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Did you know that six out of ten households face some kind of unexpected financial emergency each year? Clearly, you can never be too prepared for an emergency; especially when it comes to your finances. This video goes over four ways you can start preparing for a financial emergency: Establish an emergency fund Safeguard critical documents Consult with a financial counselor or coach Review your insurance coverage Although these steps can help you get started with financial emergency preparation, you should also take your personal financial and life situation into account and do what is best for you. Overall, getting your financial situation in order can take time, but it will prove to be worthwhile when you or a family member is faced with a financially taxing emergency. For more financial tips, check out these article for answers to common personal finance questions: "Should I Get a Credit Card or a Personal Loan?" "What if I Miss a Payment on my Personal Loan?" "9 Myths about Credit Card Debt"
Another holiday season is upon us. Whether that elicits visions of sugar-plums dancing in your head or just sheer panic, it is time to start making your lists and checking them twice; it's time to talk about a holiday budget. You may have just rolled your eyes, but a holiday budget could save you not only from stress, but it can also save you lots of time and money, which might be the greatest gift you could give yourself this year. While some consumers feel that budgeting takes the fun out of the holiday season, financial experts are fairly adamant that making and sticking to a holiday budget is important, especially this year amidst the COVID-19 pandemic. You might think that this year Americans will be spending less, which in some areas is true, such as travel, but according to the National Retail Federation (NRF), consumers are projected to spend the same amount, if not more, on holiday gifts and items. In fact, 53 percent of those surveyed who had changed holiday travel plans this year, said that they are more likely to spend more on holiday items this year. Whether or not you’re planning on spending more because you won’t be traveling, or you simply want to splurge/indulge at the close of a challenging year, making a holiday budget could keep you from having a blue Christmas. 2020 Holiday Budget Template Use the holiday budget template above to map out your expenses and save money this holiday season! Download Now To help you get started on making your holiday budget, we’ve compiled some helpful tips and strategies that will have you rockin’ around the Christmas tree this year. Creating a holiday budget can be daunting, but it doesn’t need to be. While these tips and strategies for building your budget may not be comprehensive, they can provide you with a good place to start your holiday planning. Be Realistic Consider All Costs Set Hard Limits Do Your Research Pick Your Payment Method Be realistic This is a key concept when it comes to holiday budgeting. Kevin Panitch, founder of Just Start Investing speaks to this point by emphasizing not stretching your budget beyond what is needful: "One important aspect of holiday budgeting is to be realistic, both in terms of how much you can save and how much you could be spending. I'm sure many of us would love to spend more on loved ones than we already do, but that doesn't mean we should stretch our budgets so much that we can no longer achieve them sustainably." Although it can be stressful trying to balance how much you would like to spend on some loved ones versus how much you can actually afford to spend, the stress of falling into debt is far greater. Matt Edstrom, CMO of GoodLife Home Loans, drives this point home: “Whatever irrational guilt you might feel from not spending enough on gifts will dissipate much faster than the guilt you’ll feel from putting yourself in any sort of debt. If you struggle with impulse spending around the holidays, constantly remind yourself of the stress that stems from debt.” Consider all costs A very important aspect of your budget will be outlining all possible costs that you may accumulate throughout the holiday season. Although travel may not be one of your costs this year, it is important to consider all other costs: Food — Are you planning on some holiday baking? Maybe you’re in charge of a fancy holiday feast, turkey and all the trimmings? Just keep in mind that there are costs attached to whatever you’re planning to cook, bake, or snack on, and turkeys can cost a pretty penny. Gifts — The holidays are generally a season of giving, and it can be fun to surprise your loved ones with something they’ve been eyeing for months, but that doesn’t mean that you need to break the bank. Postage — Although this may be an important cost this year more than ever before, it is important to consider the costs of sending packages and/or letters to friends and family. Set hard limits While some people set a dollar limit that they can afford, others just go spend and add up the receipts later. Have you ever considered how much of your annual income you spend in the holiday season? This perspective can be helpful when setting financial limits. Leslie Copeland, chief strategy officer at Ascend Federal Credit Union cautions, "Shoppers should spend no more than 1.5 percent of their annual income on holiday expenses. Once that number is set, they can plan out gifts, food, entertaining and travel costs." What does 1.5 percent of an annual income look like? If you make $10,000 per year, your max holiday budget should be $150. If you make $20,000 per year, your max holiday budget should be $300. If you make $40,000 per year, your max holiday budget should be $600. If you make $80,000 per year, your max holiday budget should be $1,200. Do your research With all costs considered and your spending limits set, it can be tempting to just go and spend your whole budget without any real thought. However, before you start spending, it can be beneficial to take some time to do some research: compare and contrast prices on items and see where you can get the best deals. Nishank Khanna, CFO of Clarify Capital, stresses that “reviewing sales is essential for the holiday season. If you don’t take the time to look up holiday promotions and discounts, you’re leaving money on the table. Why pay more for something than you need to? Doing your research before making purchases helps markets stay competitive and more importantly, means more money in your pocket.” A quick way to easily compare product prices is by simply searching for it in Google. The search results should populate various retailers that carry the product, also listing prices and any promotional options available. Another helpful option is to download a Google Chrome extension, like Honey, that will search the internet for the best prices and discounts that are available with the online merchant you are visiting at the time. Pick your payment method When it comes to purchasing your holiday items, you can choose from a variety of payment methods, which is both a blessing and a curse. You could choose to shop with just cash, but as online shopping will be the more popular and convenient shopping option due to the COVID-19 pandemic, debit or credit will likely be your two options, with the majority of consumers likely choosing to use their credit cards. Shopping with a credit card can be somewhat dangerous, as consumers often spend more with a credit card than they would otherwise. However, credit card rewards can be a great way to finance some of your holiday shopping. Michael Micheletti, director of corporate communications for Freedom Debt Relief, outlines how to use your credit card rewards to your advantage during the holiday season: “If you have a credit card account that offers rewards points, check your statements (or online accounts) to see how many points you have. Then visit the rewards website to convert the rewards into gifts, gift cards, or cash. Some rewards providers may even double the value of rewards at specific retailers. In some cases, you may be able to use the converted points as actual gifts for someone on your list. Otherwise, convert to rewards you can use yourself for everyday expenses (e.g., at a grocery, discount or big-box store), and then allocate that amount you’ve saved to your holiday budget. In addition, two major retailers (Amazon and Walmart) give you the opportunity to view and use your points across many different card providers within their online or application experience. This option really does provide transparency into using credit card points at the point of sale versus the often cumbersome experience of having to use individual lender websites.” Another option that you can use for payment, that is not only unique but offers a surefire way to control your spending, is by using gift cards. Think of where you normally do holiday shopping in the past, or stores that you visit frequently throughout the year. Instead of trying to set aside some money close to the holidays, which will likely just cause you more stress, set aside certain amounts of money throughout the year by purchasing gift cards for yourself to use during the holiday season. Then, when the holidays roll around, discipline yourself into using those gift cards for any holiday purchases. If buying gift cards at specific stores appears to be too limiting, consider looking into a Visa or Mastercard gift card that can be used at nearly any retail location, including online. One last payment method that you could consider, but shouldn’t necessarily be quick to use, is a personal loan. While applying for a personal loan could be a quick way to get some extra cash for the holidays, it would not be generally advisable to go into debt to finance your holiday festivities. Especially this year, during the COVID-19 pandemic, going into debt is not a good idea, nor is it necessary as travel, one of the major holiday season costs, is not happening for many consumers this year. However, if a personal loan could help you take care of holiday expenses, and you are confident that you’ll be able to pay your debt back in the new year, there are many lenders that you can choose from. Top Personal Loan Companies Learn more about the top personal loan companies and read verified customer reviews. Compare Lenders Making a budget is one thing, but sticking to it is an entirely different task. If you’re like me, you may make a budget and feel ready to take on the world and then just never look at it ever again. However, I would not encourage this practice, especially during the holiday season. So, what can you do to stick to your holiday budget? Here are a couple of ideas: Make lists (and stick to them) Making a list and checking it twice is never a bad idea when you’re trying to stick to a budget. Carefully consider what items belong on your lists, which will likely be informed by the product research you’ve done previously. Then, bring your list (physical copy or digital) with you when you go shopping, and stick to it! A helpful way you can manage your lists and shopping is by setting reminders on your phone, a suggestion made by Gareth Seagull, founder of Finance Friday: “Set reminders on your phone for when you go shopping. Depending on your phone, you may be able to attach the image of your budget on [the reminder], so every time you go shopping, you have the budget right there, and you’ll never forget.” Map out stores to visit Whether you’re shopping in person or online, map out which stores you want to visit. This can most definitely save you time and money, as you won’t get distracted by other retail options around you. Start shopping now Sometimes the holidays creep up on you and catch you completely off guard. In those moments, you may find yourself tearing through the mall on Christmas Eve, or hoping and praying that Amazon’s two-day shipping could magically occur in just one day. To avoid this stress, it is ideal to start your holiday shopping early, a practice which could also help you stick to your budget. Cristina Yasakci, a senior credit manager at Credit Achievers Today, speaks to this point: “We tend to spend more when we are rushed or in a hurry. If you take a little time organizing your strategies, it will make the whole experience fun!” Save yourself the stress and the money, and even have some fun while you’re at it, by getting started on your holiday shopping early. Stay focused Holiday shopping can be a time fraught with temptation, because chances are that as you’re shopping for others or picking up your holiday treats, you’ll come across some things you’d like to purchase for yourself. But, you must remain focused on the task at hand. Even what may seem like multiple small purchases can throw off your budget, which could lead to cutting corners in other areas that you weren’t initially planning on. This year many consumers are relying upon online shopping to make their holiday purchases. Online shopping is convenient, and will save you from combatting crowds during the COVID-19 pandemic, but it is important to keep yourself safe online, not only from spending too much but also from scam and/or fraud. Here are some strategies to help: Protect against e-commerce fraud E-commerce fraud is any type of fraud occurring on an e-commerce platform, and usually involves the use of a stolen or fake credit card or a fake identity. Thus, it is important to protect your credit card and personal information. Internet security company, Norton, suggests the following to protect yourself online while shopping: Shop only on secure websites. Do your research on the company and website before placing an order. Take a look at the website’s privacy and security policies. NEVER give out your social security number. If an online retailer asks for this information that is a big red flag. Taking the time to make sure that the websites you are shopping on are safe can save you a lot of trouble, and even a lot of money, overall! Don’t get caught up in convenience Online shopping is convenient and very easy, which is a blessing and a curse — a blessing because you don’t even need to leave your bed, but a curse because it’s a lot easier to spend more than you would if you were in a store. Although Yasacki urges consumers to start shopping early, she also advises taking extra care while online shopping: “Yes, shopping online can be easier, but, also a lot more dangerous. It is that much easier to get caught up in the moment. These conveniences can be very dangerous, particularly because you will be right back to using your credit cards. Be careful not to fall for the hook of “free shipping,” and make sure to compare all the prices for the same item. Is the shipping price built-in the price of the item? Or, is it free shipping if you spend above a certain amount?” Although “free shipping” is always a tempting option, make sure you check your prices to see if it’s actually worth it. Additionally, taking care with your credit card usage could save you a lot of stress and money later on. The final word Heading into the holidays can be a stressful time. But, with a little but of planning and research, you could save yourself from the stress of overspending this year. Although there are surely many other tips and tricks for creating a holiday budget and saving money, this guide can be a good place to start. 2020 Holiday Budget Template Use our holiday budget template to track your expenses and save money this year! Download Now
Myth or fact? Credit cards and personal loans are practically the same. "Personal loans and opening a new credit card are, at the core, the same concept," begins Brett Holzhauer, credit card writer at FinanceBuzz.com, "you are borrowing money with the promise of paying it back. However, the purpose and application of both of these products are vastly different." In this article, we are going to explore the similarities and differences between these two financial products, as well as answer the big question: Should I get a credit card or a personal loan? But first, let's break down what credit cards and personal loans are and when it's best to use one or the other. What is a credit card? On the most basic level, a credit card is a plastic card issued by a bank or other financial institution that allows you to borrow money to make purchases - generally smaller, every day purchases. Obtaining a credit card is quick and easy, and in many cases it is easier for consumers to receive approval for a credit account rather than a personal loan. "Credit cards are meant for those with the financial means of paying their monthly statements," says Holzhauer, "while personal loans offer access to cash that you will pay off over a predetermined time in the form of debt." Similar to a loan, you will be given a set amount of money, called a credit limit, when you open a credit account. This money can be used for making purchases or paying bills, and it is expected that you will pay back any money spent from your credit limit each month. However, credit cards have revolving credit, meaning that you can borrow more money as you pay off your debt, which can be both a good and a bad thing for borrowers. Expanding on this point, Abigail Welles, content specialist at Credit Card Insider adds that “a credit card is considered 'revolving' debt, meaning you can continue to borrow money as long as you have not hit this limit. If you do not pay off your balance, you’ll get hit with interest, which can effectively keep [consumers] in debt." Credit card pros and cons Credit cards can be a great option for some borrowers, but perhaps not all. Before deciding on using a credit card for your spending needs, consider both the pros and cons. Opening a new credit card can help improve your credit score, and there are various credit factors that can contribute to this. Making on-time payments is one of the more important and efficient ways to build credit with a credit card. As you use your card and make payments, this activity is generally reported by the card lender to the national credit bureaus - Experian, TransUnion, and Equifax. Based on this information, the credit bureaus are then able to create your credit score. If you miss payments, however, this will not only impact your credit score, but you could get hit with high interest rates that can accrue on an outstanding balance over time, resulting in potential credit card debt. Thus, if you have existing debt, a credit card may not be the best option for you. Various types of credit cards offer rewards or points for travel, or even cash back on purchases. These benefits can be a great incentive to use the card, but may not be profitable if you don't make on-time payments. Some credit cards even have introductory offers, such as no interest rate periods that provide flexibility if payments are missed. Most personal loan providers do not offer introductory services. It is important to note that credit cards may also have fees, such as an annual fee, late fee, cash advance fee, and a balance transfer fee. Key Takeaway: Credit cards are best for smaller, everyday purchases. They are also a good option in the following circumstances: You need extra cash You are a responsible borrower looking for rewards You can pay the balance off before any interest accrues You want to make online purchases It's for emergencies or occasional spending Top credit card companies The top three credit card companies on BestCompany.com include: Capital One American Express Discover Based on customer reviews, each company is comparable, receiving high ratings. Customers generally highlight good customer service as well as competitive rates and rewards. Each company offers multiple credit card options, providing more flexibility for consumers of all credit levels. Top Credit Card Companies Compare top-rated credit card companies and customer reviews to see what would be best for you. Compare What is a personal loan? A personal loans is a type of installment loan that provide borrowers with a fixed amount of money which they are responsible for paying back throughout the life of the loan, or loan term, which could be as short as one year or up to five years and beyond. If you need a large loan amount, a personal loan would be the best option for you. Some personal loan lenders offer up to $100,000, which provides greater flexibility for whatever you are looking to finance. For large expenses such as home renovation, unexpected medical costs, or even debt consolidation, credit cards may not be the best choice, as you will not likely be able to get a substantial amount of money. Personal loans pros and cons Because personal loan lenders offer larger amounts of money, it can be more difficult to be approved than for a credit card. To this point, Dane Janas, an IRS-licensed Enrolled Agent, host of the Financially Boundless podcast and YouTube channel, and CEO of Boundless Tax adds, "Generally, the underwriting is more advanced as well, so you stand a lesser chance of actually being approved if you have less-than-stellar credit." Personal loans will generally require borrowers to have an excellent credit score to qualify, but they usually have a lower interest rate than credit cards. The higher your credit score, the lower rates you will be able to receive. It is important to note that credit cards generally only have variable interest rates, while personal loans offer fixed interest rates in addition to variable rates. The fixed interest rate option with personal loans is nice because you will know from the start what your fixed monthly payment will be, which will never change throughout the life of the loan. Personal loans do not have revolving credit, meaning that you will not have access to more funds as you pay off your loan. Instead, each monthly payment goes toward the entire loan amount. Take note that personal loans also have their own set of fees. Many lenders have a late fee and a loan origination fee, which is generally withdrawn from your total loan amount before funds are disbursed to you. In addition, you may be charged a prepayment penalty fee, which is applied if the borrower pays off their loan before the term is complete. Key Takeaway: Personal loans are best for large purchases. They are also a good option in the following circumstances: You have good credit and are confident in your ability to make payments You are looking to consolidate debt You have unexpected expenses You have a good credit score that can get you low interest rates Top personal loan companies The top three personal loan companies on BestCompany.com include: Best Egg FreedomPlus SoFi Although Best Egg is the highest rated personal loan company on BestCompany.com, customers have also been pleased with their experiences with FreedomPlus and SoFi. When deciding between each company, it is important to look at APR rates, maximum loan amounts, and the average credit score requirement for each company. Top Personal Loan Companies Compare top-rated personal loan companies and customer reviews to see what would be best for you. Compare Which is best? Depending on your financial needs, a credit card could be a better option than a personal loan and vice versa. More than anything, consider the reason for which you are borrowing money, as well as interest rates, fees, and your own credit history. In either case, be sure to make on-time payments, which can save you from future financial stress or difficulty. In addition, you can consider the following when deciding which is best for you: Purchase intent — Ask yourself what you will use the funds for. A big, one-time purchase? Or smaller, more frequent purchases? A credit card is better for everyday purchases, while a personal loan may be the best option for a one-off major purchase. Credit score — It is important to consider your current credit score when looking to borrow money either through a credit card or personal loan. If you have a low credit score you could have a more difficult time being approved for a personal loan, which may not be the case with a credit card. Personal loan interest rates are also contingent upon your credit score. The higher your credit score, the lower the rates you will receive. Interest rates — Credit cards generally have higher interest rates than personal loans. Consider filling out a pre-qualification form in either case to see what rates you will be offered, but it would likely only be wise to do so if a soft credit pull is performed. Spending behaviors — If you are prone to over spending, a credit card may not be the best option for you. Whether you choose a credit card or personal loan for your financial needs, be wise and consider making a payment plan to keep yourself on track. Spending too much money, missing payments, or not being able to make payments could have negative repercussions. The bottom line The decision between a credit card and a personal loan is entirely dependent on your financial needs and circumstances, and it is important to carefully consider those details before jumping in with either option. No matter which you choose, be sure that you will be able to manage and make payments, so you have an opportunity to grow your credit and make those important purchases in your life without creating any future financial stress.
Personal loan companies often offer a wide APR range. The rate can vary from 2 percent to over 30 percent, which can be confusing for potential borrowers. What determines the APR? Why is it important? How do I know if I will pay 2 percent, 5 percent or even 30 percent? Many key factors influence the APR of your personal loan and determine if your loan falls on the lower or higher end of the advertised range. What is an APR? An Annual Percentage Rate (APR), is the yearly amount borrowers will pay on a loan, expressed as a percentage. It differs from interest rates because it accounts for additional fees and charges (except compounding); therefore, it is usually a higher percentage than your normal interest rate. APRs are particularly helpful in comparing loans. While many factors determine if a loan is right for your needs, generally you want to look for a lower APR. How is APR calculated? APR is calculated by multiplying the interest rate by the number of periods in a year in which that rate is applied. Investopedia represents this calculation with the following formula: APR = (((fees+interest/principal)/# of days in loan term) x 365) x 100 What factors influence APR? A number of factors influence a loan’s APR. Six of the most influential factors include the following: Credit score and history Debt-to-income ratio Annual income Employment history Loan terms Interest rate type (fixed or variable) Credit score and history Your credit score and history is often the most influential factor on your APR. A variety of factors work together to form your credit score: Payment history Credit utilization ratio Length of credit history New credit — number of accounts, new accounts opened, etc. Credit mix — the different types of debt that you have Typically, the higher your credit score, the lower your loan’s interest rate. Some personal loan companies have a minimum requirement for credit scores. Best Egg FreedomPlus SoFi Upgrade Upstart Min. credit score 600 620 680 600 620 Minimum credit score requirements do not guarantee that you’ll be approved for a loan, and in most cases you will not qualify for the lowest advertised interest rate. To get the lowest rate possible, you’ll need to have an excellent credit score (typically 700+). If your credit score is low and you’d like to improve it to either increase your chances of approval, or qualifying for a lower interest rate, there are some options for improving your credit score: Make on-time payments Keep your credit utilization ratio low Avoid closing credit cards Check and/or monitor your credit score Having a healthy credit score is key for securing a low interest rate, and so it is in your best interest to ensure that it is high and that you’re doing what you can to keep it that way. Compare Personal Loan Lenders Learn more about personal loan products, rates, and terms by looking at the top-rated companies and their offerings. Compare Debt-to-income ratio Your debt-to-income (DTI) ratio is another major factor when qualifying for personal loans. Your ratio is determined by your monthly debt (such as a mortgage, car loan, etc.) divided by your gross monthly income. This number is typically represented as a percentage. A lower percentage indicates less debt relative to your income. Lenders prefer to see a lower DTI ratio smaller than 36 percent, although there might still be room for negotiation. Annual income Annual income affects your debt-to-income ratio and is often taken into consideration when you are offered an APR. Higher incomes typically lead to lower rates. Some lenders may require a minimum annual income. Employment history Lenders want to know that their loans will be paid in full. They may look at your employment status and history to determine if you are a high risk: for example, if you change jobs frequently. Customers who are self-employed may also have to submit additional information to verify their employment status and financial stability. Loan terms Sometimes the length of the loan may impact its APR. A shorter loan length generally has a lower APR. Interest rate type (fixed or variable) Many lenders offer both variable and fixed interest rates, which is directly tied to the APR you will get on a loan. A variable interest rate is an interest rate that will fluctuate throughout your loan term because it is determined by underlying market factors. Typically, variable rates will be lower, at least at the beginning of the life of a loan; however, the rate will likely rise throughout the life of your loan. A fixed interest rate will not change throughout the life of your loan. While this can be helpful since your monthly payments will never change, fixed rates are generally higher than variable rates. Can my APR be negotiated? Depending on your lender — national bank, credit union, or online lender — you may be able to negotiate a lower interest rate on your personal loan. Banks are generally very strict in their lending practices and are less likely to budge on rates. In most cases, if you apply for a loan with a bank and are approved, the approval terms are final and you won’t be able to make any changes to your rate or terms. It is important to note that this is also likely the case with online lenders. Where you might be more able to negotiate a lower interest rate is if you are working with a local credit union. Because credit unions work with members and often have less strict rules, there is a greater chance that you’d be able to negotiate your rates. Overall, it is easier to negotiate rates if you have a history with a bank or credit union. Thus, negotiating rates with an online lender could be difficult because all they know about you is the information you provide — credit score, debt-to-income ratio, etc. However, if you have worked with a lender before or if you can prove that you have a stable job and income, this could put you in a better position for negotiating rates. The bottom line Your annual percentage rate (APR) will be a large defining piece of how much you will pay on your loan each month, and you’ll likely want to keep it as low as possible. And the best place to start is by knowing what an APR is and what affects it. Top Personal Loan Lenders Compare APRs, terms, and fees to find the best lender for you. Compare
Anyone who has debt (and that includes just about all of us at one time or another in life), has felt the burden, stress and anxiety associated with this sometimes-crushing load. Credit cards, student loans, auto loans, mortgage loans, business loans, and other forms of debt can linger for years seemingly always knocking at your door. While this is something that can that can gnaw at the back of one's mind throughout life, another burning question people have is what happens to my debt after I die. There is not one cut and dried answer for every situation, but there are a few guidelines that will hopefully provide some comfort and security. A debt does not "die" when a person does. Creditors still want their money. When someone passes away, their debts become part of their estate. An estate is essentially a collection of the person's assets and liabilities-things you owned and things you owed. Your estate will be the responsibility of whoever was deemed in charge. This will be someone known as the executor or personal representative. This person or group will attempt to sell off any assets in order to pay off the debts. However, if more is owed than is owned, don't worry-family members are not obligated to reach into their pockets to pay up. In fact, there is a ruling from the Federal Trade Organization (FTA) that protects surviving family members from having to take care of a deceased's debts. It reads, in part: "Family members typically are not obligated to pay the debts of a deceased relative from their own assets. What's more, family members - and all consumers - are protected by the federal Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to try to collect a debt." In a scenario such as this, creditors are simply out of luck. Of course, if you have a joint account with someone who passes away, it can be a different story. If you also signed the loan agreement, you will likely be responsible for shouldering the debt. This goes for business partners and spouses. The same is usually the case for co-signers-whether or not the co-signer was related to the person who has died. Co-signers are typically left with the debt, expect for in the case of federal student loans, which are discharged at the time of death. As for secured debt such as cars and homes, surviving family members will be responsible for the balance on the loan. So if you are planning on leaving one of these assets to an heir, make sure the debt is paid off or that you leave them with the means to pay them off at the time of your death.
Need money to finance one of life's many major needs or purchases? Unless you are the fortunate heir to a large sum of money or you find yourself in the enviable position of being independently wealthy, you're probably going to need some help paying for things such as a new home, major home repair, schooling, or major medical need. Thankfully, there is a lender near you ready to help you out. Unless you have very poor credit-or no credit history or stable income- you should be able to qualify for a loan to give you a hand. Whether it's to pay for something you desperately want or need, or whether it's to give you a hand in a big pinch, loans are available to help you. In addition to personal loans, which can help you pay for any number of things, there are a few other types to help you out regardless of your situation of station in life. Here are few besides personal loans: Education/Student loans Remember when you were a child in school and your parents begged you to get good grades? They weren't just saying this so you could achieve something and they could brag to their friends about how smart their kids were. They were hoping you would get a scholarship. And why not? School is expensive. The average undergraduate tuition at a U.S. public university is more than $9,000 a year. A graduate degree can be three or four times as much. If you don't get a scholarship or a qualify for a grant, a loan is the only option for many college-goers. Student loans typically have a low-interest rate and will cover the cost of tuition as well as room and board in many cases. Many student loans are sponsored by the U.S. government; others are privately sponsored. Interest will not accrue while the student is in school, nor will the student have to pay back the loan while enrolled in courses seeking a degree. One key difference between student loans is that they can be granted regardless of credit history or income. This is the source of much criticism. Mortgage loans If you can purchase a home with cash, consider yourself lucky and in the minority. For the rest of us, there are mortgage loans. Mortgage loans are granted based on the applicant's credit history and score, income, and employment status. The rate is predicated based on the these factors, and the terms are usually set in 15- or 30-year periods. Most mortgage loans require a down payment of anywhere between 5 percent and 20 percent. Applicants who can only provide a small down payment often are subject to mortgage insurance, which protects the lender in the event the borrower defaults on the loan. Loan rates are largely subject to market conditions, which can vary greatly from month to month and year to year. Because these loans are secured, the borrower attaches collateral to it, in this case, the property itself. Thus, in the case of a defaulted loan, it is foreclosed and the home is possessed by the lender. Auto loan Auto loan rates are generally a little lower than mortgage loans and are paid back over a three- to six-year term. Again, qualification is based on income and credit. This type of loan is also secured, meaning if you fail to make your payments, the lender can take possession of the automobile. Business loan If you are a small-business owner, you may apply for a business loan to get your business off the ground, to help it grow, or to help build up infrastructure or purchase supplies and equipment. Business loans take into account one's business credit and sometimes even personal credit. Defaults on business loans may result in bankruptcy of the business or even consequences for personal property.
The need to borrow money might start in childhood or adolescence when you ask your parents or friend to spot you a couple of bucks to see a movie or to buy a toy or popular game. As an adult, borrowing money is required for larger, more significant purchases such as a home, an automobile or recreational vehicle. For many purchases, credit cards or installment payments, the typical method is through secured loans, or those with which the person receiving the loan supplies some sort of collateral. There is another form of a loan, however, where the person desiring the loan can be approved without pledging an asset to back the granted funds. These loans are known as unsecured loans. In an unsecured loan, the borrower does not put up collateral against what is lent. Qualifying for an unsecured loan and the degree to which a person is approved is dependent on their credit score, credit history, income and employment status. Unsecured loans can be attractive for the very reason that collateral is not a factor. Your property is not at risk, meaning if you default on an unsecured loan the creditor cannot step in and take your home away from you, as would be the case when defaulted on a mortgage (which is a secured loan). Unsecured loans usually involve a much simpler application process. Because such a loan is largely based on credit score, the lender only has to determine the score and can make an approval decision within one business day. A downside of obtaining an unsecured loan is that you will pay a higher interest rate. Rates will vary depending on the lender, but be prepared to pay additional percentage points. In addition, unsecured loans have strict limits on how much money can be borrowed. With a secured mortgage loan, your approval amount can essentially be whatever you qualify for, whether it be $100,000 or over $1 million. Unsecured loans, however, will be much lower. You will also have less time to pay back your unsecured loan than with a secured loan. A secured loan often must be repaid within three or four years, as opposed to the 10, 15, 20 or 30 years you'll find with a secured loan. One reason for this shorter repayment period is because since the loan amount is smaller, there is no prudent reason to spread the payment out across several years. Another potential pitfall with unsecured loans is that the debt incurred in obtaining such a loan only leads to more debt piling up. People often use unsecured loans to finance other purchases that are in turn financed or paid for through installments. Unsecured loans are often granted in the form of personal loans. A popular loan, personal loans can be used for essentially anything-home improvements and renovations, medical costs, weddings, vacations, and even for purchasing jewelry or expensive electronics. Another common unsecured loan is a student loan, either for undergraduate or graduate studies. In these examples, the student puts up no collateral and instead promises to pay back money loaned for tuition, books, and other educational expenses. Student loans do not need to be repaid until the student has completed his or her studies. If the person fails to pay back the loan, the financial institution can garnish wages or tax refunds to pay on the outstanding balance. Credit cards are also a form of unsecured debt. They, too, carry high-interest rates and can apply steep penalties for late payments or by exceeding credit limits. Educational loans can often be unavoidable for the student seeking to complete a degree. However, most financial experts caution people when considering personal loans and in applying for credit cards. In any case, diligence, discipline, and prudence should be exercised when assuming unsecured debt. People who can make a plan to be dedicated to repaying the loans can avoid the dangers and pitfalls that so often ensnare those who become entangled in excess unsecured debt. Need help with another personal loan question? Find the answer on our Personal Loans FAQ page.
When you're sitting in the office of a mortgage lender or discussing with the local auto dealer the prospect of financing a new car, the words "We'll need to do a credit check" can either inspire you with confidence or leave you with sweaty palms, a racing heartbeat, and a knotted-up stomach. Calling up your credit score can have many ramifications. When you're financing a large purchase, when you are setting up installment payments, or when you are trying to apply for a credit card, line of credit or another retail credit card, your credit score and history will be strongly considered. A low score will make it more difficult to qualify for the size of loan you desire and will make the terms and rates more stringent and less in your favor. On the other hand, if you have a higher credit score, your worries and fears can be minimized, as your chances of securing the loan you want are greatly enhanced. If you currently have a less-than-ideal credit score, all hope is not lost. Rest assured that it is possible to raise your score and improve it. All that is needed is a little time, discipline, and hard work. Here are a few specific ways in which you can raise and improve your credit score: Make payments on time It may seem obvious, but this practice is critically important if you wish to keep your score on the high side or raise it up. If you do make your credit card, installment, auto loan, and mortgage payments on time, continue to do so. If you have struggled in the past with making your payments by the due date, make the commitment and the necessary changes in your finances and spending habits to ensure that you make the payments on or before the monthly due date. Late or missed payments will not only incur late fees, but they will negatively impact your score. When it comes to mortgage loans, payments more than 30 days late will cause a hit on your credit score. Keep credit card balances down and credit utilization ratio low Credit reporting agencies take into account a ratio between your current balances and the credit limit. Jeff Proctor, a personal finance writer over at DollarSprout.com, explains your credit utilization ratio "is how much credit you are using in relation to your maximum borrowing capability—and it’s the second most important factor in determining your credit score. In other words, if the maximum combined limit on all of your credit cards is $15,000 and you have $5,000 in credit card debt, your credit utilization ratio is 33%." Proctor continues, "Ideally, your credit utilization ratio should remain below 30%, and lower is even better. By aggressively paying off your existing debts, you will not only improve your credit score, but you will improve your ultimate financial situation (which is more important than your score, anyway)." Avoid closing credit cards Avoid closing credit card accounts, as that will lower your credit score. Nathan Grant, a Credit Industry Analyst with Credit Card Insider, suggests keeping credit card accounts open "even if you don’t use them and they are all paid off. The age of your accounts is another large factor in determining your credit score, so as long as you don’t have to pay an annual fee and you’re responsible enough to not rack up additional debt while keeping the card open," keep your credit card accounts open. Grant also notes, "Keeping a card open that is carrying no balance has a two-fold benefit. In addition to aging your accounts, it will also widen the gap between your total balances and your total available credit." Request a credit limit increase Increasing your credit limit has the ability to improve your credit score if you keep your credit utilization ratio low and make your payments on time. Joseph Allen, VP Mortgage Lending Officer at Quontic, gives this advice when looking to increase your credit limit: "When increasing credit limit, it’s important to know that most creditors will only allow one increase per year. Many creditors do not require a credit check in order to approve a credit line increase, however, some do. The best time to request a credit line increase is when you have little to no balance on your credit card. If your card is maxed out, then denial is more likely." Check your credit report You can request a credit report at no cost. The report will show all your current debts as well as any delinquencies or negative aspects of your credit. It's possible that some of these may be in error, so checking your reporting to find any inconsistencies or inaccuracies is vital. Manage credit cards with responsibility and prudence It's not necessarily a bad thing to have a credit card, but you must be vigilant in using it wisely. Plan to use credit cards for emergencies only. Or, if you decide to use it for incidental purchases, be dedicated to paying off the balance each month. Become an authorized user on a credit card You don't have to be the primary credit cardholder to get credit score benefits. Travis Holoway, CEO and co-founder of SoLo Funds, a mobile lending exchange connecting lenders and borrowers for the purpose of providing more affordable access to loans, recommends becoming an authorized user on a credit card. "This is an often overlooked non-traditional way to build credit but the major benefit is that a person with little or no credit can join ‘credit forces’ with someone that has more established credit. As payments are made to the credit card account, they will positively impact everyone associated and will help someone with no credit start to build indirectly." Practice responsible spending habits If you can't keep to a budget and spend responsibly, your financial situation will likely suffer and as a result, so will your credit score. Healthy spending habits typically equate to a good credit score, so make budgeting a priority. Don't spend more than you can afford and save when possible. Experienced in being frugal with her funds, Carol Gee explains an experience when she had to help repair her husband's credit after he wasn't budgeting correctly while overseas for the military. "He got behind on purchases I didn't know he had made, and his credit took a hit (I was the bill payer in our family). So when he returned and we received orders to a new base, I put a couple of our new utilities in his name and paid them on time monthly as usual. A year or so later when I checked both our credit scores, his was four points higher than mine." Gee's experience demonstrates that even if there is a time when you aren't budgeting correctly, your credit score isn't ruined forever. Just be sure to change course as soon as possible and to get back on track with your bills, and your credit score will slowly improve. Richard Best, a writer for dontpayfull.com (a savings, discount, and coupon aggregator that also provides tips and education for saving money and managing personal finances) with over 30 years of experience in financial services, echoes Carol's thoughts in noting that your payment history is one of the five most important factors that affect your credit score. Best explains that "payment history, which includes your on-time or delinquent payment record, accounts for 35 percent of your score." Do some credit house cleaning Best also suggests what he calls 'credit house cleaning.' Best explains, "The vast majority of credit reports contain errors—misapplied payments, incorrect credit limits, even wrong Social Security numbers—which can drag histories of other people into your own. By law, the credit bureaus must correct errors." Best concluded by saying that if you catch these inaccuracies, that "you can see your score improve instantly." Contact creditors or meet with credit counselors If you are behind on payments or are having difficulty making ends meet, speak with your creditors. In some cases, the lenders may be willing to renegotiate the terms and rates of your loan, and they may be willing to set up a plan with you to help you meet your obligations. You may also receive education on how to better manage your money and how to set up a plan for getting back on track. Your score will not automatically jump up to optimal levels, but abiding by these simple guidelines will improve your situation over time. A credit score will plummet if you fail to pay debts by the due dates and if you open several different lines of credit and assume several forms of debt. Also, when your credit cards are maxed out, your score will fall as well. *Josh McFadden also contributed to this piece.
Your credit score: That little three-digit number that is a key determining factor in so many important decisions, purchases and investments. You hear all the time the necessity of having good credit and of the dangers of having bad credit. Financial experts, mortgage professionals and economists alike preach against the dangers of bad credit and how low scores can hinder your opportunities and leave you shackled with debts and other restrictive obligations. So where is your credit score? In the imperfect world in which we leave, not everyone is going to have a glowing credit report. Just as all people come in different size and shapes, with varying personalities, backgrounds and experiences, so, too, will people be saddled with credit scores all over the board. Different credit scores and score ranges will qualify one for different levels of credit as well as various rates, terms and types of loans. For example, if you have diligently paid your installment loans, car payments and mortgage on time, and if you have kept credit card balances to a minimum, you likely have an excellent score in the range of 720 and above. This will enable you to receive favorable loan terms and qualify for higher amounts of credit. What about an average credit score? The typical American has a FICO score somewhere in the neighborhood of 690, which, according to the Fair Isaac Corp. teeters on the edge of average and good credit. The same institution reports that average credit-on the FICO scale-lies somewhere between 630 and 689. These numbers are based on a range from 300 to 850. Average credit is certainly nothing to be worried about, but an average score (particularly one on the lower end of the spectrum) does come with limitations, and it certainly would be advantageous to raise the score to the good or excellent level. Average scores can also vary from state to state. For example, it appears as though the Southern states seem to produce lower scores among its residents. Meanwhile, Minnesota has the highest average credit score at around 718. Other states with high average scores are North Dakota, South Dakota, Vermont, New Hampshire, Massachusetts and Montana. Be aware that there are definite levels within an average score. For instance, a person with a 635 score will have more going against him or her than a person with a 680 score. Though both are considered average, lenders will be more inclined to look at the score itself rather than the status of it being average, good, poor or excellent. Have more personal loan questions? Find answers on our Personal Loans FAQ page.
Many graduates are finding themselves deep in their student loans and are searching for ways to help pay them off quicker. One option they are discovering is to use small personal loans to payoff and save on high-interest loans. The personal loan is a way to pay off the higher interest loans under new and more favorable conditions. Huffingtonpost has come up with thes following advantages and disadvantages: Advantages You may have access to a lower fixed rate loan by using a personal loan. Personal loans usually have shorter payoff periods if your goal is to pay off your loans as fast as possible. Your student loan can be combined into one convenient payment. You can release any cosigners you have on your student loans. If you qualify for the personal loan on your own, the person who cosigned for your student loans will not be obligated on your new loan. Unlike most student loans, a personal loan is dischargeable in bankruptcy Disadvantages Could lose the benefits of forbearance and deferment options on federal loans Most lenders have a limit on loan amounts for personal loans and if you have new credit a lender may not feel like you have sufficient credit history to warrant a high loan amount No tax benefits on a personal loan A personal loan could be a great option to help pay off your student loans. There are lenders that offer personal loans just for that purpose. Find out all your options of how to repay your loans and discover which option is best for you.