Can you retire at 50? On average, people usually retire at 65. But what if you want to retire 15 years earlier than that like at 50? Is it doable? Below are 10 easy steps to take to retire at 50. Retiring early can be challenging. Therefore, SmartAsset’s free tool can match you with  a financial advisor who can help to work out and implement a retirement income strategy for you to maximize your money.
10 Easy & Simple Steps to Retire at 50:
1. How much you will need in retirement.
The first thing to consider is to determine how much you will need to retire at 50. This will vary depending on the lifestyle you want to have during retirement. If you desire a lavish one, you will certainly need a lot.
But according to a study by SmartAsset, 500k was found to be enough money to retire comfortably. But again that will depends on several factor.
For example, you will need to take into account where you want to live, the cost of living, how long you expect to live, etc.
Read: Can I Retire at 60 With 500k? Is It Enough?
A good way to know if 500k is possible to retire on is to consider the 4% rule. This rule is used to figure out how much a retiree should withdraw from his or her retirement account.
The 4% rule states that the money in your retirement savings account should last you through 30 years of retirement if you take out 4% of your retirement portfolio annually and then adjust each year thereafter for inflation.
So, if you plan on retiring at 50 with 500k for 30 years, using the 4% rule you will need to live on $20,000 a year.Â
Again, this is just an estimation out there. You may need less or more depending on the factors mentioned above. For example, if you’re in good health and expect to live 40+ years after retiring at 50, $500,000 may not be enough to retire on. That’s why it’s crucial to work with a financial advisor.
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1. Answer these few easy questions about your current financial situation
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2. Maximize your tax-advantaged retirement accounts.
Once you have an idea of how much you need in order to retire at 50, your next step is to save as much as possible at a faster rate. If you are employed and you have a 401k plan available to you, you should definitely participate in it. Nothing can grow your retirement savings account faster than a 401k account.
See: How to Become a 401k Millionaire.
That means, you will need to maximize your 401k contributions, for example. In 2020, and for people under 50, the 401k contribution limit is $19,500. Also, take advantage of your company match if your employee offers a match.
In addition to the maximum contribution of $19,500, your employer also contributes. Sometimes, they match dollar for dollar or 50 cents for each dollar the worker pays in.
In addition to a 401k plan, open or maximize your Roth or traditional IRA. For an IRA, it is $6,000. So, by maximizing your retirement accounts every year, your money will grow faster.
3. Invest in mutual or index funds. Apart from your retirement accounts (401k, Roth or Traditional IRA, SEP IRA, etc), you should invest in individual stocks or preferably in mutual funds.Â
4. Cut out unnecessary expenses.
Someone with the goal of retiring at 50 needs to keep an eye on their spending and keep them as low as possible. We all know the phrase, “the best way to save money is to spend less.”
Well, this is true when it comes to retiring 15 years early than the average. So, if you don’t watch TV, cancel Netflix or cable TV. If your cell phone bill is high, change plans or switch to another carrier. Don’t go to lavish vacations.
5. Keep an eye on taxes.
Taxes can eat away your profit. The more you can save from taxes, the more money you will have. Retirement accounts are a good way to save on taxes. Besides your company 401k plan, open a Roth or Traditional IRA.
6. Make more money.
Spending less is a great way to save money. But increasing your income is even better. If you need to retire at 50, you’ll need to be more aggressive. And the more money you earn, the more you will be able to save. And the faster you can reach your early retirement goal.
7. Speak with a financial advisor.
Consulting with a financial advisor can help you create a plan to. More specifically, a financial advisor specializing in retirement planning can help you achieve your goals of retiring at 50. They can help put in a place an investment strategy to put you in the right track to retire at 50. You can easily find one in your local area by using SmartAsset’s free tool. It matches users with financial advisors in just under 5 minutes.
8. Decide how you will spend your time in retirement.
If you will spend a lot of time travelling during retirement, then make sure you do research. Some countries like the Dominican Republic, Mexico, Panama, the Philippines, and so many others are good places to travel to in retirement because the cost of living is relatively cheap.
While other countries in Europe can be very expensive to travel to, which can eat away your retirement money. If you decide to downsize or sell your home, you can free up more money to spend.
9. Financing the first 10 years.
There is a penalty of 10% if you cash out your retirement accounts before you reach the age of 59 1/2. Therefore, if you retire at 50, you’ll need to use money in other accounts like traditional savings or brokerage accounts.
10.Put your Bonus, Raise, & Tax Refunds towards your retirement savings.
If retiring at 50 years old is really your goal, then you should put all extra money towards your retirement savings. That means, if you receive a raise at work, put some of it towards your savings account.
If you get a tax refund or a bonus, use some of that money towards your retirement savings account. They can add up quickly and make retiring at 50 more of a reality than a dream.
Retiring at 50: The Bottom Line:
So can I retire at 50? Retiring at 50 is possible. However, it’s not easy. After all, you’re trying to grow more money in less time. So, it will be challenging and will involve years of sacrifices, years living below your means and making tough financial decisions. However, it will be worth it in the long run.
Read More:
How Much Is Enough For Retirement
How to Grow Your 401k Account
People Who Retire Comfortably Avoid These Financial Advisor Mistakes
5 Simple Warning Signs Youâre Definitely Not Ready for Retirement
Speak with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning to retire at 50, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How To Retire At 50: 10 Easy Steps To Consider appeared first on GrowthRapidly.
Depending on the time period in which you were raised, many young children and adolescents had differing opinions (and ideals) about what credit was and how it should or shouldnât be utilized. While some were privileged enough to understandthe complexities and importance of credit, others had to learn at the expense of their own mistakes along the way. No matter where you were or where you are currently, luckily there are always actionable steps that can be taken to clean up, improve, and get smart about your credit â letâs explore.Â
Become familiar with what can impact your creditÂ
There are five key components that are factored into your credit score.Â
Payment historyÂ
Your ability to make timely payments plays a huge role in your credit score. Lenders want to have the confidence that you as the borrower are capable of paying back any debts on time. If there is ever a situation that can impact your payment history, itâs best to notify your lender as soon as possible to avoid any negative remarks on your credit report. Â
Credit utilizationÂ
In order to determine your credit utilization rate, divide the amount of credit currently in use by the amount of credit you have available. For the best possible scores, keep this percentage under 30%. This shows creditors you have the ability to manage debt wisely. To optimize and improve your score, make it a goal to utilize less than 10% if possible.  Â
Length of credit history Â
Lenders will take an account of all creditors and the length of time each account has been open. In order to improve this average, try your best not to close any accounts as this can have the potential to decrease your overall credit score. Â
Credit mix Â
Car, student loan debt, mortgage, and credit cards are all varying types of revolving and installment loans. Lenders view this as favorable when youâre able to manage different types of credit. A good rule of thumb for using a credit card is charging a small amount each month and paying it off in full to avoid any interest payments. Not only does this impact your score positively, but it also creates good habits that donât require you to solely rely on credit cards for purchases. Â
New creditÂ
Any time you apply for credit, youâre giving lenders the right to obtain copies of your credit report from a credit bureau. Soft inquiries do not have an impact on your score, such as pulling your own credit report or a potential employer pulling your report as a part of the screening process. Applying for a new credit card, requesting a credit limit increase, financing a car, or purchasing a home are all examples of hard inquiries. For processes such as auto purchases, student loans, or mortgages these are typically treated as a single inquiry if done within a short scope of time such as thirty days. Be mindful of the number of inquiries outside of these scenarios â this mainly relates to retail store credit cards. Inquiries have a greater impact if you have a short credit history or a limited amount of active credit accounts.  Â
Review your credit reports and dispute errors if necessaryÂ
Carve out some time to obtain a free credit report from one of the three credit bureaus (Experian, TransUnion or Equifax) to review. Familiarize yourself with everything that is listed. In the instance something doesnât appear correct, follow the proper protocols to dispute errors. Completing this exercise at least once a year after initially cleaning up any errors can help correct any mistakes, but also ensures accuracy. The credit reporting agency and the lender must be contacted in order to jumpstart the process of resolution. Even in the instance, there are no issues found, youâll have peace of mind knowing the due diligence has been done. Â
Communicate and be honest with all creditorsÂ
If you are experiencing any type of financial hardships due to unforeseen circumstances, make it a priority to communicate upfront with all creditors. Explaining your personal situation while proposing reasonable solutions may work in your favor. Refrain from avoiding creditors due to emotional reasons or negative thoughts; your pride cannot overshadow your personal needs. When discussing finances, most of us donât want to disclose any personal information â however, if this can result in bettering your personal finance journey and credit score simultaneously; thereâs no way to lose.Make your requests known and be proactive so the best solutions can be provided. Â
Create a plan and remain completely committedÂ
Commit to at least three goals that relate to improving your credit. This could simply start with paying all of your bills on time and regularly checking in with creditors to ensure good standing. If credit card spending is a challenge for you, commit to limiting your credit card usage while paying more than the minimum balance. Rally the assistance of your family and friends to serve as your accountability partners to make sure you achieve your goals. No matter the personal goals you decide to set, commit to staying the course. Often times our personal lack of patience leads us to believe that the hard work thatâs being put forth is in vain. If nothing else, commit to improving your credit for you and your familiesâ wellbeing. Â
Protect your hard work (and your credit)Â
Once your new credit score emerges and is here to stay, the first order of business is to celebrate â congratulations! Your hard work and dedication have indeed paid off. In order to make sure your credit score stays in tip-top shape, donât be too quick to take your foot off of the gas just yet! Be sure to stay informed about any tactics or strategies to keep your credit score in the best shape possible. Weâre all on our phones throughout the day, so make it a regular occurrence to do a quick internet search on ways to improve your credit score. Continually staying educated about various credit improvement opportunities Â
The post National Get Smart About Credit Day appeared first on MintLife Blog.
You need to come up with some cash, fast. Maybe you have a leaky roof that desperately needs fixing or you need help paying for your kid’s first semester of college. But where do you turn?
If you’re a homeowner, you have options that involve tapping into your home equityâthe difference between what your home is worth and how much you owe on your mortgage.
There are three main ways to tap into home equity, but sorting through those options can be confusing. To help, we’ve boiled down what you need to know about some of the most common home financing optionsâcash-out refinance, home equity loan, and home equity line of creditâand how to determine which one is right for you.
1. Cash-out refinance
How it works:Â A cash-out refinance replaces your existing mortgage with a new loan that’s larger than what you currently oweâand puts the difference in your pocket. With a cash-out refinance, you’re able to receive some of your home’s equity as a lump sum of cash during the process.
“This only works if you have equity in your home, either through appreciation or paying down your mortgage,” says David Chapman, a real estate agent and professor in Oklahoma.
Pros:Â If you need cold, hard cash in your hands, a cash-out refinance can help you get it. You can use this money for whatever you wantâupgrades to your house, even a vacation. Another positive? If interest rates are lower than when you first got your loan, you’ll get to lock in lower interest rates than you’re paying now.
“Now is the time to look at a cash-out refinance due to the low interest rate environment,” says Michael Foguth, founder of Foguth Financial Group.
Cons:Â You’ll have to pay closing costs when you refinance, though some lenders will let you roll them into your mortgage. The costs can range from 2% to 5% of your loan amount. And, depending on the circumstances, if interest rates have gone up, you could end up with a higher interest rate than your existing mortgage.
Also, you’ll be starting over with a new loan and, unless you refinance into a different type of mortgage altogether, you’ll ultimately be extending the time it takes to pay off your home loan. Even if you get a better interest rate with your new loan, your monthly payment might be higher.
When to get a cash-out refi: A cash-out refinance makes the most sense if you’re able to get a lower interest rate on your new loan. (Experts typically say that at least a 1% drop makes refinancing worth it.)
This option also works well for home renovations, since (ideally) you’ll be increasing your home’s value even more with the updates. In essence, you’re using your home’s existing equity to help pay for even more equity growth.
While you could use your cash-out refinance to pay for anything, financial experts typically advise that you spend the money wisely, on something that you see as a good investment, rather than on something frivolous.
2. Home equity loan
How it works: Unlike a cash-out refi, which replaces your original loan, a home equity loan is a second additional mortgage that lets you tap into your home’s equity. You’ll get a lump sum to spend as you see fit, then you’ll repay the loan in monthly installments, just as you do with your first mortgage. The home equity loan is secured by your house, which means that if you stop making payments, your lender could foreclose on the home.
Pros:Â With a home equity loan, you get a huge chunk of cash all at once. A home equity loan lets you keep your existing mortgage, so you don’t have to start over from year one. Your interest rate is typically fixed, not adjustable, so you know exactly what your monthly payment will be over the life of the loan. And, another plus is your interest may be tax-deductible.
Cons: Compared with a cash-out refinance, a home equity loan will likely have a higher interest rate. Home equity loans also come with fees and closing costs (though your lender may opt to waive them). Another downside? You’re now on the hook for two mortgages.
When to get a home equity loan: A home equity loan makes more sense than a cash-out refi if you’re happy with your current home loan, but you still want to tap into your home equity, says Andrina Valdes, chief operating officer of Cornerstone Home Lending. It can also be handy for home renovations that add value, though of course you’re free to use it however you want.
“A home equity loan could be used in cases where you may already have a low mortgage interest rate and wouldnât necessarily benefit from a refinance,” says Valdes.
3. Home equity line of credit
How it works:Â A home equity line of credit, aka HELOC, is similar to a home equity loanâit’s a second mortgage that lets you pull out your home equity as cash. With a HELOC, however, instead of a lump sum amount, it works more like a credit card. You can borrow as much as you need whenever you need it (up to a limit), and you make payments only on what you actually use, not the total credit available.
Since it’s a second mortgage, your HELOC will be treated totally separately from your existing mortgage, just like a home equity loan.
“With a HELOC, the homeowner will need to make two payments each monthâtheir mortgage payment and the HELOC payment,” says Glenn Brunker, mortgage executive at Ally Home.
Pros: You borrow only what you need, so you may be less tempted to spend this money than a lump-sum home equity loan. You pay interest only once you start borrowing, but you can keep the line of credit open for many years, which means your HELOC can act as a safeguard for emergencies.
HELOCs typically have lower interest rates than home equity loans, and they typically have little or no closing costs. (Again, your lender might offer to waive these fees.) HELOCs are often easier to get because they’re subject to fewer lending rules and regulations than home equity loans.
Cons:Â HELOCs usually have adjustable interest rates, which means you can’t necessarily predict how much your monthly payment will be. Most HELOCs typically require the borrower to pay interest only during what’s known as the draw period, with principal payments kicking in later during the repayment period. If you don’t plan properly or you lose your job, you might be caught off guard by these higher payments down the road. As is the case with other second mortgages, your bank can foreclose on your house if you stop making payments.
“Once a HELOC transitions into the repayment period, the borrower is required to make both principal and interest payments,” says David Dye, CEO of GoldView Realty in Torrance, CA. “Many borrowers forget about this transition and are often startled by the sudden increase in minimum payments.”
When to get a HELOC: A HELOC makes the most sense if you want the flexibility and peace of mind of knowing you can easily access money in the future, says Mindy Jensen, a real estate agent in Colorado.
“A HELOC is great to have just in case,” says Jensen. “You have access to it, but are not committed to taking it or paying for money you don’t have an immediate need for.”
And compared with an actual credit card, a HELOC has a much lower interest rate, so it’s likely a cheaper financing option for you.
The post Need Cash? 3 Ways To Tap Your Home Equityâand Which One’s Right for You appeared first on Real Estate News & Insights | realtor.com®.
The sad thing about cars is that like boats and diamond rings, theyâre depreciating assets. As soon as you drive yours off the lot, it immediately begins losing value. Some people are lucky enough to live somewhere with a reliable public transportation system. And others can bike to work. If you donât fall into either of those categories, however, a car isnât something you can put off buying.
Check out our investment calculator.
If youâre preparing to purchase a new or used vehicle, you might be wondering, how much should I spend on a car? Weâll answer that question and reveal ways to make sure youâre not overpaying when you buy your vehicle.
The True Cost of Buying a Car
Next to buying a house, buying a car is likely one of the biggest purchases youâll make in your lifetime. And if you want a quality vehicle that isnât going to break down, youâre probably going to have to pay a pretty penny for a new ride. The average cost of a brand new car was about $33,543 in 2015, compared to $18,800 for a used one.
When you buy a car, of course, youâre paying for more than just the vehicle itself. Besides the fee youâll pay for completing a car sales contract (known as a documentation fee), you might have to pay sales tax. Then there are license and registration fees, which vary by state. In Georgia, for example, youâll pay a $20 registration fee every year versus the $101 that drivers pay annually in Illinois.
The amount you pay up front for a car can rise by 10% or more when you add taxes and fees into the equation. And if you need a car loan, you might have to put 10% down to get a used car and 20% down to get a new vehicle. If you decide to roll the sales tax and fees into the loan, youâll cough up even more money over time because interest will accrue.
Once the car is in your possession, youâll have to pay for insurance, car payments, parking fees, gasoline and whatever other costs come up. In a 2015 study, AAA found that a standard sedan cost Americans $8,698 annually, on average. As convenient as having your own car might be, itâll be a huge investment.
Related Article: The True Cost of Cheaper Gas
How Much Should I Pay?
The exact amount that you should spend on a car might change depending on who you ask. Some experts recommend that car-buyers follow the 36% rule associated with the debt-to-income ratio (DTI). Your DTI represents the percentage of your monthly gross income thatâs used to pay off debts. According to the 36% rule, it isnât wise to spend more than 36% of your income on loan payments, including car payments.
Another rule of thumb says that drivers should spend no more than 15% of their monthly take-home pay on car expenses. So under that guideline, if your net pay is $3,500 a month, itâs best to avoid spending more than $525 on car costs.
That 15% cap, however, only applies to consumers who arenât paying off any loans besides a mortgage. Since most Americans have some other form of debt â whether itâs credit card debt or student loans that they need to pay off â that rule isnât so useful. As a result, other financial advisors suggest that car buyers refrain from purchasing vehicles that cost more than half of their annual salaries. That means that if youâre making $50,000 a year, it isnât a good idea to buy a car that costs more than $25,000.
How to Buy a Car Without Busting Your Budget
If youâre trying to figure out how to make your first car purchase happen, know that you can do it even if your finances are currently in disarray. If you look at a website like Kelley Blue Book before visiting a dealership, youâll have a better idea of what different makes and models cost. From there, you can set a goal and work towards reaching it by saving more and keeping your excess spending to a minimum.
Once you find a car you like (and that you can afford), you can save money by challenging or cutting out certain fees. For example, you can lower or bypass dealer fees for shipping and anti-theft systems. If youâre planning on getting an extended warranty, you can shop around and see if thereâs another company offering a better deal on it than your car manufacturer.
Meeting with more than one dealer and comparing offers can also improve your chances of being able to find a vehicle within your price range. So can timing your purchase so that youâre buying a car when a salesperson is more open to negotiating, like near the end of a sales quarter.
Try out our budget calculator.
If you need financing, itâs important to make sure youâre not getting saddled with a car loan thatâll take a decade to pay off. Long-term car loans are becoming more common. In 2015, the average new car loan had a term of 67 months versus the 62 months needed to cover the average used car loan.
The longer your loan term, however, the more interest youâll pay. And the harder itâll be to trade in your car in the future, especially if the amount of the loan surpasses the carâs value. Thatâs why some experts suggest that buyers get loans that they can pay off in four years or less.
The Takeaway
How much should you spend on a car? Only you can decide that after reviewing your budget and figuring out if you can pay for the various expenses that go along with owning a car.
Keep in mind that getting a new or used car will likely involve taking on more debt. If you canât make at least minimum payments on the debt you already have, it might be a good idea to get a part-time job or concentrate on saving so you wonât have to take out a huge loan.
Update: Have more financial questions? SmartAsset can help. So many people reached out to us looking for tax and long-term financial planning help, we started our own matching service to help you find a financial advisor. The SmartAdvisor matching tool can help you find a person to work with to meet your needs. First youâll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.
In an economic emergency, covering even basic yet important expenses can be tough. For example, in 2020, the coronavirus pandemic rocked the foundations of millions of Americans. The National Multifamily Housing Council found that by Jan. 20, 11.4% of tenants had not sent money for their rent.
The last thing you want is to be evicted from your home because of nonpayment of rent. When used correctly, a credit card can help you through hard situations. Since the card issuer only requires a small minimum payment, it can buy you time before getting back on your feet.
Here’s how to charge rent, not just during a financial crisis but under normal conditions as well, advantageously.
See related: How to earn rewards when paying monthly bills
How to pay rent with a credit card
How to pay through your landlord
How to pay through third-party services
Best credit cards to pay rent
Pros of paying rent with a credit card
Cons of paying rent with a credit card
How to pay through your landlord
First, ask your landlord if you can charge your rent. Some have software already set up to accept payments, so all you would need to do is provide your account information and your card will be charged. Larger property management companies are more apt to accept credit cards than individual landlords, but it’s worth an inquiry.
Bear in mind that there will be a processing fee, which typically falls between 2.5% and 2.99% of the transaction. The landlord will probably pass that cost to you, though it doesn’t hurt to ask if they’ll absorb the fee.
For example, if your rent is $1,800 and the fee is assessed at 2.99% of the transaction, the added cost would be $53.82. If the minimum credit card payment is 2% of the balance, your payment would be $36. Add the fee to it and all you’d need pay is $89.82 – a far cry from the $1,800 due.
If your landlord doesn’t offer this option, consider explaining your reason for wanting to charge the amount. If it’s not a permanent change to the rental agreement (which spells out the method and timing of your payments), your landlord may allow you to send the money via an app such as PayPal or Venmo on a temporary basis.
You would set up the app, attach your credit card to the account, and then follow through with the “pay-to” transaction:
Locate your landlord’s profile name.
Hit the “pay” function.
The money is deducted from your credit card and sent to your landlord’s bank account on file.
You receive the bill of the transaction amount plus the fee from your credit card company.
Yet another way to use your credit card to cover your rent is to take out a cash advance. It comes with some serious consequences that make this method your last choice, though:
Fees can be 5% of the amount you withdraw.
Interest rates are often higher on cash advances than they are on purchases.
There is no interest-free grace period, as there is for purchases.
How to manage your credit cards during the coronavirus outbreak
Coronavirus: What to do if you’re unemployed and have credit card debt
How to pay through third-party services
An alternative to paying your landlord directly is to use a company that acts as an intermediary. The general process is simple:
Sign up with the company.
Identify your landlord.
Enter your rent amount and due date.
The company charges your card and sends your landlord the money in the form of a paper check or electronic transfer.
You receive a bill from your credit card company and can send any amount that is at least the minimum payment.
You should have no trouble paying any landlord this way if the third party sends your rent with a paper check. It’s the same as if it were coming straight from your own checkbook.
However, if the company sends payments electronically, your landlord would need to register for an account so the money can be deposited.
But charging rent with a third-party company is becoming popular.
“We’ve seen a 50% increase in the number of Plastiq customers that are paying for rent with their credit card [in 2019] compared to 2018,” says Eliot Buchanan, co-founder and CEO of the consumer-to-business bill-paying company.
“However, there are card processing fees involved, so rent payers should compare the costs and benefits of paying rent on a credit card to determine whether it makes sense to do in their particular situation.”
Accepting credit cards for rent payments is a win-win, says Brian Davis, director of education for SparkRental.
“Landlords and property managers who accept rent by credit card offer more flexibility for their renters, with an option to stay current on their rent even if their bank account is short on the first on the month,” says Davis.
Review a variety of third-party companies before deciding on one, paying close attention to the fee structure and whatever unique benefits they may have.
Third-party service
Transaction fee
Benefits/Perks
Plastiq
2.85%
Up to 2% cash back on transactions, depending on your card.
RentMoola
2.99% – 3.99%
Earn “MoolaPerks” for deals on travel, shopping, home service providers, etc.
SparkRental
2.99% – 3.99%
Designed for landlords with a more challenging tenant base.
RentPayment
2.95%
Can pay via app, by replying to a text or by phone.
RadPad
2.99%
For landlords who prefer paper checks.
Cozy
2.75%
Can add low-cost renter’s insurance to the payment.
Best credit cards to pay rent
Some rewards cards offer generous introductory bonuses. You can open an account for the specific purpose of using that bonus to offset the fees involved in charging your rent.
To get the bonus, you have to meet the card’s required minimum spend within the first three months of opening the card. When you do, the reward is yours.
If you get cash back, you can use the money as a statement credit. For cards that give points or miles, you can trade them in for cash too, but you won’t get as much for them as you would for things like travel.
Whatever the case, the introductory bonus will nullify the amount you’re charged in fees when use your card for rent. After that, you’ll be earning rewards on purchases, which will also offset the fees, should you continue to charge your rent.
Just a few examples include:
Rewards credit card
Minimum spend
Introductory bonus
Wells Fargo Propel American Express® card
$1,000 in first 3 months
20,000 points ($200 cash value)
Blue Cash Preferred® Card from American Express
$1,000 in first 3 months
$250 statement credit
Citi Rewards+® Card
$1,000 in first 3 months
15,000 ThankYou points (redeemable for $150 in gift cards at ThankYou.com)
Chase Sapphire Preferred Card
$4,000 in first 3 months
60,000 points (redeemable for $750 toward travel when you go through Chase Ultimate Rewards)
See related: Best rewards credit cards
Another option is to open a credit card that comes with 0% APR for an extended period of time.
You won’t be charged interest on the debt you carry over until the rate rises to the regular rate. Therefore, if you charge your rent and can only afford to pay the minimum, the debt won’t escalate with financing fees.
A few good examples include:
0% APR credit card
Intro APR purchase period
ABOC Platinum Rewards Mastercard
12 months (12.90-22.90% variable thereafter)
Citi® Diamond Preferred® Card
18 months (14.74-24.74% variable thereafter)
Discover it® Cash Back
14 months (11.99-22.99% variable thereafter)
See related: Best 0% APR credit cards
Pros of paying rent with a credit card
Aside from helping you through an emergency, charging rent has a few other benefits:
Build and improve credit history
Charging regularly, paying on time and keeping the balance at zero are the swiftest ways to establish a positive credit rating. Rent is a necessary expense, so why not parlay it into a high credit score?
Arthur Ruth, vice president of operations of Memphis Maids, a house cleaning service in Memphis, Tennessee, has been paying rent with his credit card for over 15 years.
“Using your cards so much, if you pay them correctly, you can save money and even improve your credit score,” says Ruth. “That’s something really important in this day and age.”
Cash flow freedom
When Ni’Kesia Pannell, an Atlanta-based journalist and entrepreneur, was temporarily short on cash, she took advantage of the credit card option.
“I was in between freelance gigs and needed to pay bills,” says Pannell. “The fees were high, but at the time, it was worth it.”
Once her financial situation returned to normal, she resumed paying by check.
In the same vein, if your rent is due on the first of the month but your income is sporadic, you may need some extra time to accumulate it all without any stress.
CreditCards.com, but you can still find a great card offer for you! Our CardMatch tool can help match you with prequalified offers and cards that align with your credit history – with no harm to your credit score. Get personalized offers from our partners in seconds.
Avoid late fees
If you don’t pay your rent on time, the landlord may charge you a late fee – which can be assessed at 5% of your rent payment or more.
“It’s nice to have the flexibility to charge your rent as an option if you hit a particularly tough month,” says Davis. “If tenants find themselves stretched too thin financially one month, it’s cheaper to charge their rent than let it go late – and it keeps them from falling behind and souring their relationship with their landlord.”
Cons of paying rent with a credit card
While paying with a credit card has its advantages, there are a few drawbacks to consider as well:
Fees
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In the event you are responsible for the credit card processing fee, you’re looking at an increase in your monthly obligation. If the value of your credit card rewards doesn’t surpass the fees, you will lose – not gain – money.
To know if it makes financial sense, look at your card’s rewards program and compare its earnings rates to the transaction fees you’ll be charged. If the fee is 2.5% of the transaction, and you’re earning 1.5% in cash back, you’re losing 1% every month. So, for example, you’ll be out $15 for a $1,500 rent payment.
“It may not sound like much, but over time, it adds up,” says Ande Frazier, former editor-in-chief of MyWorth, a financial education media company. “And if money is tight, [it will impact] what you should be spending on, [like] something essential.”
Credit card debt
As convenient as it is to rely on a substantial credit line when you need it, it’s also easy to over-borrow. Elevated interest rates and low payments will put you into a deep hole.
“It’s a vicious cycle,” says Frazier.“That debt will grow and grow, and the compounding interest will be huge. If you can’t afford your rent, you’re living in the wrong place.”
Credit damage
Credit scores consider the amount of debt you owe and weigh it against the amount you can borrow. If you hit your limit and the balance stays anywhere near it, your scores will sink. Skip payment cycles, and those scores plummet further.
This puts you in a terrible position if you have to move. Almost all landlords check credit reports to see if you’re a low-risk tenant. So, if they see excessive debt and a pattern of missed payments, they may pass you over for tenancy.
See related: How to rent an apartment with bad credit
Final thoughts
In extreme situations, charging your rent and then paying incrementally can keep you in positive position with your landlord. To avoid credit card debt spiraling out of control, pay as much as you possibly can to the balance each month. Then when life returns to normal and you want to continue to charge your rent, make sure you always have the money in your checking account to cover the payment when the bill is due.
There are over 25 million auto loans every year in the United States, with the majority of drivers using finance to pay for new and used vehicles. Car loans are some of the most common secured loans in the country and for many Americans, a car is the second most expensive purchase they will make in their lifetime.
But shopping for a new car and applying for a suitable car loan is a stressful experience filled with uncertainty and difficult decisions. One of the most difficult decisions is whether to opt for a new car or a used one. In this guide, weâll showcase some of the pros and cons of both options, pointing you in the right direction and helping you to make the right choice.
Reasons to Buy Used
It is satisfying to own something that is brand-new. Itâs fresh out of the factoryâyouâre the first to use it, the first to experience it.Â
Consumers are prepared to pay a premium just to be the first owner. iPhones and other tech are great examples of this. You could save 30% on the price of a new phone by opting for a refurbished model. The screen and case will be near-perfect, the hardware and software will be fully functional, and everything will be backed by a warranty. However, you donât get the satisfaction of peeling back the protective stickers and being the first to open the box.
Itâs a similar story with cars. There are no stickers to peel and boxes to open, but you canât beat the new car smell or the way the steering wheel feels in your palms.
Thatâs not all, either. There are many other benefits to owning a brand-new car and using your auto loan to acquire one.
New Cars Depreciate Fast
A $200,000 mortgage acquired today might cost you $300,000 or more over the lifetime of the loan. However, in a couple decades, when that mortgage is in the final stretch and you own a sizeable chunk of home equity, youâll likely have something worth $250,000, $300,000, or more.
If you get an auto loan on a new car, itâs a different story. As your interest increases and your payments exceed the original value, the current value nose-dives. At the end of the term, you could have something that is worth a small fraction of what you paid for it.
As an example, letâs assume that you purchase a $40,000 car with a $10,000 down payment and a $30,000 loan. With an interest rate of 6% and a term of 60 months, youâll repay just under $35,000 over the lifetime of the loan.
However, as soon as you drive that car out of the lot, the price will plummet. At the end of the first year, it will have lost between 20% and 30% of its value. If we assume a 20% loss, that car is now worth just $32,000. The irony here is that you will have paid just under $7,000 in that year, and as the years progress, you fall into a pattern where the more you pay, the less itâs worth.
In the next 4 years, the car will experience an average deprecation of between 15% and 18%. Again, letâs assume a conservative estimate of 15%. That $40.000 purchase will be worth $27,200 at the end of year 2; $23,120 at the end of year 3; $19,653 in year 4, and $16,705 at the end of the loan.
And donât forget, that vehicle cost you $45,000 in total.
Unless youâre buying a rare car that will become a collectible, all cars will depreciate, and that depreciation will be pretty rapid. However, used cars donât suffer such rapid deprecation because they donât have that inflated sticker price. If you take good care of them and pay a good price, you wonât stand to lose as much money.
Used Cars are Cheaper
As stated above, all cars depreciate, but if the first year suffers the biggest drop then why not buy a car that is just a year or two old?
Itâs the same car and offers many of the same benefits, but youâre getting it for up to 30% less on average. For a $40,000 car, thatâs a saving of $8,000. Once you add a 20% down payment, your loan only needs to cover $25,600. For a 6% loan, thatâs just $495 a month, compared to the $619 youâd pay on a $40,000 new car with the same 20% down payment.
That puts more money in your pocket and less debt on your credit report. Thatâs a double-whammy well worth sacrificing a new car smell for.
Itâs Still Nearly New
If you buy a used car that is just a couple of years old, you can still get something that has been well maintained and is just as impressive as it was the day it rolled off the lot.Â
Think about the last time you bought a brand-new car, computer, phone, musical instrumentâor anything else that came with a premium price tag. You probably kept it in perfect condition soon after buying. Everyone goes through a period of doing their utmost to keep a new purchase immaculate and the more they pay, the longer than period lasts.
Most consumers will keep a car in perfect condition for at least two or three years, but no matter what they do, they are powerless to the depreciation. This means you can get an almost-new, perfect car that is nearly a third cheaper than it was when it was new.
Reasons to Buy New
Î used car doesnât provide you with that enjoyable, tactile experience. You canât enjoy the ubiquitous new car smell and you wonât be the first owner. However, there are numerous benefits to buying used instead of new, not least of which is the amount of money you will save now and in the future.
More Finance Options
You have a few more options at your disposal when it comes to financing a new car. Many dealerships offer low-interest and even no-interest financing to encourage you to sign on the dotted line.Â
These deals often have hidden terms, penalties, and other issues, and if you fail to make a payment, they wonât hesitate to take your car from you. However, if youâre struggling to finance elsewhere and have your heart set on a brand-new car, this could be your only option.
Make sure you read the terms and conditions closely and donât let them bombard you with small print and sales talk. They are there to sell you a car. All they care about is your signature on that contract and if that means glossing over a few of the terms, they wonât hesitate.
More Customization and Better Features
Technology is advancing at a tremendous pace and this can be felt in all industries, including the automotive sector. A lot can happen in a few short years and if you buy a used car as opposed to a new one, you could miss out on a host of electronics, safety features, and more.
Customization is also possible with new cars. You can request colors, fabrics, and other aesthetic changes, as well as additional features relating to the power and performance of the vehicle.
Better Cover
New cars offer bumper-to-bumper warranty cover, which means that youâre covered in the event of an issue. If major repairs are needed, you wonât be out of pocket, and these warranty plans tend to offer roadside assistance as well.
This can be true for used cars as well, with the manufacturerâs warranty being transferred when the car is in the hands of a new owner. However, the warranty is at its longest and most useful when the car is first purchased.
Cheaper Maintenance
The warranty wonât cover everything, and you will still be responsible for normal wear and tear. However, because the car is new, it should require less maintenance and may take several years before you need to make significant purchases.
Surveys suggest that new car owners pay anywhere from $0 to $300 for maintenance during the first 12 months, with this fee spanning between $300 and $1,100 once the car is a decade old.
Simpler Process
Used car purchases take time. You need to find the vehicle, inspect it, negotiate with the seller, and then hope you can agree to a price and payment plan. If you want something specific with regards to colors and features, you may have to search many inventories and individual sellers before you find something that fits.
With a new car, you simply agree to a budget and see whatâs available. If you need any tweaks or changes, you can request them directly from the dealer.
Summary: New vs Old
There are two ways at looking at this. Firstly, there are more advantages for buying a new car and these include some pretty important ones. However, the advantages for buying used are much bigger and if your bank balance or credit score is low, that could be the deciding factor.Â
In any case, itâs important to look closely at the pros and cons, evaluate them based on your personal situation, and donât rush this decision.
Auto Loan: New Car vs Old Pros and Cons is a post from Pocket Your Dollars.
Have you ever wondered, "How many credit cards should I have? Is it wise to have a wallet full of them? Does having multiple credit cards hurt my credit score?"
If you’ve been following this blog or the Money Girl podcast, you know the fantastic benefits of having excellent credit. The higher your credit scores, the more money you save on various products and services such as credit cards, lines of credit, car loans, mortgages, and insurance (in most states).
Even if you never borrow money, your credit affects other areas of your financial life.
But even if you never borrow money, your credit affects other areas of your financial life. For instance, having poor credit may cause you to get turned down by a prospective employer or a landlord. It could also increase the security deposits you must pay on utilities such as power, cable, and mobile plans.
Credit cards are one of the best financial tools available to build or maintain excellent credit scores. Today, I'll help you understand how cards boost your credit and the how many credit cards you should have to improve your finances.
Before we answer the question of how many credit cards you should have in your wallet, it's important to talk about using them responsibly so you're increasing instead of tanking your credit score.
5 tips for using credit cards to build credit
Make payments on time (even just the minimum)
Don’t rely on being an authorized user
Never max out cards
Use multiple cards
Keep credit cards active
A common misconception about credit is that if you have no debt you must have good credit. That’s utterly false because having no credit is the same as having bad credit. To have good credit, you must have credit accounts and use them responsibly.
Having no credit is the same as having bad credit.
Here are five tips for using credit cards to build and maintain excellent credit scores.
1. Make payments on time (even just the minimum)
Making timely payments on credit accounts is the most critical factor for your credit scores. Your payment history carries the most weight because it’s an excellent indicator of your financial responsibility and ability to pay what you owe.
Having a credit card allows you to demonstrate your creditworthiness by merely making payments on time, even if you can only pay the minimum. If the card company receives your payment by the statement due date, that builds a history of positive data on your credit reports.
I recommend paying more than your card’s minimum. Ideally, you should pay off your entire balance every month so you don’t accrue interest charges. If you tend to carry a balance from month-to-month, it’s wise to use a low-interest credit card to reduce the financing charge.
2. Don’t rely on being an authorized user
Many people start using a credit card by becoming an authorized user on someone else’s account, such as a parent’s card. That allows you to use a card without being legally responsible for the debt.
Some credit scoring models ignore data that doesn’t belong to a primary card owner.
Some card companies report a card owner’s transactions to an authorized user’s credit report. That could be an excellent first step for establishing credit … if the card owner makes payments on time. Even so, some credit scoring models ignore data that doesn’t belong to a primary card owner.
Therefore, don’t assume that being an authorized user is a rock-solid approach to building credit. I recommend that you get your own credit cards as soon as you earn income and get approved.
3. Never max out cards
A critical factor that affects your credit scores is how much debt you owe on revolving accounts (such as credit cards and lines of credit) compared to your total available credit limits. It's known as your credit utilization ratio, which gets calculated per account and on your accounts' aggregate total.
A good rule of thumb to improve your credit scores is to keep your utilization ratio below 20%.
Having a low utilization ratio shows that you use credit responsibly by not maxing out your account. A high ratio indicates that you use a lot of credit and could even be in danger of missing a payment soon. A good rule of thumb to improve your credit scores is to keep your utilization ratio below 20%.
For example, if you have a $1,000 card balance and a $5,000 credit limit, you have a 20% credit utilization ratio. The formula is $1,000 balance / $5,000 credit limit = 0.2 = 20%.
There's a common misconception that it's okay to max out a credit card if you pay it off each month. While paying off your card in full is smart to avoid interest charges, it doesn't guarantee a low utilization ratio. The date your credit card account balance is reported to the nationwide credit agencies typically isn't the same as your statement due date. If your outstanding balance happens to be high on the date it's reported, you'll have a high utilization ratio that will drag down your credit scores.
4. Use multiple cards
If you need more available credit to cut your utilization ratio, there are some easy solutions. One is to apply for an additional credit card, so you spread out charges on multiple cards instead of consistently maxing out one card. That reduces your credit utilization and boosts your credit.
Having the same amount of debt compared to more available credit instantly reduces your utilization and improves your credit.
For example, if you have two credit cards with $500 balances and $5,000 credit limits, you have a 10% credit utilization ratio. The formula is $1,000 balance / $10,000 credit limit = 0.1 = 10%. That’s half the ratio of my previous example for one card.
Another strategy to cut your utilization ratio is to request credit limit increases on one or more of your cards. Having the same amount of debt compared to more available credit instantly reduces your utilization and improves your credit.
5. Keep credit cards active
Credit card companies are in business to make a profit. If you don't use a card for an extended period, they can close your account or cut your credit limit. You may not mind having a card canceled if you haven't been using it, but as I mentioned, a reduction in your credit limit means danger for your credit scores.
A reduction in your credit limit means danger for your credit scores.
No matter if you or a card company cancels one of your revolving credit accounts, it causes your total amount of available credit to shrink, which spikes your utilization ratio. When your utilization goes up, your credit scores can plummet.
Anytime your credit card balances become a higher percentage of your total credit limits, you appear riskier to creditors, even if you aren't. So, keep your cards open and active, especially if you're considering a big purchase, such as a home or car, in the next six months.
In general, I recommend that you charge something small and pay it off in full several times a year, such as once a quarter, to stay active and keep your available credit limit in place.
If you have a card that you don't like because it charges an annual fee or a high APR, don't be afraid to cancel it. Just replace it with another card, ideally before you cancel the first one. That allows you to swap out one credit limit for another and avoid a significant increase in your credit utilization ratio.
If you're determined to have fewer cards, space out your cancellations over time, such as six months or more.
How many credit cards should you have to build good credit?
Now that you understand how credit cards help you build credit, let's consider how many you need. The optimal number for you depends on various factions, such as how much you charge each month, whether you use rewards, and how responsible you are with credit.
There's no limit to the number of cards you can or should have if you manage all of them responsibly.
According to Experian, 61% of Americans have at least one credit card, and the average person owns four. Having more open revolving credit accounts makes you more likely to have higher credit scores, but only when you manage them responsibly.
As I mentioned, having more available credit compared to your balances on revolving accounts is a crucial factor in your credit scores. If you continually bump up against a 20% utilization ratio, you likely need an additional card.
You can keep an eye on your credit utilization and other important credit factors with free credit reporting tools such as Credit Karma or Experian.
Also, consider how different credit cards can help you achieve financial goals, such as saving money on everyday purchases you're already making. Many retailers, big box stores, and brands have cards that reward your loyalty with discounts, promotions, and additional services.
If you continually bump up against a 20% utilization ratio, you likely need an additional card.
I use multiple cards based on their benefits and rewards. For instance, I only use my Amazon card to get 5% cashback on Amazon purchases. I have a card with no foreign transaction fees that I use when traveling overseas. And I have a low-interest card that I only use if I plan to carry a balance on a large purchase for a short period.
There's no limit to the number of cards you can or should have. Theoretically, you could have 50 credit cards and still have excellent credit if you manage all of them responsibly.
My recommendation is to have a minimum of two cards so you have a backup if something goes wrong with one of them. Beyond that, have as many as you're comfortable managing and that you believe will benefit your financial life.
Purchasing an investment property can be an exciting milestone for a would-be landlord or entrepreneur. The financing for investment properties, on the other hand, isnât nearly as exciting. It can be a trouble spot, though. Investment property loans arenât as easy to get as conventional home purchase financing. If you donât have the cash to […]
The post Tips for Financing Investment Properties appeared first on The Simple Dollar.
If you have bad credit and need a car loan, there are some challenges when compared to obtaining a standard car loan. However, pick your head up because there are a handful of great lenders that specifically tailor their programs to people with bad credit. We researched the landscape of lenders that can help you get a car loan even if you have a below-average credit score.
Based on our study, OneMain Financial and LightStream are two of the top lenders offering bad credit card loans. This is due to factors including loan options, requirements to qualify, and interest rates offered. Of course, we offer in-depth reviews of all the top lenders who offer bad credit car loans further down in this piece.
Apply now with our top pick: OneMain Financial
In this guide we also help you understand the factors that go into selecting the right auto lender, and how to get the best rate you can.
Most Important Factors for Bad Credit Car Loans
If youâre in the market for a bad credit car loan, there are a plethora of factors to consider and compare. Here are the main loan details we looked at in our study, and the ones you should prioritize as you select the best car loan for your needs.
Check your credit score. And understand what is in your credit report.
FICO scores under 579 is considered ‘poor’. But you may need a bad credit loan with a score as high as 669.
Interest rates and fees matter. These can make a huge difference in how much you pay for an auto loan each month.
Compare loan terms. Consider your repayment timeline and compare lenders with this in mind.
Getting prequalified online can help. Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report.
Watch out for loan restrictions. Some lenders impose restrictions on what car you can purchase. Keep this in mind to avoid unpleasant surprises later.
The Best Bad Credit Car Loans of 2021
The best bad credit car loans make it easy for consumers to qualify for the financing they need. The following lenders made our list due to their superior loan offerings, excellent customer service, and reputation in this industry.
Car Loan Company
Best For…
Get Started
Best for Flexibility
Apply Now
Best Personal Loan Option
Apply Now
Best Loan for Bad Credit and No Credit
Apply Now
Best Loan Comparison Site
Apply Now
Best Big Bank Loan for Bad Credit
Apply Now
Best for Fast Funding
Apply Now
Why Some Lenders Didn’t Make the Cut
While the lenders we are profiling are the best of the best, there are plenty of bad credit car loans that didnât quite make the cut. We didnât include any lenders that only offer auto loan refinancing, for example, since we know many people need a car loan in order to purchase a new or used car or truck. We also stayed away from bad credit car loans that charge outrageous fees for consumers with the lowest credit scores.
Bad Credit Auto Loan Reviews
We listed the top companies we selected in our study above, but we also aim to provide readers with more insights and details on each. The reviews below highlight the highlights of each lender that made our list, plus our take on who they might be best for.
OneMain Financial: Best for Flexibility
OneMain Financial offers personal loans and auto loans with interest rates that range from 18.00% to 35.99%. You can repay your auto loan in 24, 36, 48, or 60 months, and you can use this lender to borrow up to $20,000 for a new or used car. You can apply for your auto loan online and from the comfort of your own home, and itâs possible to get approved within a matter of minutes.
While OneMain Financial doesnât list a minimum credit score requirement, itâs believed they will approve consumers with scores as low as 600. You should also note that auto loans from OneMain Financial come with an origination fee of up to 5% of your loan amount.
Sign Up With OneMain Financial Today
Why This Lender Made Our List: OneMain Financial offers a lot of flexibility in terms of your loan terms, including the option to repay your auto loan over five years. OneMain Financial also has pretty decent reviews from users for a bad credit lender, and they have an A+ rating with the Better Business Bureau.
Potential Downsides to Be Aware Of: OneMain Financial charges some pretty high rates for its bad credit loans, and donât forget that you may need to pay an origination fee that is up to 5% of your loan amount. Their loans are also capped at $20,000, which means this lender wonât work for everyone.
Who Itâs Best For: This lender is best for consumers with really poor credit who need auto financing but canât get approved for a better loan.
Upgrade: Best Personal Loan Option
Upgrade is an online lender that offers personal loans with fixed interest rates, fixed monthly payments, and a fixed repayment timeline. You can borrow up to $50,000 in an unsecured loan, which means you wonât actually use the car you purchase as collateral for the loan.
You can repay the money you borrow over 36 to 60 months, which makes it possible for you to tweak your loan offer to secure a monthly payment you can afford. Upgrade has a minimum credit score requirement of 620 to qualify, although theyâll consider additional factors such as your income and employment history.
Sign Up With Upgrade Today
Why This Lender Made Our List: Upgrade lets you âcheck your rateâ online without a hard inquiry on your credit report. This makes it easy to shop around and compare this loan offer to others without having to fill out a full loan application. Also note that Upgrade has an A+ rating with the BBB.
Potential Downsides to Be Aware Of: Upgrade charges APRs as high as 35.89% for consumers with the worst credit, and an origination fee of up to 6% of your loan amount might also apply.
Who Itâs Best For: Upgrade is best for consumers with decent credit who need to borrow a larger loan amount. This loan is also best for anyone who wants an auto loan that isnât secured by their vehicle.
AutoCreditExpress.com: Best Loan for Bad Credit and No Credit
AutoCreditExpress.com is an online platform that lets consumers with bad credit and even no credit get the financing they need. Once you fill out some basic loan information, youâll be connected with a lender who can offer you financing as well as a dealership in your area. From there, youâll head to the local dealership and pull the pieces of your auto loan together, including the purchase price of the car you want.
Sign Up With Autocreditexpress.com Today
Why This Lender Made Our List: AutoCreditExpress.com has an A+ rating with the Better Business Bureau. This platform also makes it possible for consumers with no credit at all to finance a car, which is a welcome relief for people who are building credit for the first time.
Potential Downsides to Be Aware Of: This website is a loan platform but they donât offer loans directly to consumers. This means you wonât have any idea on rates and terms until you fill out an application and get connected with a lender.
Who Itâs Best For: This loan is best for consumers with no credit or minimal credit history who cannot get approved for a loan elsewhere.
MyAutoLoan.com: Best Loan Comparison Site
MyAutoLoan.com is a loan comparison site that makes it easy to compare up to four auto loan offers in a matter of minutes. You can use this website to apply for a new auto loan, but you can also utilize it to consider refinancing offers for an auto loan you already have. You can also use funds from this platform to purchase a car from a dealer or from a private seller.
Sign Up With MyAutoLoan.com Today
Why This Lender Made Our List: Comparing auto loans in terms of their terms, rates, and fees is the best way to save money and wind up with the best deal. Since MyAutoLoan.com is a loan comparison site, they make it easy to shop around and compare competing offers.
Potential Downsides to Be Aware Of: Loan comparison sites connect you with other lenders who have their own loan terms and minimum requirements for approval. Make sure you know and understand all the details of loans youâre considering before you sign on the dotted line.
Who Itâs Best For: MyAutoLoan.com is best for consumers who want to do all their auto loan shopping with a single website.
Capital One: Best Big Bank Loan for Bad Credit
Capital One offers online auto loan financing in conjunction with a program called Auto Navigator®. This program lets you get prequalified for an auto loan online, then work with a participating dealer to coordinate a loan for the car you want. Capital One also lets you search available vehicles at participating dealerships before you apply for financing, making it easy to figure out how much you might need to borrow ahead of time.
Sign Up With Capital One Today
Why This Lender Made Our List: Capital One offers the huge benefit of letting you get prequalified online without a hard inquiry to your credit report. Capital One is also a reputable bank with a long history, which should give borrowers some comfort. They have an A+ rating with the BBB and plenty of decent reviews from consumers.
Potential Downsides to Be Aware Of: You should be aware that Capital One auto loans only work at participating dealers, so you may be limited in terms of available cars to choose from.
Who Itâs Best For: Capital One auto loans are best for consumers who find a car they want to buy at one of the participating lenders that works with this program.
LightStream: Best for Fast Funding
LightStream offers online loans for a variety of purposes, including auto financing. Their auto loans for consumers with excellent credit start at just 3.99% with autopay, and even their loans for consumers with lower credit scores only run as high as 16.79% with autopay.
You can apply for your LightStream loan online and get approved in a matter of minutes. This lender can also send your funds as soon as the same business day you apply.
A minimum credit score of 660 is required for loan approval, although other factors like your work history and income are considered.
Sign Up With LightStream Today
Why This Lender Made Our List: LightStream offers auto loans with exceptional terms, and thatâs even true for consumers with less than perfect credit. You can also get your loan funded as soon as the same business day you apply, which is crucial if you need auto financing so you can get back on the road.
Potential Downsides to Be Aware Of: With a minimum credit score requirement of 660, these loans wonât work for consumers with the lowest credit scores.
Who Itâs Best For: LightStream is best for people with decent credit who need to get auto loan financing as quickly as possible.
What You Need To Know When Applying For A Car Loan With Bad Credit
Interest rates and fees matter.
If you think your interest rate and loan fees wonât make a big difference in your monthly payment, think again. The reality is that rates and fees can make a huge difference in how much you pay for an auto loan each month. Consider this: A $10,000 loan with an APR of 35.89% will require you to pay $361 per month for five years. The same loan amount at 21.99% APR will only set you back $276 per month. At 9.99%, you would pay only $212 per month for five years. The bottom line: Make sure to compare auto loans for bad credit so you wind up with the lowest possible APR you can qualify for.
Take steps to improve your credit score before you apply.
Itâs not always possible to wait to apply for a car loan, but you may be able to secure a lower interest rate and better loan terms if you can improve your credit score before you borrow money. The most important steps you can take to improve your score include paying all your bills early or on time, as well as paying down debt in order to decrease your credit utilization. You should also refrain from opening or closing too many credit card accounts in order to avoid new inquiries on your credit report and maintain the longest average length of your credit history possible.
Compare loan terms.
Some lenders let you borrow money for up to 84 months, while others let you repay your loan over 36 or 60 months at most. If you need to repay your loan over a longer timeline in order to secure an affordable monthly payment, make sure to compare lenders based on this factor. If youâre having trouble figuring out how much can you can afford, gauging affordability based on the monthly payments you can handle can also help in that effort.
Getting prequalified online can help.
Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report. This makes it considerably easier to compare rates and shop around without formally applying for an auto loan. Getting prequalified with more than one lender can also help you determine which one might offer the lowest rate without having to fill out a full loan application.
Watch out for loan restrictions.
As you compare the lenders on this list, keep in mind that not all lenders extend loans for any car you want. Some only let you finance cars with participating lenders in their network, which can drastically limit your options and make it impossible to purchase a car from a private seller. If you hope to purchase a car from someone you know or a website like craigslist.org, you may want to consider reaching out to your personal bank or a credit union you have a relationship with.
Bad credit car loans donât have to be forever.
Finally, you should know that a car loan for bad credit doesnât have to last forever. You may need to borrow money for a car right now regardless of the interest rate and terms you can qualify for, but it may be possible to refinance your loan into a better loan product later on. This is especially true if you focus on improving your credit score right away, and if you use your auto loan as an opportunity to prove your creditworthiness.
How to Get the Best Rate
1. Check your credit score.
Your credit score is one of the most important defining factors that dictate loan costs. Before you apply for an auto loan, it can help you check your credit score to see where you stand. Your score may not be as bad as you realize, but it could also be worse than you ever imagined. Either way, it helps to know this important information before you start shopping for an auto loan.
2. Improve your credit over time.
If your credit score needs work, youâll want to take steps to start improving it right away. The most important steps you can take to boost your credit score include paying all your bills early or on time and paying down debt to decrease your credit utilization. Also, make sure youâre not opening or closing too many credit accounts within a short amount of time.
3. Check your credit reports.
Use the website AnnualCreditReport.com to get a free copy of your credit reports from all three credit bureaus. Once you have this information, check over your credit reports for errors. If you find false information that might be hurting your score, take the steps to have the incorrect information removed.
4. Compare loan offers from at least three lenders.
A crucial step to get the best rate involves shopping around and comparing loan offers from at least three different lenders. This is important since lenders with different criteria might offer a lower APR or better terms than others.
5. Be flexible with repayment terms.
Also consider a few different loan terms provided you can afford the monthly payment with each. Some auto lenders offer better rates for shorter terms, which can help you save money if you can afford to repay your loan over 24 or 36 months instead of 60+.
How We Chose the Best Auto Loans
The lenders on our list werenât plucked out of thin air. In fact, the team behind this guide spent hours comparing auto lenders based on a wide range of criteria. Hereâs everything we considered when comparing the best bad credit car loans of 2021:
Interest Rates and Loan Terms: Our team looked for loans that offer reasonable rates and terms for consumers with poor credit. While higher APRs are typically charged to consumers with a low credit score, we only considered lenders that offer sensible rates that donât seem out of line for the auto loan market.
Ratings and Reviews: We gave preference to lenders who have decent reviews online, either through Consumer Affairs, Trustpilot, or another third party website. We also gave higher marks to lenders who have a positive rating with the Better Business Bureau (BBB).
Online Availability: Lenders who offer full loan details online were definitely given top priority in our ranking, and lenders who let you get prequalified online without a hard inquiry on your credit report were given the most points in this category. But since not everyone wants to apply for a loan online, we also included some lenders that let you apply over the phone.
Approval Requirements: Finally, we looked for lenders that extend credit to consumers with low credit scores in the first place. Not all lenders offer specific information on approval requirements, but we did our best to sort out lenders that only accept borrowers with good or excellent credit.
Summary: Best Bad Credit Card Loans of 2021
Best for Flexibility: OneMain Financial
Best Personal Loan Option: Upgrade
Best Loan for Bad Credit and No credit: AutoCreditExpress.com
Best Loan Comparison Site: MyAutoLoan.com
Best Big Bank Loan for Bad Credit: CapitalOne
Best for Fast Funding: LightStream
The post What Are the Best Car Loans When You Have Bad Credit? appeared first on Good Financial Cents®.
These days, things are changing so fast, itâs tough to keep up. Thatâs especially true in the mortgage industry, where interest rates and the overall home loan landscape are shifting with such head-spinning speed, it’s easy for outdated information to circulate, leading home buyers and homeowners astray.
You may have heard, for instance, that everyone can score a record-low interest rate, or that refinancing is a no-brainer, or that mortgage forbearance means you don’t have to pay back your loan, ever. Sorry, but none of these rumors is trueâand falling for them could cost you dearly.
To help home buyers and homeowners separate fact from fiction, we asked experts to highlight some rampant mortgage mistruths out there today. Whether you’re looking to buy or refinance, these are some reality checks you’ll be glad to know.
Myth No. 1: Everyone qualifies for low interest rates
Thereâs a lot of buzz about record-low mortgage interest rates lately. Most recently, a 30-year fixed-rate mortgage dropped to 2.88% for the week of Aug. 6, according to Freddie Mac.
This is great news for borrowers, but here’s the rub: “Not everyone will qualify for the lowest rates,” explains Danielle Hale, chief economist at realtor.com®.
So who stands to get the best rates? Namely, borrowers with a good credit score, Hale says. Most lenders require a minimum credit score of about 620. Some lenders might require an even higher threshold (more on that later).
Your credit score isn’t the only factor affecting what interest rate you get. It also depends on the size of your down payment, type of home, type of loan, and much more. So, keep your expectations in check, and make sure to shop around to increase the odds you’ll get a good rate.
Myth No. 2: Getting a mortgage today is easy
Many assume today’s low interest rates mean that getting a mortgage will be a breeze. On the contrary, these low rates mean just about everyone is trying to get a mortgage, or refinance the one they have. This glut of applicants, combined with the uncertain economy, means some lenders may actually tighten loan requirements.
In fact, a realtor.com analysis found that 5% to 20% of potential borrowers may struggle to get a mortgage because of these stricter standards. And getting a mortgage could become even tougher if the recession gets worse.
For example, some lenders may also require higher minimum credit scores and larger down payments. In April, JPMorgan Chase began requiring a 700 minimum credit score and 20% down payment.
Jason Lee, executive vice president and director of capital markets at Flagstar Bank, says some lenders arenât offering the loans that are considered riskierâsuch as jumbo loans, which exceed the conforming loan limit (for 2020, that max is $510,400).
“There arenât as many loan products available,” Lee says.
And even if you do manage to get a loan, it may take longer than you’d typically expect.
âBased on low rates and a high volume of refinances, loans are taking longer to complete from application to closing,â says Staci Titsworth, a regional mortgage manager for PNC Bank.
As such, borrowers should ask their lender how long the process will take to close, and make sure theyâre aware of the expiration date on the interest rate theyâve locked inâsince with rates this low, they could go up.
âMost lenders are locking in the customerâs interest rate so itâs protected from market fluctuations,” Titsworth adds.
Myth No. 3: Everyone should refinance their mortgage
âWith mortgage rates hovering near record lows, a refinance can make sense and can help free up monthly cash flow,â Hale says.
Still, not everyone should refinance. Homeowners should make sure to take a good hard look at their situation to see whether it makes sense for them.
For one, it will depend on your current interest rate. If it’s low already, it may not be worth the troubleâparticularly since refinancing comes with fees amounting to around 2% to 6% of your loan amount.
Given these upfront costs, refinancing often makes sense only if you plan to remain in your house for a while.
In general, ârefinancing is a good idea for homeowners who plan to live in the same home for several years, because they will reap the monthly savings over a longer time period,” Hale explains.
Myth No. 4: You can apply for a mortgage after you’ve found a home
Many people assume that you can find your dream home first, then apply for the mortgage. But that’s backwardânow more than ever. Today, your first stop when shopping for a house should be a mortgage lender or broker, who can get you pre-approved for a home loan.
For âa buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home,â Hale says.
Mortgage pre-approval is all the more essential in the era of the coronavirus pandemic. Why? Because many home sellers, leery of letting just anyone tour their home, want to know a buyer is seriousâand has the cash and financing to make a firm offer. As such, some real estate agents and sellers require a pre-approval letter before a potential buyer can view a home in person.
Nonetheless, according to a realtor.com survey conducted in June of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52% obtained a pre-approval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.
Aside from getting their foot in the door of homes they want to see, home buyers benefit from pre-approval in other ways. Since pre-approval lets you know exactly how much money a lender will loan you, it also helps you target the right homes within your budget.
After all, as Lee points out, âYou donât want to get your heart set on a home only to find out you canât afford it.â
Myth No. 5: Mortgage forbearance means you don’t have to pay back your loan
The record unemployment caused by the COVID-19 pandemic means millions of Americans have struggled to pay their mortgages. To get some relief, many have been granted mortgage forbearance.
Nearly 8% of mortgages, or 3.8 million homeowners, were in forbearance as of July 26, according to the Mortgage Bankers Association.
The problem? Many mistakenly assume that mortgage forbearance means you won’t have to pay your loan, period. But forbearance means different things for different homeowners, depending on the terms of the mortgage and what type of arrangement was worked out with the lender.
âForbearance is not forgiveness,â Lee says. âRather, itâs a timeout from having to make a mortgage payment where your servicerâthe company you send your mortgage payments toâwill ensure that negative impacts to your credit report and late fees will not occur. However, because forbearance is not forgiveness, you will need to reach some sort of resolution with your loan servicer about the missed payments.â
The paused payments may be added to the back end of the loan or repaid over time.
âIt does not forgive the payments, meaning the borrower still owes the money,â Hale says. âThe specifics of when payments need to be made up will vary from borrower to borrower.â
The post 5 Rampant Mortgage Myths You’ll Hear These DaysâCompletely Debunked appeared first on Real Estate News & Insights | realtor.com®.
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