, those people who are struggling financially may feel that they are in quicksand and slowly sinking without making any headway on their credit card payments. There are options so do not worry.
Home Equity
Although the economy was booming some years back and took a dive which left an awkward housing bubble for homeowners who are facing paying more than their home is actually worth on the market today, the home does still have equity. For that reason alone, many people can be approved for a low interest line of credit that is not only tax deductible but can also be spent any which way that is needed! This can be helpful to many homeowners because they do not have to worry about applying for a high-interest rate personal loan or one that is more specific in the way it can be spent.
Credit Unions
The great thing about credit unions is that they are actually owned by their members but still are a bank. Members of credit unions generally live within a certain geographical area and work similar jobs, which is a great benefit to those who have access to the credit union. They tend to be more understanding of financial situations and since members own them, it is considered a non-profit organization that is ‘allowed’ to offer lower fees and high quality customer care.
Peer to Peer
Peer to Peer lending is a growing trend that really took off about nine years ago. It can be looked at as a great situation for both parties involved whereas the borrowers pay low interest rates and investors pay higher ones. Breaking this down into numbers – a borrower may pay as little as 6.5% and the return on that would be a whopping 10.5%! With this type of lending, borrowers will post something about what type of loan they are seeking online and then the investors have the option of scrolling through and choosing whom they would like to work with. Although this may not be the most efficient way of receiving money, the option is available.
Family and Friends
If you have tried your luck with peer to peer lending and have no takers, you can always ask your family and friends. Generally there is someone who will be more than willing to help you out if you are not the type of person who asks for financial assistance all of the time. Depending on your particular situation, you may be left feeling slightly helpless and embarrassed but there is not a reason to be. It may be harder to swallow pride and ask for help – but just know that you are not the only person that is struggling financially. If your friends and family are worried about repayment, there are various sites the can be utilized to create contractual and promissory agreements that are actual legal documents.
Co-Signing
When all else fails, try to think of someone who can co-sign on a loan for you. You would still be considered financially responsible but you may require a ‘back-up’ to receive loan approval. Most of the time if your co-signor has better credit and a steady income, you will more than likely be approved. Having a co-signer is just a form of security for the lenders.
These are all great options for those individuals who do not have great credit scores. Do some research and never give up, there is always an option available.
To fully understand if there is a difference between a hard money loan and a short-term loan, one must first know what each of these are. When you hear the term short term, it seems self-explanatory. These types of loans come attached with a very quick repayment schedule and may mature in as quickly as a 90-day period. The overall fulfillment of the loan greatly depends on the amount that is being financed of course, but overall, the maturation rate is much less than that of a regular loan. On the other hand, a hard money loan is considered to be a type of asset based financing where someone would generally receive funds after putting up collateral – such as their home or land owned. Private investors and companies usually handle hard money loans and both loans are accompanied by higher interest rates typically because of the risk involved on the lender’s side.
Advantages of These Loans
The approval process for both a hard money and short-term loan is much quicker than that of a typical loan. With private investors and different companies, closing on a hard money loan may take less than a weeks’ time. In this type of scenario, people are placing their homes and real estate against the money being borrowed and although there is a quite a bit of risk involved for the lenders, they also have a great deal of collateral as well. This is beneficial to those who may have lower credit scores but have something to show for themselves.
The advantages associated with a short-term loan seem to make this a viable option for most people. These loans do not typically require any sort of collateral and have a quick application process. Since the application process is not lengthy, neither is the wait time for the money. When money is needed immediately, other than receiving a payday loan or cash advance on a credit card, a short-term loan is really worth looking into. Is commitment an issue but you still need cash now? A short-term loan allows you to receive the money that you need but at the same time not the commitment of having any long-term obligations.
Disadvantages for These Loans
Hard money loans are not the least expensive option to take and interest rates generally are in the teens. These particular type of loans are not usually the first option for the average person who works the typical nine to five and does not have quite a financial buffer as others may have. Another thing to consider is the fact that on both hard money and short-term loans, lending is usually over a very short term. Those who may find themselves struggling a little financially may find it difficult to abide by the strict repayment terms that accompany both of these types of loans. One more thing to consider with hard money lending is that they only lend a fraction of what your property may be worth. If your property is worth 60,000, they may only lend you 30,000. These are just a couple of things to keep in mind before applying for a hard money loan.
With short-term loans, a lender is more than likely to conduct a background check of your past credit history before approval. If your credit score is lower, there may be a possibility that you will not be approved for a short-term loan. As with most options in life, there are advantages and disadvantages to both of these types of loans. It is always suggested to find out as much information as possible to help you with your financial situation before making a decision on what will be the best option for you. Many trained professionals are more than willing to help you find a way to receive the money in your time of need.
Due to the start of rigid regulations being placed on payday loans, some big banks are getting out of the payday advance business. Those included in the list of banks to exit the payday advance industry are Fifth Third, Guaranty Bank, U.S. Bank and Wells Fargo. This could be just the start of a large amount of changes to come to big banks as much stricter rules are getting placed on a range of banking products.
The Risk of Payday Advance Loans for Banks
Payday advance loans are so called because of their direct tie to customers’ government benefits, paychecks or other types of income that is deposited into a bank account. These types of loans are often looked down upon for their extremely high interest rates and difficult payment terms. Due to this, bank regulators have gotten pressure to implement stricter regulations in order to deal with the risk that payday advance loans pose to consumers.
New Regulations of Payday Advance Loans
These new regulations that are being placed on payday advance loans cause problems for big banks, making these types of loans less profitable and not worth the trouble for banks. Although new regulations do not outright ban banks from selling payday advance loans, they did place rules on them that are strict enough to cause big banks to begin to pull out of the business.
Close-End vs. Open-End
One of the most significant new rules to impact big banks is the banning of open-ended credit lines, which is the structure that many banks follow. For instance, these regulations require that banks put a cooling period in place in order to stop customers from taking out multiple payday advance loans during one payday cycle. This rule counters many banks allowance of customers to take out advances whenever they are needed.
Wells Fargo
Wells Fargo is the biggest bank to discontinue its policy of lending out payday advance loans. The last day to obtain this type of loan from them will be January 31st. However, for those customers who already have an existing loan, immediate changes will not be put into place. In fact, existing payday advance loan customers will be able to have access to the service for half a year, at which time Wells Fargo will implement a plan to transition their customers.
Fifth Third Bank
Fifth Third Bank has plans to take away their payday advance loan service by the end of 2014. However, they are in the works to create alternative loan products for those customers who benefit from payday advance loans. There is clearly still a need for short term and small credit solutions, and so alternative loan products that are similar in design to payday advance loans will likely become available to meet demand.
Customers Turning to Payday Lenders
As new regulations push big banks out of the payday advance lending business, customers find themselves with limited options. Many are turning to online payday lenders or brick and mortar payday lenders to have their lending needs met. Due to this, many financial experts think that these new regulations do not actually help customers obtain better terms for payday advance loans.
The Popularity of Payday Advance Loans
A study found that over half of those who use payday advance loans paid off their payday loan only to obtain another within twelve days. In fact, the average payday loan user took out ten payday advance loans each year, and was subject to an average of $460 in fees. Those who use payday advance loans can pay as high as $1o for each $100 that is borrowed.
Although emergency cash loans have a bad reputation, there are some situations where these types of loans come in handy. In fact, if used responsibly, an emergency cash loan can aid you when you are in a sticky situation or just find yourself in need of money quickly. Here are five good uses for emergency cash loans.
Medical Emergencies
If you or a loved one goes through a medical emergency, not only can that be a tough emotional situation, but also a financial one. Health insurance doesn’t always cover the medical procedures we need, and so an emergency cash loan can ease that financial burden when you find yourself faced with a hefty medical bill. Emergency cash loans cannot only be used for medical bills, but prescriptions as well. Whether you need money in order to pay for those out of pocket prescriptions or because you only receive partial health insurance, an emergency cash loan can be a convenient way to get the needed cash for any medical emergency.
Car Repairs
Without a car, many people have no way of going about their daily lives. If your car breaks down and you have no money on hand to pay for it then an emergency cash loan can come to the rescue. Emergency cash loans can be well worth it, especially if you risk losing money because you can’t get to work. In order to ensure you are able to repay your emergency cash loan, create a repayment plan in order to make sure you are borrowing responsibly.
Getting You Through Until The Next Paycheck
Life can throw all kinds of curve balls at you, and if you simply do not have the money to pay for them then emergency cash loans are a great way to tide you over until your next paycheck. For example, if your child needs money for a soccer uniform or you owe money to a friend, an emergency cash loan will ensure that you can go about your daily life. In order to take out an emergency cash loan responsibly however, make sure that you do not take out more money than you can afford to repay come your next paycheck.
Putting Groceries on the Table
If you are unable to put groceries on the table there is nothing to be ashamed of, as this happens to millions of Americans across the country. If you have run out of money, and need to feed you and your family then an emergency cash loan is a good way to get the money you need in between paychecks. The good thing about these loans is that you can take out a small amount of money at a time, and so you do not have to worry about over-extending yourself, as a few hundred dollars can most likely feed you and your family until your next paycheck.
Other Emergencies
Besides medical and auto emergencies, there are plenty of other types of situations that an emergency cash loan can come in handy. Due to its convenience and how easy it is to obtain one, many people choose to use them in situations where they need to get their hands on cash as soon as possible. Another great thing about emergency cash loans is that almost anyone can obtain one. As long as you have a steady income and a few documents then you can get the cash you need almost instantly. In fact, credit checks are not required for cash loans, and so even if you have bad credit, or no credit at all, an emergency cash loan can help you out in almost any situation.
If you have good to excellent credit you are likely in a stable financial spot. However, you can easily ruin your credit score, as well as take a substantial hit to your bank account if you decide to co-sign a payday loan for a family member or close friend. In fact, a study done by the Federal Trade Commission indicated that 75% of co-signers ended up paying for the entire loan, this statistic is even worse for payday loans. On top of this, it is worthy to note that lenders will go after the person with the strongest credit first if a payday loan goes into default, which will directly affect your good credit score. For this reason following the general rule of “never cosign” is a good idea. However, it is understandable that it is difficult to say no to a family member or friend who is asking you to cosign a payday loan, and so here are five things to consider before you do so.
Knowledge is Key
It is crucial that you fully understand the weight of cosigning a payday loan. You are just as responsible for the loan repayment, and all activity on the loan will be directly reflected on your credit score. Due to this, it is key that you treat cosigning as a business deal, and sit down with your loved one to discuss all of the repercussions of not repaying the loan on time.
You Determine All of the Rules
Due to the fact you are the one with the strong credit score, you are also the one with the most to lose from cosigning a payday loan. This means that you have to dictate the rules to suit your needs.
Discuss it Fully
Before you agree to cosign a payday loan it is critical that you sit down with the co-signee and have an open and honest conversation. The bottom line is that you don’t want to regret signing on the dotted line at the end of the day, and so it is important to ensure that the co-signee understands that they are the ones who are gaining from having you as a cosigner, and that you are taking on a huge responsibility by agreeing to it. Even if you feel you can fully trust the individual you are cosigning a payday loan for, if they are in a bad financial situation then they might not be able to pay back the loan no matter how much they want to be able to. This would result in you having to deal with the full responsibility of repaying it.
Be Wary of the Negative Aspects
Once you have cosigned a payday loan there is rarely an opportunity to go back. Due to this, it is important to understand all of the negative affects of cosigning. For example, what will you do if you lose your job and are still held responsible for the payday loan? Also keep in mind that if your co-signee even makes a late payment you may be held responsible for paying the late penalties and fees that accumulate.
Create a Good Exit Strategy
If you decide to go through with cosigning a payday loan then it is crucial that you understand what the process is for removing yourself from the loan, and if it is even a possibility. There are some payday lenders that will allow you to remove yourself as a cosigner after the fact, however it is usually a very lengthy and complicated process, and will only be allowable if the co-signee has kept up with his or her payments.
The reason why people take out a personal loan depends greatly on their personal circumstances. Some people take one out because of necessity and some out of choice. Whatever the reason for why you’re looking to obtain a personal loan, there are a few things that you should always avoid. If you make these mistakes while applying for a personal loan it can result in your struggle to make repayments on times, creating too much debt for you to handle and paying much more than you really need to. Here are the top four mistakes that you should avoid when looking into obtaining a personal loan.
Running to the First Personal Loan That is Offered
Just like any purchase of an expensive or large item, it is crucial that you spend time browsing the personal loan market and doing research on the loan that is most suited to your financial needs. If you find that you are rushing into an application process without looking into what other personal loans are being offered, then it is very likely that you won’t receive the most competitive rates or best terms that are available to you. Even if you are given an offer that looks too good to pass up, it is important that you do not immediately sign any contracts. Walk away with the needed information and look through it with an expert. You could find that there are hidden clauses or terms that will make the loan not as great as you thought it was originally.
Not Asking Questions
If you find yourself with questions once you have gone through the process of researching and finding the best personal loan for your situation, whether that be a payday loan or bank loan, it is vital that you are not afraid to ask a representative of the bank, lender or company you are looking in to. It’s crucial that you feel you have a grasp on all aspects of what is being agreed upon before you apply for the personal loan. The representative at any establishment will be more than happy to answer any questions that you have.
Agreeing to Repayment Terms That are Irresponsible
Agreeing on exact terms with a lender can be quite tricky. It is important that you negotiate for terms that are not only achievable, but also do not leave you in a financial position where you are constantly struggling. The goal of most personal loans are to give you a better quality of life and aid in easing the strain of difficult financial times or strife. Keep this in mind when applying for a loan, as you should never find yourself in a position where you obtained a personal loan to help a financial situation, but then found yourself locked into a personal loan that you are not able to afford. In the majority of cases you will be able to offer that is given to you.
Taking Out too Big of a Personal Loan
There should be no circumstance where you get too greedy and take out too big of loan. Keep in mind that the bigger the loan, the more interest you will end up having to repay. Never think of a personal loan as free money as it is just the opposite. To avoid this mistake it is a good idea to figure out exactly the amount of money you need in order to achieve what you wanted from taking out the personal loan in the first place. Before taking out any loan you should always consider the long term affects of taking out the loan. The first question to ask yourself should always be if you could afford to repay the loan as agreed.
