10 Proven Ways to Lower Your Car Insurance

A woman wearing a yellow shirt drives a silver car.

We’ve heard the insurance tagline over and over: “Switch and save money today.” Every insurance company claims to have the best deal. But, how can you get a good deal while maintaining the appropriate amount of coverage? We’ve got you covered—literally, and with no extra cost to you. Check out these ten ways to help lower your car insurance. 

1. Get Quotes Annually 

Insurance rates are increasing every year, so your insurance premiums will naturally increase over time. However, a huge spike in your insurance bill might mean it’s time to switch providers. Every year or two, use a car insurance quote finder to compare your current insurance rate to competitors. You can also sign up for Jerry.Ai, a tool that automatically checks for the lowest insurance rates before your policy renewal. Requesting quotes annually will ensure that your rates remain low and competitive. 

2. Bundle Your Insurance Plans

Insurance companies often offer discounts when you bundle home, auto, or life insurance. Plus, you have the added convenience of paying all your insurance on one bill. If you’re satisfied with your insurance rates, you can stay with the same company to build up discount opportunities. Some insurance companies will give discounts to their long-term customers, also known as a customer loyalty discount. Bundling and customer loyalty can help you lower your overall insurance costs. 

3. Get Rid of Insurance You Don’t Need 

Older vehicles require less insurance depending on their overall value. For example, you may not need collision and comprehensive coverage on a vehicle if its value is less than your deductible combined with your insurance premium. If you have a car that’s only worth $1,000–$3,000, you might decide to get rid of some of your insurance and purchase a replacement vehicle out of pocket in the case of an accident. If you don’t drop unneeded insurance, you can end up spending more on your premiums than what the total car is worth. 

4. Increase Your Deductible 

A deductible is the amount of money you pay out of pocket as a result of an accident. An increased deductible means lower premium rates. This is a great option for individuals who can keep enough cash savings to cover their deductible in the event of any emergency. Ask your insurance agent about raising your deductible to see how your premiums will fluctuate. 

5. Drive Safely  

This one might seem kind of obvious, but driving safely is the best way to keep your insurance rates low. Insurance providers record your driving history, including any accident reports or traffic tickets. These instances accrue points that eventually lead to increased insurance rates. Even if you switch insurance providers, companies will be able to access your driving history. Try your best to avoid speeding, running red lights, and driving recklessly. Be smart, and drive smart. 

If you do get a ticket, take a defensive driving class to get the points taken off your record. A defensive driving class is an online or in-person course created by individual states to teach drivers how to anticipate dangerous situations and make educated driving decisions. In some states, taking this class can reduce your insurance by 10 percent.

The defensive driving course may seem expensive for a single ticket, but it will end up saving you money on your insurance premiums. You can usually take driving school once a year. If you keep a clean driving record for three to five years, you could save on your insurance rates. 

6. Improve Your Credit Score

Studies show that drivers with a higher credit score are more responsible behind the wheel. Drivers with higher credit scores cost the insurance company less than individuals with a low credit score. A credit score is just another way for insurance companies to measure risk—the very thing insurance companies seek to avoid. Improving your credit score can also help you qualify for auto and home loans. Study your credit report and find ways to improve your overall credit score.

Are you looking for a way to monitor your credit needs? Check out ExtraCredit by Credit.com. It has five killer features, each specifically designed to help you out—no matter what shape your credit is in. 

Sign up for ExtraCredit today!

7. Pick the Right Vehicle 

Insurance rates fluctuate based on the make and model of a car. This is something to consider when purchasing a new or used car. A car such as a Toyota or Chevy will be significantly cheaper to insure than a Porsche. That’s because it’s less risk for insurance companies. Remember, getting a cheaper insurance premium is dependent on your ability to minimize risk for the insurance company. Picking a car brand with an affordable initial price and reasonable upkeep costs can help you save money on insurance and your vehicle in general. You can also save on car insurance by selecting a smaller car with installed safety features.

8. Choose a Group Insurance Plan 

People under the same household can create a group policy to save money. The plan will be more expensive as you add individuals to your group policy, but cheaper than if everyone was on their own insurance plan. Members of the insurance plan either need to be related or have joint ownership of the car. Each of the drivers will be insured for all the cars your family owns. Younger drivers will be more expensive to insure because of their added risk. Look for additional discounts to minimize your total group rate. 

9. Ask Your Insurance Provider About Other Discounts 

Car insurance companies often have additional discounts for specific groups of people. For example, if you are a member of the military, you can get a discount at some insurance companies. You can also lower the insurance premium for your teenage driver through a good student discount. Some other car insurance discounts include the following: 

  • Government employees and retirees discount
  • Multiple vehicle discount 
  • Homeowners discount (separate from the bundling discount) 
  • Paperless billing discount 
  • Hybrid or green vehicle discount 
  • Driver education discount for people under 21
  • Automatic payments or paid-in-full discount 

Ask your insurance provider about additional discounts to see if you qualify. 

10. Find Out About Pay-as-You-Go or Usage-Based Insurance 

If you don’t use your car often, you may be able to save on your insurance. Some companies offer a discount for driving under 10,000 miles in a single year. Other companies offer a pay as you go plan that allows you to pay a base rate and then pay per mile. These discounts could save you money if you do not have a long work commute or if you rarely use your car. This may also be a good incentive to use public transportation when possible. 

Final Thoughts

We all want to save money on car insurance, but that’s not the only factor in becoming a smart insurance customer. Before diving into savings, first determine your insurance needs and goals. Do your research to find out the difference between liability and full coverage insurance. Once you have the right coverage, you can start chipping away at your rates by following these ten tips to lower your car insurance. 

The post 10 Proven Ways to Lower Your Car Insurance appeared first on Credit.com.

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What is Credit Card Churning? Dangers and Benefits

Credit card issuers have consumers right where they want them, lending money at high-interest rates and earning money from many different fees. Even reward cards benefit the issuers, because all the additional perks and rewards they provide are covered by the increased merchant fees, which essentially means the credit card company offers you extra money to incentivize you to spend, and then demands this money from the retailers.

It’s a good gig, but some consumers believe they can beat the credit card companies and one of the ways they do this is via something known as credit card churning.

What is Credit Card Churning?

Many reward cards offer sign-up bonuses to entice consumers to apply. Not only can you get regular cash back, statement credit, and air miles, but you’ll often get a reward just for signing up. For instance, many rewards credit cards offer a lump sum payment to all consumers who spend a specific sum of money during the first three months.

Credit card churning is about taking advantage of these bonuses, and getting maximum benefits with as little cost as possible.

“Churners” will sign up for multiple different reward cards in a short space of time, collect as many of these bonuses as they can, clear the card balance, and then reap the rewards.

Does Credit Card Churning Work?

Credit card churning does work, to an extent. Reward credit cards typically don’t require you to spend that much money to receive the sign up bonus, with most bonuses activated for a spend of just $500 to $1,000 over those first three months. This is easily achievable for most credit card users, as the average spend for reward cards is over $800 a month.

If you have good credit, it’s possible to sign up to multiple credit cards, collect bonus offers without increasing your usual spend, and get everything from hotel stays to free flights, cash back, gift cards, statement credit, and more.

However, it’s something that many credit card companies are trying to stop, as they don’t benefit from users who collect sign-up bonuses, don’t accumulate debt, and then pay off their balance in full. As a result, you may face restrictions with regards to how many bonuses you can collect within a specified timeframe. 

What’s more, there are several things that can go wrong when you’re playing with multiple new accounts like this, as all information is sent to the credit bureaus and could leave a significant mark on your credit report.

Dangers of Churning

Even if the credit card companies don’t prevent you from acquiring multiple new credit cards, there are several issues you could face, ones that will offset any benefits achieved from those generous sign-up bonuses, including:

1. You Could be Hit with Hefty Fees

Many reward credit cards have annual fees, and these average around $95 each, with some premium rewards cards going as high as $250 and even $500. At best, these fees will reduce the amount of money you receive, at worst they will completely offset all the benefits and leave you with a negative balance.

Annual fees aren’t the only fees that will reduce your profits. You may also be charged fees every time you withdraw cash, gamble, make a foreign transaction or miss a payment,

2. Your Credit Score Will Drop

Every time you apply for a new credit card, you will receive a hard inquiry, which will show on your credit report and reduce your FICO score by anywhere from 2 to 5 points. Rate shopping, which bundles multiple inquiries into one, doesn’t apply to credit card applications, so credit card churners tend to receive many hard inquiries.

A new account can also reduce your credit score. 15% of your score is based on the length of your accounts while 10% is based on how many new accounts you have. As soon as that credit card account opens, your average age will drop, you’ll have another new account, and your credit score will suffer as a result.

The damage done by a new credit card isn’t as severe as you might think, but if you keep applying and adding those new accounts, the score reduction will be noticeable. You could go from Excellent Credit to Good Credit, or from Good to Fair, and that makes a massive difference if you have a home loan or auto loan application on the horizon.

Your credit utilization ratio also plays a role here. This ratio is calculated by comparing your total debt to your available credit. If you have a debt of $3,000 spread across three credit cards with a total credit limit of $6,000, your credit utilization ratio is 50%. The higher this score is, the more of an impact it will have on your credit score, and this is key, as credit utilization accounts for a whopping 30% of your score.

Your credit utilization ratio is actually one of the reasons your credit score doesn’t take that big of a hit when you open new cards, because you’re adding a new credit limit that has yet to accumulate debt, which means this ratio grows. However, if you max that card out, this ratio will take a hit, and if you then clear the debt and close it, all those initial benefits will disappear.

You can keep the card active, of course, but this is not recommended if you’re churning.

3. You’re at Risk of Accumulating Credit Card Debt

Every new card you open and every time your credit limit grows, you run the risk of falling into a cycle of persistent debt. This is especially true where credit card rewards are concerned, as consumers spend much more on these cards than they do on non-reward credit cards.

Very few consumers accumulate credit card debt out of choice. It’s not like a loan—it’s not something they acquire because they want to make a big purchase they can’t afford. In most cases, the debt creeps up steadily. They pay it off in full every month, only to hit a rough patch. Once that happens, they miss a month and promise themselves they’ll cover everything the next month, only for it to grow bigger and bigger.

Before they realize it, they have a mass of credit card debt and are stuck paying little more than the minimum every month. 

If you start using a credit card just to accumulate rewards and you have several on the go, it’s very easy to get stuck in this cycle, at which point you’ll start paying interest and it will likely cost you more than the rewards earn you.

4. It’s Hard to Keep Track

Opening one credit card after another isn’t too difficult, providing you clear the balances in full and then close the card. However, if you’re opening several cards at once then you may lose track, in which case you could forget about balances, fees, and interest charges, and miss your chance to collect airline miles cash back, and other rewards.

How to Credit Churn Effectively

To credit churn effectively, look for the best rewards and most generous credit card offers, making sure they:

  • Suit Your Needs: A travel rewards card is useless if you don’t travel; a store card is no good if you don’t shop at that store. Look for rewards programs that benefit you personally, as opposed to simply focusing on the ones with the highest rates of return.
  • Avoid Annual Fees: An annual fee can undo all your hard work and should, therefore, be avoided. Many cards have a $0 annual fee, others charge $95 but waive the fee for the first year. Both of these are good options for credit card churning.
  • Don’t Accumulate Fees: Understand how and why you might be charged cash advance fees and foreign transaction fees and avoid them at all costs. The fees are not as straightforward as you might think and are charged for multiple purchases.
  • Plan Ahead: Make a note of the bonus offer and terms, plan ahead, and make sure you meet these terms by the due dates and that you cover the balance in full before interest has a chance to accumulate.
  • Don’t Spend for the Sake of It: Finally, and most importantly, don’t spend money just to accumulate more rewards. As soon as you start increasing your spending just to earn a few extra bucks, you’ve lost. If you spend an average of $500 a month, don’t sign up for a card that requires you to spend $3,000 in the first three months, as it will encourage bad habits. 

What Should You do if it Goes Wrong?

There are many ways that credit card churning could go wrong, some more serious than others. Fortunately, there are solutions to all these problems, even for cardholders who are completely new to this technique:

Spending Requirements Aren’t Met 

If you fail to meet the requirements of the bonus, all is not lost. Your score has taken a minor hit, but providing you followed the guidelines above, you shouldn’t have lost any money.

You now have two options: You can either clear the balance as normal and move onto your next card, taking what you have learned and trying again, or you can keep the card as a back-up or a long-term option. 

Credit card churning requires you to cycle through multiple issuers and rewards programs, never sticking with a single card for more than a few months. But you need some stability as well, so if you don’t already have a credit card to use as a backup, and if that card doesn’t charge high fees or rates, keep it and use it for emergency purchases or general use.

Creditor Refuses the Application

Creditors can refuse an application for a number of reasons. If this isn’t your first experience of churning, there’s a chance they know what you’re doing and are concerned about how the card will be used. However, this is rare, and in most cases, you’ll be refused because your credit score is too low.

Many reward credit cards have a minimum FICO score requirement of 670, others, including premium American Express cards, require scores above 700. You can find more details about credit score requirements in the fine print of all credit card offers.

Your Credit Score Takes a Hit

As discussed already, credit card churning can reduce your credit score by a handful of points and the higher your score is, the more points you are likely to lose. Fortunately, all of this is reversible.

Firstly, try not to panic and focus on the bigger picture. While new accounts and credit length account for 25% of your total score, payment history and credit utilization account for 65%, so if you keep making payments on your accounts and don’t accumulate too much credit card debt, your score will stabilize.

You Accumulate Too Much Debt

Credit card debt is really the only lasting and serious issue that can result from credit card churning. You’ll still earn benefits on a rolling balance, but your interest charges and fees will typically cost you much more than the benefits provide, and this is true even for the best credit cards and the most generous reward programs.

If this happens, it’s time to put credit card churning on the back-burner and focus on clearing your debts instead. Sign up for a balance transfer credit card and move your debt to a card that has a 0% APR for at least 15 months. This will give you time to assess your situation, take control of your credit history, and start chipping away at that debt.

What is Credit Card Churning? Dangers and Benefits is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

Tips to Consolidate Credit Card Debt

Tips to Consolidate Credit Card Debt

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

If left unchecked, extensive amounts of credit card debt can cripple your finances. The good news is there are many ways to handle debt, though each requires a dedicated effort on your part. But if you can manage to consolidate credit card debt, you will reduce your burden relatively quickly. In the process, you’ll avoid the exorbitant interest rates that accompany most credit cards. Below we take a look at some of the most effective techniques you can use to make this goal a reality.

Find Out Your Credit Score

Before you can work on improving your credit and minimizing your debt, you have to know where you currently stand.

Many credit card issuers allow cardholders to see their FICO® credit score free of charge once a month, so check out if any of your cards include that free credit score. The three major credit bureaus – TransUnion, Experian and Equifax – also give out free annual credit reports. If that’s not enough, websites like Credit Karma™ and Credit Sesame provide a free look at your credit score and reports as well.

It is vital to review your credit report with a fine-tooth comb to ensure the accuracy of the information. If you find errors be sure to let the credit bureau in question know so the issue can be eradicated as soon as possible.

Zero Interest Balance Transfer Cards

Although it might seem counterintuitive to apply for another credit card to lessen your debt, a zero interest balance transfer card could really help. These cards typically include an introductory 0% balance transfer Annual Percentage Rate (APR) for six months or more. This ultimately allows you to move debt from one account to another without incurring more interest. However, once the introductory offer concludes, any leftover balances will revert to your base APR.

These offers aren’t totally free, though. Most cards also charge a balance transfer fee that’s usually between 3% and 5% of the transfer. Even with this initial payment, you will almost always still save money over leaving your debt where it stands currently.

If you want to consolidate credit card debt, here are three different balance transfer credit cards you could apply for, with varying introductory interest rates and transfer fees:

Balance Transfer Credit Cards Card Intro Balance Transfer APR Balance Transfer Fee Chase Slate 0% APR for first 15 months; then 16.49% to 25.24% Variable APR, depending on your creditworthiness No fee for first 60 days; then $5 or 5% of each transfer, whichever is greater Citi Double Cash Card 0% introductory APR for 18 months from date of first transfer when transfers are completed within 4 months from date of account opening; then 15.49% to 25.49% Variable APR, depending on your creditworthiness $5 or 3% of each transfer, whichever is greater BankAmericard® credit card 0% APR for first 15 billing cycles; then 14.49% to 24.49% Variable APR, depending on your creditworthiness No fee for first 60 days; then $10 or 3% of each transfer, whichever is greater Take Out a Personal Loan

Tips to Consolidate Credit Card Debt

The thought of taking out another loan probably doesn’t sound too appetizing to consolidate credit card debt. But a personal debt consolidation loan is one of the speediest ways to rid yourself of credit card debt. More specifically, you can use it to pay off most or all of your debt in one lump sum. That way, your payments are all merged into a single account with your lender.

The APR and length of the offered loan and the minimum credit score needed for approval are the main factors that should go into your final decision on a lender. By concentrating on these three components of the loan, you can map out what your monthly payments will be. As a result, you can more easily implement them into your financial life.

Applying for a personal consolidation loan can have a detrimental effect on your credit. Unfortunately, most institutions will run a hard credit check on you prior to approval. However, many online lenders don’t do this, which might ease your mind depending on the severity of your debt situation.

These loans are available through a wide variety of financial institutions, including banks, online lenders and credit unions. Here are a few examples of some of the most common debt consolidation lenders:

Common Debt Consolidation Lenders Banks Wells Fargo, U.S. Bank, Fifth Third Bank Online Lenders Lending Club, Prosper, Best Egg Credit Unions Navy Federal Credit Union, Unify Financial Credit Union, Affinity Federal Credit Union Auto or Home Equity Loan

If you own assets like a home or car, you can take out a lump-sum loan based on the equity you hold in them to consolidate credit card debt. This is a great way to reuse money you paid toward an existing loan to take care of your debt. When paying back your auto or home equity loan, you’ll usually pay in fixed amounts at a relatively low interest rate. Even if this rate isn’t great, it’s likely much better than any offer you’d receive from a card issuer.

Equity loans are technically a second mortgage or loan, meaning your house or car will become the loan’s collateral. That means you could lose your house or car if you cannot keep up with your equity loan payments.

Create a Budget

Tips to Consolidate Credit Card Debt

To build a budget, you first need to figure out your approximate monthly net income. Don’t forget to take into account taxes when you’re doing this.

You can then start subtracting your variable and fixed expenses that are expected for the upcoming month. This is where you will likely be able to identify where you’re overspending, whether it’s on food, entertainment or travel. Once you’ve completed this, you can begin cutting back where you need to. Then, use your surplus cash to pay off your debt one month at a time.

It shouldn’t matter if you’re dealing with substantial credit card debt or not. A monthly spending budget should always be a part of how you manage your finances. While this is likely the slowest way to eliminate debt, it’s also the most financially sound. At its core, it attempts to fix the problem without taking funding from an outside source. This should leave very little financial strife in the aftermath of paying off your debt.

Professional Debt Counseling

Perhaps since you’ve found yourself in serious debt, you feel like you want professional help getting out of it. Well the National Foundation for Credit Counseling® (NFCC®) is available for just that reason. The NFCC® has member offices all around the U.S. that are certified in helping you consolidate credit card debt.

These counselors won’t only address your current financial issues and debt. They’ll also work to create a plan that will help you avoid this situation again in the future.

Agencies that are accredited by the NFCC® will have it clearly displayed on their website or at their offices. If you’re not sure where to look, the foundation created an agency locator that’ll help you find a counselor nearby.

Borrow From Your Retirement

Taking money early from your employer-sponsored retirement account obviously isn’t ideal. That’s means borrowing from your retirement is a last-ditch alternative. But if your credit card debt has become such a handicap that it’s affecting all other facets of your life, it is a viable option to consolidate credit card debt.

Because you are technically loaning money to yourself, this will not show up on your credit report. Major tax and penalty charges await anyone who has trouble making payments on these loans though. To make matters worse, if you quit your job or are fired, you’re typically only given 60 days to finish paying it off to avoid incurring a penalty.

Tips To Consolidate Credit Card Debt

  • If you take the time to come up with a budget, don’t let it go to waste. While you might find it tough to stick to, especially if you’re trying to cut back, it is the best way to manage your money correctly. Even if a budget becomes habit, stay vigilant with where your money is being spent.
  • Although a financial advisor will cost money, he or she might be able to help you keep your finances in check while ultimately helping you plan for the future as well. However, if this isn’t an option for you financially, stay on track with your NFCC® debt counselor’s plan.
  • There are so many ways to gain access to your credit score that there’s virtually no excuse for not knowing it. It doesn’t matter if you do it through one of the top three credit bureaus, FICO® or one of your card issuers. Just remember to pay attention to those ever-important three digits as often as possible.

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Photo credit: ©iStock.com/Liderina, ©iStock.com/ferrantraite, Â©iStock.com/cnythzl

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Secured vs. Unsecured Loans: Here’s the Difference

Whether you’re trying to buy a home or looking to get a college degree, you may need to take out a loan to finance your goals. If you’re seeking out your first loan, know that borrowing money is a common practice and you don’t need a degree in economics to understand it! Learning more about loans and the different types can help you make informed decisions and take control of your finances.

Loans take many forms but they all fall within two common categories: secured vs. unsecured loans. Whether you’re approved for either type of loan depends on your creditworthiness. Creditworthiness refers to how responsible you are at repaying debt and if it’s worthwhile or risky to grant you new credit. It’s helpful to be aware of your credit prior to seeking out a loan so you know where you stand.

Now that you’re familiar with the role creditworthiness plays in getting a loan, let’s discuss the differences between secured and unsecured loans, the advantages and disadvantages of each, and which one may be right for you.

What’s the Difference Between Secured vs. Unsecured Loans?

What’s the Difference Between Secured vs. Unsecured Loans?

The main difference between secured and unsecured loans is how they use collateral. Collateral is when something of economic value is used as security for a debt, in the event that the debt is not repaid. Usually collateral comes in the form of material property, such as a car, house, or other real estate. If the debt is not repaid, the collateral is seized and sold to repay all or a portion of the debt.

Key Difference: A secured loan requires collateral, while an unsecured loan doesn’t require collateral.

What Is a Secured Loan?

A secured loan requires collateral as security in case you fail to repay your debt. If secured debt is not repaid, the collateral is taken. In addition to seizing collateral, lenders can start debt collection, file negative credit information on your report, and sue you for outstanding debt. This generally makes secured loans more risky for the borrower.

Conversely, collateral decreases the risk for lenders, especially when loaning money to those with little to no credit history or low creditworthiness. Less risk means that lenders may offer some leeway regarding interest rates and borrowing limits. See the list below to review other typical secured loan characteristics.

Characteristics of a Secured Loan:

For borrowers:

  • Presence of collateral
  • Typically more risky
  • May require a down payment
  • May sell property to repay loan
  • Generally lower interest rates
  • Longer repayment period
  • Higher borrowing limits
  • Easier to obtain for those with poor or little credit history

For lenders:

  • Typically less risky
  • Lender can take your collateral
  • Lender can hold the title to your property until loan is repaid

Secured Loan Examples

The most common uses of a secured loan are to finance large purchases such as a mortgage. Usually, these loans can only be used for a specific, intended purchase like a house, car, or boat. A home equity loan is another example of a secure loan. Some loans like business loans or debt consolidation can be secured or unsecured.

Secured Loan Examples

What Is an Unsecured Loan?

An unsecured loan doesn’t require collateral to secure the amount borrowed. This type of loan is granted based on creditworthiness and income. High creditworthiness makes an unsecured loan more accessible.

The absence of collateral makes this type of loan less risky for borrowers and much riskier for lenders. If unsecured debt is not repaid, the lender cannot seize property automatically. They must engage in debt collection, report negative credit information, or sue. As a result of the increased risk, unsecured loans have characteristics that attempt to reduce the risk. These may include higher interest rates or lower borrowing limits, and you can see more in the list below.

Characteristics of an Unsecured Loan:

For borrower:

  • No collateral required
  • Typically less risky
  • Qualify based on credit and income
  • Stricter conditions to qualify
  • Generally higher interest rates
  • Lower borrowing limits

For lender:

  • Typically more risky
  • Lender can’t take property right away if you default

Unsecured Loan Examples

Common unsecured loans include credit cards, personal loans, student loans, and medical debt. Debt consolidation and business loans can also be unsecured. In each of these instances, collateral is not required and you are trusted to repay your unsecured debt.

Unsecured Loan Examples

Advantages and Disadvantages to Consider

When it comes to deciding on the type of loan you need, it’s important to consider the advantages and disadvantages of each.

Secured Loans

Secured loans present advantages for repayment, interest, and borrowing amount, but have disadvantages regarding a borrower’s risk and limitations of use.

Advantages

  1. Bigger borrowing limits
  2. Less risk for lenders usually means lower interest rates for borrowers
  3. Longer repayment period
  4. Available tax deductions for interest paid on certain loans (e.g., a mortgage)

Disadvantages

  1. Risky for borrower (potential for loss of collateral like home, car, stocks, or bonds)
  2. Specifically for intended purpose (e.g., a home, but home equity loans are an exception)

Unsecured Loans

Unsecured loans can be advantageous for borrowers regarding risk and time, but they pose a disadvantage when it comes to interest rates and stricter qualifications.

Advantages

  1. Less risky for borrower
  2. Useful loan if you don’t own property to use as collateral
  3. Quicker application process than for a secured loan (e.g., a credit card)

Disadvantages

  1. More risky for lenders usually means higher interest rates for borrowers
  2. Hard to qualify for if you have low creditworthiness or inconsistent income (can qualify with a cosigner)

Take a look at the chart below to compare the key advantages and disadvantages between secured and unsecured loans.

Secured Loans

Unsecured Loans

Advantages

• Lower interest rates
• Higher borrowing limits
• Easier to qualify
• No risk of losing collateral
• Less risky for borrower

Disadvantages

• Risk losing collateral
• More risky for borrower
• Higher interest rates
• Lower borrowing limits
• Harder to qualify

Which Loan Type Is Best for You?

After considering the advantages and disadvantages of both loan types, it’s helpful to know which one is the best for certain circumstances. Here are some common contexts in which one may be better than the other.

  • A secured loan may be best if you’re trying to make a large property purchase or don’t have the best credit. The piece of property that you are purchasing can be used as collateral if you don’t already own other property. Additionally, this loan is more accessible for you if you have low creditworthiness and may be more advantageous with lower interest rates.
  • An unsecured loan may be best if you have high creditworthiness and a steady income. High creditworthiness helps you meet strict qualification criteria and can also help you obtain better interest rates (given that this type is characterized by higher interest).

Overall, secured and unsecured loans are each useful in different situations. Remember that the key difference is that unsecured loans don’t need collateral, while secured loans do. Secured loans are less risky for the lender and may allow for some advantageous repayment conditions. On the other hand, unsecured loans are risky for the lender, and they often come with stricter conditions that try to lessen that risk.

It is important to make smart financial decisions such as repaying debt on time and maintaining a good credit history. High creditworthiness is the key to getting the best conditions on any loan. No matter your circumstances, identifying which loan type is best for you depends on your specific credit and goals. Visit our loan center for help in deciding which loan is right for you.

Sources: Consumer Financial Protection Bureau

 

The post Secured vs. Unsecured Loans: Here’s the Difference appeared first on MintLife Blog.

Source: mint.intuit.com

How Gaps in Coverage Affect Auto Insurance Rates

A lapse in coverage increases your risk and your rates. It may be harder to find suitable and affordable car insurance and may mean that you need to make some sacrifices in order to keep those insurance premiums at an affordable level. But it’s not a complete disaster and is far from the worst thing you can have on your record.

What is a Gap in Coverage?

A lapse or gap in coverage is a period in which you were not insured. You owned a car during this period but you didn’t meet the state minimum insurance requirements.

In some cases, a gap in coverage can be the result of negligence on your part. You may have allowed your insurance policy to lapse without purchasing a new one or it may have been canceled because you failed to meet your payment obligations.

A lapse in auto insurance coverage can also occur when you are deployed, sent to prison or because you simply didn’t drive during that period. 

If you fall into the first group, your insurer will notify the Department of Motor Vehicles (DMV), telling them that your car insurance policy has lapsed and you are no longer insured. This will expose you to fines and a host of other problems (see our guide on the penalties imposed on uninsured drivers).

As for members of the military, they can suspend their car insurance coverage when they are on active duty, thus avoiding any rate increases and other problems. The same applies to students studying abroad, although in their case, they will need to contact their DMV first.

What Happens Following a Car Insurance Lapse?

Many states require you to have continuous insurance, which means your auto insurance policy has not lapsed for any period of time. As soon as it lapses, your license and registration may be revoked, and you will need to pay a fee to have these reinstated. These fees, as they apply in each state, are listed below, but it’s worth noting that you may also be hit with additional court fees and fines if you are found to be driving without insurance:

  • Alabama: Insurance Lapse Fee = $200 (first offense); $400 (second offense)
  • Alaska: Insurance Lapse Fee = $100
  • Arizona: Insurance Lapse Fee = $50
  • Arkansas: Insurance Lapse Fee = $50
  • California: Insurance Lapse Fee = $14
  • Colorado: Insurance Lapse Fee = $40
  • Connecticut: Insurance Lapse Fee = $200
  • Delaware: Insurance Lapse Fee = $100 + $5 a day
  • D.C.: Insurance Lapse Fee = $150 + $7 a day
  • Florida: Insurance Lapse Fee = $150 (first offense); $250 (second offense); $500 (third offense)
  • Georgia: Insurance Lapse Fee = $25
  • Hawaii: Insurance Lapse Fee = $20+
  • Idaho: Insurance Lapse Fee = $85
  • Illinois: Insurance Lapse Fee = $100
  • Indiana: Insurance Lapse Fee = $150 (first offense); $225 (second offense); $300 (third offense)
  • Iowa: Insurance Lapse Fee = N/A
  • Kansas: Insurance Lapse Fee = $100 (first offense); $300 (second offense)
  • Kentucky: Insurance Lapse Fee = $40
  • Louisiana: Insurance Lapse Fee = $125 to $525 (depending on length of gap)
  • Maine: Insurance Lapse Fee = Up to $115
  • Maryland: Insurance Lapse Fee = $150 + $7 per day
  • Massachusetts: Insurance Lapse Fee = $500
  • Michigan: Insurance Lapse Fee = $75
  • Minnesota: Insurance Lapse Fee = $30
  • Mississippi: Insurance Lapse Fee = $30
  • Missouri: Insurance Lapse Fee = $20 (first offense); $200 (second offense); $400 (third offense)
  • Montana: Insurance Lapse Fee = N/A
  • Nebraska: Insurance Lapse Fee = $500
  • Nevada: Insurance Lapse Fee = $251 to $1,000 (depending on length of gap)
  • New Hampshire: Insurance Lapse Fee = N/A
  • New Jersey: Insurance Lapse Fee = $100
  • New Mexico: Insurance Lapse Fee = $30
  • New York: Insurance Lapse Fee = $8 to $12 per day
  • North Carolina: Insurance Lapse Fee = $50 (first offense); $100 (second offense); $150 (third offense)
  • North Dakota: Insurance Lapse Fee = N/A
  • Ohio: Insurance Lapse Fee = $160 (first offense); $360 (second offense); $660 (third offense)
  • Oklahoma: Insurance Lapse Fee = $400
  • Oregon: Insurance Lapse Fee = $75
  • Pennsylvania: Insurance Lapse Fee = $88
  • Rhode Island: Insurance Lapse Fee = $30 to $50
  • South Carolina: Insurance Lapse Fee = $550 + $5 per day
  • South Dakota: Insurance Lapse Fee = $78 to $228
  • Tennessee: Insurance Lapse Fee = $115
  • Texas: Insurance Lapse Fee = $100
  • Utah: Insurance Lapse Fee = $100
  • Vermont: Insurance Lapse Fee = $71
  • Virginia: Insurance Lapse Fee = $145
  • Washington: Insurance Lapse Fee = $75
  • West Virginia: Insurance Lapse Fee = $100
  • Wisconsin: Insurance Lapse Fee = $60
  • Wyoming: Insurance Lapse Fee = $50

Will My Car Insurance Rates Increase Following a Gap in Coverage?

In addition to the fines mentioned above, you can expect your auto insurance quotes to be a little higher than before, although this all depends on how long the gap in coverage was.

If it was less than 4 weeks, the rate increase may amount to a few extra dollars a month. If it was longer than 4 weeks, you could find yourself paying 20% to 50% more, depending on your chosen car insurance company. 

The exact rate of increase will depend on the state, high-risk status, driving record, car insurance discounts, and age of the driver. Insurance is all about measuring risk and probable claims, and an insurance company will look at everything from marital status to DUI convictions when measuring your risk and underwriting your new policy.

Bottom Line: Getting Cheap Car Insurance Quotes After a Lapse

In our research, we found that Progressive, Esurance, and State Farm offered lower rates than GEICO, even though GEICO typically tops the charts when it comes to insurance costs. You should also get much lower auto insurance rates with providers like USAA, providing you qualify.

To save even more, maintain a high credit score, aim for those good driver discounts, and try to secure bundling discounts, which are provided when you combine multiple different insurance products, such as homeowners insurance and car insurance.

The car you drive is also key. A new car will generally lead to much higher rates than a car that is a few years old, as it will be more expensive to repair and replace.

However, a car that is a few decades old will cost more to insurance than one that is a few years old, as it may lack the safety features and anti-theft features needed to keep rates low.

 

How Gaps in Coverage Affect Auto Insurance Rates is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

States With the Worst Drivers – 2016 Edition

States With the Worst Drivers

It is common occurrence on American highways for near-accidents to occur. It is also a common occurrence on American highways for people in near-accidents, to look at the license plate of the near-accident-causer and think to themselves, “Oh, well of course they’re from Massachusetts.” Or some other state. It seems like almost every state has a reputation for having terrible drivers. Thanks to data from the National Highway Traffic Safety Administration we can confirm some of those myths and dispel others.

Looking to move? Check out mortgage rates in your new area here.

According to the National Highway Traffic Safety Administration around 32,000 people were killed in vehicle-related incidents in 2014. Of course some incidents are genuinely accidents, while some are clearly the fault of one driver, like in the event of drunk driving. But deaths and DUIs are not the only metrics to measure bad driving, people who receive speeding tickets or do not have automobile insurance can also be considered negligent drivers.

To find the states with the worst drivers SmartAsset looked at number of drivers, DUI arrests, people killed, google trends in speeding tickets and percentage of people who have auto insurance. To find out how we put all these numbers together to create our index please read the full methodology below.

Key Findings

No Massachusetts. Boston drivers usually have a reputation as bad drivers but the numbers we analyzed don’t bear that out. Massachusetts ranks 48 on our list. While we have no data on non-fatal accidents, the fact that they lead the nation in insured rate is a positive sign.

Be careful when driving in the southeast. Maybe it’s the heat causing road rage, but four out of the top ten states in our study are located in the southeast.

States with the Worst Drivers

1. Florida

Florida is often plagued with a reputation for bad drivers. The numbers seem to show that this might, in fact, be true. Floridians google “speeding tickets” and “traffic tickets” more than any other state. They also have the second lowest number of insured drivers in the nation.

2. Mississippi

Another southern state and another state in which one ought to be extra careful when driving through. Mississippi had the 5th highest deaths resulting from vehicular incidents. One area where Mississippi can improve is in DUIs. Mississippi had the 12th highest rate of DUI arrests per driver in the country. Like Florida relatively few people are insured. They rank 3rd worst in that category with only 77% insured.

Buying car insurance? Avoid these 6 mistakes.

3. Oklahoma

Continuing on the theme of states with low insured driver rates, Oklahoma has the least. Only 74% of drivers in Oklahoma are insured. It does not get much better for the state in the other categories we looked at. They have one of the 15 worst scores in DUIs per thousand drivers (7.74), number of people killed per thousand drivers in vehicular incidents (.21) and rate of googling parking and traffic tickets (52.13).

4. New Jersey

The Garden State has the infamy of being the state with the second most deaths per driver at 0.62. New Jersey drivers are more likely to be insured than some of the other states on our list. New Jersey drivers are insured at a rate of almost 90%, coming in 22nd on our list.

5. Delaware

New Jerseys neighbor and rival for worst drivers in the northeast, Delaware is unfortunately the only state with more deaths per driver than New Jersey. One curious statistic is that while Delaware has the lowest DUI rate per driver, 40% of deaths occurred when the driver was above the legal limit for drinking, which is the 4th highest rate in the country.

6. Alabama

Another southern state and a similar story to the others with pretty bad scores all around. One bright spot – Alabama has the 4th best score with only 1.42 DUI arrests per thousand drivers. Like Delaware, though, that statistic does not tell the whole story, 33% of deaths in Alabama resulted from a driver being over the legal alcohol limit.

7. Vermont

Vermont leads the nation in DUIs per driver with 50 per thousand drivers. However, they also have the lowest percentage of deaths resulting from drunk driving, at 20%.

8. Tennessee

Tennessee is one of the least insured states in the country, with 20% of people not having car insurance. Tennessee also has the 18th highest number of deaths per thousand drivers. One positive is that they are in the better half of the country for DUI per thousand drivers at 5.7.

9. Texas

Tragically for Texas it has the highest percentage of deaths coming from drunk drivers at 40% and yet it is in the better half of states for DUI arrests. Recent news that Uber and Lyft will both be leaving Austin may have an impact. According to MyStatesman, Austin only has permits for 756 legal taxis and is hoping to increase that to 1,161. But for a tech hot-spot with a population of 850,000 even this may not be enough.

10. Nevada

Nevada is the 3rd worst state for traffic and speeding tickets (when comparing googling trends) as well as being the 17th worst state for DUIs. The good news is that 88% of Nevada drivers are insured.

States with the Worst Drivers

Data and Methodology

In order to find out which state had the worst drivers SmartAsset collected data across 4 metrics.

Percentage insured. Data is taken from the Insurance Research Council.

DUI per thousand drivers. Number of drivers is taken from the Federal Highway Administration. Number of DUIs is taken from the State Justice Department.

Deaths per thousand drivers. Data is taken from the Fatality Analysis Reporting System, which is part of the National Highway Traffic Safety Administration.

Google trends on driving tickets. This data is the average of the scores each state got in google trends for the 8 phrases: speeding ticket, “speeding ticket,” speeding tickets, “speeding tickets,” traffic ticket, “traffic ticket,” traffic tickets and “traffic tickets.”

We then indexed each factor for every state giving equal weighting and then finding the average score per state to create the final index.

Questions about our study? Contact us at blog@smartasset.com.

Photo credit: Â©iStock.com/Ben Harding

The post States With the Worst Drivers – 2016 Edition appeared first on SmartAsset Blog.

Source: smartasset.com

What is a Payday Loan?

A payday loan is a short-term loan with a high annual percentage rate. Also known as cash advance and check advance loans, payday loans are designed to cover you until payday and there are very few issues if you repay the loan in full before the payment date. Fail to do so, however, and you could be hit with severe penalties.

Lenders may ask the borrower to write a postdated check for the date of their next paycheck, only to hit them with rollover fees if that check bounces or they request an extension. It’s this rollover that causes so many issues for borrowers and it’s the reason there have been some huge changes in this industry over the last decade or so. 

How Do Payday Loans Work?

Payday lending seems like a simple, easy, and problem free process, but that’s what the payday lender relies on. 

The idea is quite simple. Imagine, for instance, that your car suddenly breaks down, payday is 10 days away, and you don’t have a single cent to your name. The mechanic quotes you $300 for the fix, and because you’re already drowning in debt and have already sold everything valuable, your only option is payday lending.

The payday lender offers you the $300 for a small fee. They remind you that if you repay this small short-term cash sum on payday, you won’t incur many fees or any real issues. But a lot can happen in 10 days. 

More bills can land in your mailbox, more expenses can arrive out of nowhere, and before you know it, all of your paycheck has been allocated for other expenses. The payday lender offers to rollover your loan for another month (another “payday”) and because you don’t have much choice, you agree.

But in doing so, you’ve just been hit with more high fees, more compounding interest, and a sum that just seems to keep on growing. By the time your next payday arrives, you’re only able to afford a small repayment, and from that moment on you’re locked into a debt that doesn’t seem to go anywhere.

Predatory Practices

Payday loans have been criticized for being predatory and it’s easy to see why. Banks and credit unions profit more from high-income individuals as they borrow and invest more money. A single high-income consumer can be worth more than a dozen consumers straddling the poverty line.

Payday lenders, however, target their services at low-income individuals. They offer small-dollar loans and seem to profit the most when payment dates are missed and interest rates compound, something that is infinitely more probable with low-income consumers.

Low-income consumers are also more likely to need a small cash boost every now and then and less likely to have the collateral needed for a low-interest title loan. According to official statistics, during the heyday of payday loans, most lenders were divorced renters struggling to make ends meet.

Nearly a tenth of consumers earning less than $15.000 have used payday loans, compared to fewer than 1% for those earning more than $100,000. Close to 70% of all payday loans are used for recurring expenses, such as utility bills and other debts, while 16% are used for emergency purchases.

Pros and Cons of Taking Out a Payday Loan

Regardless of what the lender or the commercial tells you, all forms of credit carry risk, and payday loans are no exception. In fact, it is one of the riskiest forms of credit available, dragging you into a cycle of debt that you may struggle to escape from. Issues aside, however, there are some benefits to these loans, and we need to look at the cons as well as the pros.

Pros: You Don’t Need Good Credit

Payday loans don’t require impeccable credit scores and many lenders won’t even check an applicant’s credit report. They can afford to do this because they charge high interest and fees, and this allows them to offset many of the costs associated with the increased liability and risk.

If you’re struggling to cover your bills and have just been hit with an unexpected expense, this can be a godsend—it’s a last resort option that could buy you some time until payday.

Pros: It’s Quick

Payday loans give you money when you need it, something that many other loans and credit offers simply can’t provide. If you need money right now, a payday lender can help; whereas another lender may require a few days to transfer that money or provide you with a suitable line of credit.

Some lenders provide 24/7 access to money, with online applications offering instant decisions and promising a money transfer within 24 hours.

Pro: They Require Very Little

A payday loan lender has a very short list of criteria for its applicants to meet. A traditional lender may request your Social Security Number, proof of ID, and a credit check, but the average payday lender will ask for none of these things.

Generally, you will be asked to prove that you are in employment, have a bank account, and are at least 18 years old—that’s it. You may also be required to submit proof that you are a US citizen.

Cons: High Risk of Defaulting

A study by the Center for Responsible Lending found that nearly half of all payday loans go into default within just 2 years. That’s a staggering statistic when you consider that the average default rate for personal loans and credit cards is between 1% and 4%.

It proves the point that many payday lender critics have been making for years: Payday loans are predatory and high-risk. The average credit or loan account is only provided after the applicant has undergone a strict underwriting process. The lender takes its time to check that the applicant is suitable, looking at their credit history, credit score, and more, and only giving them the credit/loan when they are confident it will be repaid.

This may seem like an unnecessary and frustrating process, but as the above statistics prove, it’s not just for the benefit of the lender as it also protects the consumer from a disastrous default.

Con: High Fees

High interest rates aren’t the only reason payday lenders are considered predatory. Like all lenders, they charge fees for late payments. But unlike other lenders, these fees are astronomical and if you’re late by several weeks or months, those fees can be worth more than the initial balance.

A few years ago, a survey on payday lending discovered that the average borrower had accumulated $458 worth of fees, even though the median loan was nearly half that amount.

Cons: There are Better Options

If you have a respectable credit history or any kind of collateral, there are better options available. A bank or credit union can provide you with small short-term loans you can repay over many months without accumulating astronomical sums of interest. 

The interest rates are much lower, the fees are more manageable, and unless your credit score is really poor, you should be offered more favorable terms than what you can get from a payday lender.

Even a credit card can offer you better terms. Generally speaking, a credit card has some of the highest interest rates of any unsecured debt, but it can’t compare to a payday loan. It also has very little impact on your credit score and many credit card providers offer 0% on purchases for the first-few months.

What’s more, if things go wrong with a credit card, you have more options than you have with a payday loan, including a balance transfer credit card or a debt settlement program.

Why Do Payday Loans Charge So Much Interest?

If we were to take a cynical view, we could say that payday loans charge a lot simply because the lender can get away with charging a lot. After all, a payday loan lender targets the lowest-income individuals, the ones who need money the most and find themselves in desperate situations.

However, this doesn’t paint a complete picture. In actual fact, it all comes down to risk and reward. A lender increases its interest rate when an applicant is at a greater risk of default. 

The reason you can get low rates when you have a great credit score and high rates when you don’t, is because the former group is more likely to pay on time and in full, whereas the latter group is more likely to default.

Lending is all about balancing the probabilities, and because a short-term loan is at serious risk of defaulting, the costs are very high.

Payday Loans and Your Credit Score

Your credit will only be affected if the lender reports to the credit bureaus. This is something that many consumers overlook, incorrectly assuming that every payment will result in a positive report and every missed payment in a negative one. 

If the lender doesn’t report to the main credit bureaus, there will be no changes to your report and the account will not even show. This is how many payday lenders operate. They rarely run credit checks, so your report won’t be hit with an inquiry, and they tend not to report on-time payments.

However, it’s a different story if you miss those payments. A lender can report missed payments and defaults and may also sell your account to a debt collector, at which point your credit score will take a hit. 

If you’re concerned about how an application will impact your credit score, speak with the lender or read the terms and conditions before applying. And remember to always meet your payments on time to avoid any negative marks on your credit report and, more importantly, to ensure you’re not hit with additional fees.

Payday Loans vs Personal Loans

A personal loan is generally a much better option than a payday loan. These loans are designed to help you cover emergency expenses, pay for home improvements, launch businesses, and, in the case of debt consolidation loans, to clear your debt. 

The interest rates are around 6% to 10% for lenders with respectable credit scores, and while they often charge an origination fee and late fees, they are generally much cheaper options. You can repay the loan at a time that suits you and tailor the payments to fit your monthly expenses, ensuring that they don’t leave you short at the end of the month.

You can get a personal loan from a bank or a credit union; whenever you need the money, just compare, apply, and then wait for it to hit your account. The money paid by these loans is generally much higher than that offered by payday loans and you can stretch it out over a few years if needed.

What is an Unsecured Loan?

Personal and payday loans are both classed as unsecured loans, as the lender doesn’t secure them against money or assets. Secured loans are typically secured against your home (mortgage, home equity loan) or your car (auto loan, title loan). They can also be secured against a cash deposit, as is the case with secured credit cards.

Although this may seem like a negative, considering a lender can repossess your asset if you fail to meet the payment terms, it actually provides many positives. For instance, a secured loan gives the lender more recourse if anything goes wrong, which means the underwriters don’t need to account for a lot of risk. As a result, the lender is more likely to offer you a low interest rate. 

Where cash advance loans and other small loans are concerned, there is generally no option for securing the loan. The lender won’t be interested, and neither should you—what’s the point of securing a $30,000 car against a $1,000 loan!?

New Payday Loan Regulations

Payday lenders are subject to very strict rules and regulations and this industry has undergone some serious changes in recent years. In some states, limits are imposed to prevent high interest rates; in others, payday lenders are banned from operating altogether. 

The golden age of payday lending has passed, there’s no doubt about that. In fact, many lenders left the US markets and took their business to countries like the UK, only for the UK authorities to impose many of the same restrictions after a few years of pandemonium. In the US, the industry thrived during the end of the 2000s and the beginning of the 2010s, but it has since been losing ground and the practice is illegal or highly restricted in many states.

Are Payday Loans Still Legal?

Payday loans are legal in 27 states, but many states have imposed strict rules and regulations governing everything from loan amounts to fees. The states where payday lenders are not allowed to operate are:

  • Arizona
  • Arkansas
  • Connecticut
  • Georgia
  • Maine
  • Maryland
  • Massachusetts
  • New Jersey
  • New York
  • North Carolina
  • Pennsylvania
  • Vermont
  • West Virginia

It is still possible to apply for personal loans and title loans in these states, but high-interest, cash advance loans are out of the question, for the time being at least.

Debt Rollover Rules for Payday Lenders

One of the things that regulations cover is something known as Debt Rollover, whereby a consumer rolls their debt over into the next billing period, accruing fees and continuing to pay interest. The more rollovers there are, the greater the risk and the higher the detriment to the borrower.

Debt rollovers are at fault for many of the issues concerning payday loans. They create a cycle of persistent debt, as the borrower is forced to acquire additional debt to repay the payday loan debt. 

In the following states, payday loans are legal but restricted to between 0 and 1 rollovers:

  • Alabama
  • California
  • Colorado
  • Florida
  • Hawaii
  • Illinois
  • Indiana
  • Iowa
  • Kentucky
  • Louisiana
  • Michigan
  • Minnesota
  • Mississippi
  • Montana
  • Nebraska
  • New Hampshire
  • New Mexico
  • North Dakota
  • Ohio
  • Oklahoma
  • Rhode Island
  • South Carolina
  • Tennessee
  • Texas
  • Virginia
  • Washington
  • Washington D.C.
  • Wisconsin
  • Wyoming

Other states tend to limit debt rollovers to 2, but there are some notable exceptions. In South Dakota and Delaware, as many as 4 are allowed, while the state of Missouri allows for 6. However, the borrower must reduce the principal of the loan by at least 5% during each successive rollover.

Are These Changes for the Best?

If you’re a payday lender, the aforementioned rules and regulations are definitely not a good thing. Payday lenders rely on persistent debt. They make money from the poorest percentage of the population as they are the ones most likely to get trapped in that cycle.

For responsible borrowers, however, they turn something potentially disastrous into something that could serve a purpose. Payday loans still carry a huge risk, especially if there is any chance that you won’t repay the loan in time, but the limits imposed on interest rates and rollovers reduces the astronomical costs.

In that sense, they are definitely for the best, but there are still risks and potential pitfalls, so be sure to keep these in mind before you apply for any short-term loans.

What is a Payday Loan? is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

How To Get A Car Loan in 5 Easy Steps

Need a car loan soon? Whether you’re about to buy a car soon or just thinking about it, chances are you will likely finance it (unless, of course, you have the cash to buy it right away). So why not learn a few steps along the way to help you get a car loan. A little knowledge about the process can go a long way; so far as saving you thousands of dollars in the long run!

Ready to start comparing car loan already? Start now… it’s Free.

Step One: Review your credit file

You may need to get a free credit report and make sure you have a good credit score before applying for a car loan. The better your credit score, the higher your chance to get approved and save on interest.

Step Two: Compare interest rates

You should shop around, compare auto rates and fees before you apply for a car loan. The worst thing you can do to yourself is to apply for multiple loans at the same time, as this can affect your credit score.

So, look at multiple rates at one place so you can make the best decision. Also, remember you can choose a fixed rate or variable rate on a car loan.

Whichever you choose depends on what you’re comfortable with. Remember that a fixed rate will stay the same for all of the term of the loan. That means, your repayment will be predictable and you’ll be able to budget for a lot easier than with a variable rate.

Click here to compare car loan rates through LendingTree.

Step Three: Dealer Finance or Car loan?

You should always compare bank/independent loan to dealer finance.

Granted dealer financing may get you a auto loan with a very low rate, but that does not mean you get the best deal. Sometimes dealer financing can be more expensive in the long run. So you may want to compare rates from 2-3 lenders with a dealer finance rate to make sure you get the best rate possible.

Step Four: Get pre-approved

Before you commit to a car you should get pre-approved first. Plus, walking into the car dealership with a pre-approval letter in your hand, gives you greater negotiating power.

Step Five: Gather your documents and go car shopping

Once you decide on an auto loan that you’re happy with, it’s time to go car shopping! So gather your financial documents such as your pay stubs, bank statements, tax returns, and W2s.

Want to explore your car loan options? Visit LendingTree to compare the best car loan rates.

Related: How to save money for a car

Speak With The Right Financial Advisor

You can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAsset’s 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 Get A Car Loan in 5 Easy Steps appeared first on GrowthRapidly.

Source: growthrapidly.com