loans http://www.wisebread.com/taxonomy/term/1008/all en-US 9 Financial Moves You Will Always Regret http://www.wisebread.com/9-financial-moves-you-will-always-regret <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/9-financial-moves-you-will-always-regret" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_regret_money_000017061233.jpg" alt="Woman making financial moves she will always regret" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We all do dumb stuff with our money, especially when we're young. Most of the time, we make mistakes that won't cripple us in the long run. But there are a handful of bad financial moves that almost always come out negative.</p> <p>Nobody's perfect, but if you avoid these mistakes, you'll probably be in good shape, money-wise.</p> <h2>1. Failing to Invest When You're Young</h2> <p>If you've read Wise Bread long enough, you should know about the power of compounding investment returns. This is the notion that the earlier you invest, the better off you'll be financially because your investments will have time to grow. A $500 per month investment from age 45 to 60 will grow to about $161,000, assuming a 7% annual return. But if you start at age 30, it would represent $606,000. And if you started at age 20? $1.28 million.</p> <h2>2. Buying a House You Can't Afford</h2> <p>There are many reasons why the economy and stock market took a dive in 2007 and 2008, but one of the main culprits was the subprime mortgage crisis, which stemmed from a flurry of people who purchased expensive homes with unfavorable loan terms. People bought homes with little or no money down, with mortgage payments that began high and only got higher. This led to a massive number of foreclosures, as homeowners were left unable to make payments.</p> <p>Banks these days try to avoid lending to anyone who would have to pay more than 28% of their net income each month toward the mortgage. Lenders are also reluctant to provide home loans to those who would have an overall debt-to-income ratio of 43% or more. If you find that you may be exceeding these limits, it's likely that you are stretching yourself too thin and are putting yourself at risk of foreclosure, and possibly bankruptcy.</p> <h2>3. Racking Up Credit Card Debt</h2> <p>Debt stinks, and credit card debt may be the worst kind. That's because credit card interest rates tend to be so high that's hard to make a dent in what you owe. An interest rate on a credit card is at least 11% even for <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">low-interest cards</a>, according to Bankrate.com. That means that for every $100 you owe, you're paying an additional $11 annually. These extra payments then make it harder for you to save for other important things, and to make matters worse, high debt hurts your credit score, and a bad credit score affects your ability to get things like a home loan. So in summary, credit card debt can lead to an endless spiral of despair.</p> <p>Take heart, however. It's possible to avoid credit card debt by living within your means and paying off all credit card balances in full each month. If you do end up with credit card debt, focus on <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">paying off credit cards</a> with the highest interest rates first, then work your way down.</p> <h2>4. Choosing a College Based on Price</h2> <p>There is an assumption by some parents and students that the most expensive schools are also the best. And that's one of the reasons why members of the Class of 2015 exited with an average of $35,000 in student loan debt.</p> <p>While it's true that many of the top schools are quite pricey, it's best to evaluate colleges on overall value, not cost. This means taking into account not just the price, but also the quality of the education and the likelihood of landing a well-paying job after graduation. (Because a good job will help you pay off those student loans.)</p> <p>There's also a growing acceptance of community college as an option for students. Community colleges will offer a low-cost place for students to take the foundational classes that are common among freshmen and sophomores before going off to a major university to complete their degree.</p> <p>Student loan debt is often referred to as &quot;good&quot; debt, but it's horribly crippling to millions of young people. Worst of all, it can't be discharged in bankruptcy, so failing to make student loan payments can haunt a student for years after graduation.</p> <h2>5. Cosigning a Loan With an Untrustworthy Person</h2> <p>At one point or another, many people are approached with a request to cosign a loan. Often it's from a friend or relative who would not otherwise be able to obtain the loan on their own. Generally speaking, you should almost always say no to these requests. That's because cosigning the loan makes you responsible for paying the loan back if the other person fails to make payments. This can lead to financial hardship for you and hurt your credit score.</p> <p>If you have a loved one in need of assistance, you're almost always better off just lending or giving them money directly, or finding some other less risky way to help.</p> <h2>6. Ignoring Your Company's 401K Match</h2> <p>You may think that as long as you put some money into your company's retirement plan, you're doing fine. But are you maximizing the money you could be getting from enrolling?</p> <p>Most companies will match contributions up to a certain percentage of your pre-tax income. Usually, this means matching up to 5% of your salary, and some companies match even more. So if you're not contributing up to this level, you're leaving free money on the table. Over time, this could add up to tens of thousands of dollars missing from your retirement account.</p> <p>If you are unclear about how much to put into your 401K, make sure you at least put in enough to get the full company match. Even an additional 1% or so from your employer can make a huge difference in the size of your retirement fund later.</p> <h2>7. Not Buying Health Insurance</h2> <p>If you are young, you may feel like health insurance is a waste of money. You have no illness, you work out, you eat right. But ask about the young guy who got into a severe car accident, or tore a ligament in a pickup soccer game. No one is invincible, and <a href="http://www.businessweek.com/bwdaily/dnflash/content/jun2009/db2009064_666715.htm">62% of all bankruptcies</a> stem from from medical expenses, according to a 2007 Harvard Study.</p> <p>There's even less of an excuse to avoid health insurance now that there are reasonably priced plans available on state and federal health exchanges.</p> <h2>8. Defaulting on a Loan</h2> <p>You may find yourself in a situation where debt seems so overwhelming you decide to stop making payments altogether. You should avoid this temptation and keep making payments, even if they are the minimum.</p> <p>Quite simply, if you fail to pay a debt, it will show up as a negative event on your credit reports, and will thus impact your ability to get favorable loan terms in the future. Failing to pay a debt often leads to calls from collection agencies, and you could even be sued. If you lose a judgement, you may have your wages garnished. If you find that you owe too much, you may be able to file for bankruptcy as a last resort. But that won't help you avoid debt from student loans, which can remain on a credit report for seven years and are not discharged in bankruptcy.</p> <h2>9. Failing to Pay Taxes</h2> <p>You may hate the Internal Revenue Service, but the agency does not care about your feelings. If you owe taxes, you are expected to pay them, and there are penalties for dodging the tax man. You'll be penalized 5% of what you owe for each month your taxes are late.</p> <p>The IRS advises that you're better off filing a return and paying some taxes, even if it's not the full amount. A &quot;failure-to-file&quot; penalty is usually higher than a &quot;failure-to-pay&quot; penalty, the agency says, and it will work with you on an installment plan if you can't pay a tax bill in full right away.</p> <p>Paying your taxes late doesn't usually hurt your credit score, but if you pay nothing to the IRS, you may be subjected to a federal tax lien, which would show up on credit reports.</p> <p><em>Have you made these &mdash; or other &mdash; financial moves you later regretted?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-tax-friendly-ways-to-save-beyond-your-retirement-fund">9 Tax-Friendly Ways to Save Beyond Your Retirement Fund</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-best-free-financial-learning-tools">9 Best Free Financial Learning Tools</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/optimize-your-ira-and-401k">Optimize Your IRA and 401(k)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-pay-down-debt-first-or-invest">Should You Pay Down Debt First or Invest?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have">7 Investment Accounts All 30-Somethings Should Have</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance 401k compound interest cosigning investing loans retirement stocks taxes Thu, 21 Apr 2016 10:30:05 +0000 Tim Lemke 1694644 at http://www.wisebread.com The Fed Raised Rates — Then Something Weird Happened http://www.wisebread.com/the-fed-raised-rates-then-something-weird-happened <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-fed-raised-rates-then-something-weird-happened" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_concerned_computer_000038377234.jpg" alt="Woman wondering what happened after Fed raised rates" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In December of last year, the Federal Reserve Board raised its benchmark Federal Funds Rate for the first time in more than a decade. Before the move, economists warned consumers to brace for a jump in the interest rates they pay on mortgage loans, auto loans, and credit cards.</p> <p>But a funny thing happened: pretty much nothing.</p> <p>Consumer interest rates haven't jumped much, if at all, since the Federal Reserve's move. That's good news for consumers who haven't had to pay more to borrow money. But it does lead to a big question: How long will the low interest rates on mortgage loans and other debt last?</p> <p>That's a question that no one can accurately answer. And, as now apparent, it's one that the Federal Reserve Board might be able to influence but won't be able to directly control.</p> <h2>The Fed's Move</h2> <p>The Federal Funds Rate is important: It affects the interest rates that banks charge on important consumer products such as mortgage loans, personal loans, auto loans, and credit cards. But the Federal Funds Rate only <em>influences </em>these rates. They don't directly set them.</p> <p>That's why consumers haven't seen, for instance, mortgage interest rates budge much from the historic lows at which they still remain.</p> <p>The Federal Reserve Board had set its funds rate at zero since 2008. Back then, the Fed took this move as a way to help the economy survive the Great Recession. But as the economy has slowly improved, members of the board's Federal Open Market Committee &mdash; which guides and sets the Federal Funds Rate &mdash; late last year decided it was finally time to increase this key rate.</p> <p>In December of last year, the Federal Reserve raised the funds rate by 25 basis points, moving it from 0% to 0.25%.</p> <p>And that's when financial experts predicted significant jumps in the interest rates that consumers pay. We're still waiting for those big jumps to happen. Why?</p> <h2>Influencing, Not Setting</h2> <p>It comes down to the difference between influencing and setting.</p> <p>Consider mortgage interest rates. Many believe that the Federal Reserve Board sets the interest rates that consumers pay on mortgage loans. It doesn't. Instead, mortgage interest rates are determined by mortgage backed securities, which are indirectly linked to the yield on 10-Year Treasury notes. When yields fall on Treasuries, so does the interest rate on mortgages. Treasury yields fall when demand for notes goes up, such as when the stock market declines (as happened in early 2016) or when the international economy stumbles (as has also happened).</p> <p>This doesn't mean that the Federal Reserve doesn't have any influence over whether mortgage rates rise or fall. After its meetings, the Federal Open Market Committee releases statements that list the opinions and feelings about the economy that its members hold. If the committee members say that the economy is strong &mdash; and their opinions about it are mostly positive &mdash; mortgage interest rates tend to rise.</p> <p>If the committee members instead express negative opinions about the economy, mortgage interest rates will usually fall.</p> <h2>Interest Rates Mostly Stable</h2> <p>Mortgage interest rates have remained at historically low levels for a long time. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage stood at 3.71% as of the week ended March 31. The average rate on a 15-year fixed-rate mortgage loan was at 2.98%. Last year the 30-year stood at 3.70% and the 15-year was 2.98%</p> <p>The New York Times on March 18 reported that the average interest rate on a 60-month loan for a new car stood at 3.15%. That's up only slightly from a year ago, when this rate was 3.11%.</p> <p>Variable-rate credit cards have seen their average interest rates rise from December of last year, but only slightly. Bankrate reported that as of Dec. 30 of last year, the average interest rate on a variable-rate card stood at 15.80%. As of March 30, the site said that this average had risen to 15.96%. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Best Low APR Credit Cards</a>)</p> <p>So, yes, the Fed's rate hike might have had a slight impact on some interest rates but it has had no impact on others. The lesson here? Consumers should pay attention to what the Federal Reserve is doing when it comes to its Federal Funds Rate. And any increase in that rate might influence lenders and banks to raise their own rates.</p> <p>But consumers shouldn't panic, either, when the Fed does raise this benchmark rate. A higher Federal Funds Rate might not mean skyrocketing mortgage, auto, and credit card interest rates, because lots of others factors are at play.</p> <p><em>Have you benefited from low interest rates?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-fed-raised-rates-then-something-weird-happened">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-you-need-to-know-about-credit-scores">5 Things You Need to Know About Credit Scores</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-how-much-the-feds-interest-rate-hike-might-cost-you">This Is How Much the Fed&#039;s Interest Rate Hike Might Cost You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-the-fed-is-keeping-rates-low-and-what-it-means-for-you">3 Reasons the Fed Is Keeping Rates Low (And What It Means for You)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you">15 Surprising Ways Bad Credit Can Hurt You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/oh-noes-inflation">Oh noes! Inflation!</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance federal reserve interest rates loans mortgages the fed Tue, 05 Apr 2016 09:00:07 +0000 Dan Rafter 1682551 at http://www.wisebread.com 5 Things Your Real Estate Agent Wishes You Knew http://www.wisebread.com/5-things-your-real-estate-agent-wishes-you-knew <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-your-real-estate-agent-wishes-you-knew" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000020439873_Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Buying or selling a home is a complicated process. And you can make it even more challenging when you make some of the more common buying or selling mistakes.</p> <p>Just ask your local real estate agent. You can bet that the agents selling homes in your community have seen plenty of mistakes from both first-time buyers and sellers, and those who have bought and sold homes several times.</p> <p>What does your real estate agent wish you knew before starting your home search? What mistakes does your agent wish you knew to avoid when listing your home? Here are five of the biggest. Avoid these missteps and you'll make your agent happy. More importantly, you'll make the buying or selling process an easier one. (See also:&nbsp;<a href="http://www.wisebread.com/dont-let-these-6-home-d-cor-flaws-ruin-your-house-hunt">Don't Let These 6 Home Décor Flaws Ruin Your House Hunt</a>)</p> <h2>1. Looking at Homes You Can't Afford Leads to Disappointment</h2> <p>The biggest mistakes that buyers make? They waste time touring homes that are out of their price ranges. Then, when they have to look at homes they can actually afford, they're disappointed. That $180,000 home doesn't have the same modern kitchen or sprawling master bath as that Colonial listing for $300,000.</p> <p>The best way to avoid this mistake is to get pre-approved for a mortgage loan before you start shopping. During the pre-approval process, you'll submit documents such as copies of your last two paycheck stubs, your last two years of tax returns, and your most recent bank account statements to a lender. That lender will study these documents, run your credit, and let you know exactly how large of a mortgage loan it will give you. You can then use this information to visit only those homes that you can afford.</p> <p>You can also use your pre-approval letter to prove to sellers that you can qualify for a mortgage. If you get in a bidding war with other buyers over a home, sellers are more likely to choose a buyer who has already been pre-approved for a mortgage.</p> <h2>2. Pricing a Home Too High Never Works</h2> <p>Sellers want to get the most profit out of their homes. That's understandable. But too many of them try to list their homes for a price that's too high for the market. They hope that at least one buyer will make a higher offer. And if one doesn't? Then they can simply lower the price.</p> <p>But this is a flawed strategy. Buyers today won't make an offer on a home that is priced at $250,000 when other homes in the neighborhood are selling for $200,000. Instead, they'll ignore the higher-priced home. Sellers, then, will see their homes languish on the market for months before finally lowering their price. By the time they do, buyers see that the home has been sitting on the market for months. They'll naturally start to wonder what's wrong with the property, and might be hesitant to tour it.</p> <p>The better move? Listen to your real estate agent. Your agent will show you the sales prices that similar homes in your neighborhood have fetched. You can then set the right asking price: One that attracts offers and leaves you with a solid offer.</p> <h2>3. You Can't Rush Buying a Home</h2> <p>Buying a home takes time. Your agent knows this. Unfortunately, too many buyers don't.</p> <p>Some buyers simply have unrealistic expectations on how long it will take them to buy a home. Then, when the process takes longer than they expect, they tend to get desperate. They might make offers on homes they don't truly love just to speed the process along.</p> <p>The better approach is a patient one. Give yourself plenty of time to find your new home. If you need to move by the end of the summer, don't start looking on June 1. Instead, start looking March 1.</p> <h2>4. You Can't Turn Away Showings and Expect the Best Offers</h2> <p>Selling a home is not the same as living in a home. When you're selling, you need to keep your home clean at all times. Spotless. You can't let dishes pile in the sink or clothes overflow in the laundry room. You need to clear out extra furniture and personal mementos to make your home look as spacious as possible.</p> <p>You also need to be willing to leave your home whenever your agent calls with news that buyers want to tour it. This can be inconvenient. But it's important to show your home to as many potential buyers as you can. It's the only way to receive the highest number of good offers for your property.</p> <p>So don't refuse a showing, even if it comes at the last minute. Yes, it's a hassle to give your home a last-minute vacuuming and then to head off to the mall for the day. But it's a necessary step to getting that home sold.</p> <h2>5. You Can't Take Low Offers Personally</h2> <p>It's easy to get annoyed when buyers make a lowball offer for your home. Buyers might offer you $150,000 for your home that's listed at $250,000. But don't get mad &mdash; simply make a counter offer. If the buyers refuse to go any higher, then you can refuse their offer.</p> <p>Don't give in to the temptation and cut out the buyers prematurely. Yes, their offer might be annoyingly low. But that doesn't mean that they won't eventually make a counter offer that will work for you. If you let your anger cut off negotiations too early, you might never get that solid offer.</p> <p><em>Have you made these &mdash; or other &mdash; real estate mistakes? Let us know in comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-things-your-real-estate-agent-wishes-you-knew">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-important-things-you-need-to-know-about-the-housing-market-in-2016">6 Important Things You Need to Know About the Housing Market in 2016</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-it-makes-sense-to-apply-for-a-mortgage-loan-without-your-spouse">When It Makes Sense to Apply for a Mortgage Loan Without Your Spouse</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing home owners loans offers pre-approvals selling a house shopping for house Mon, 21 Mar 2016 10:01:08 +0000 Dan Rafter 1675386 at http://www.wisebread.com 5 Things Lenders Look For in a Loan Application http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-lenders-look-for-in-a-loan-application" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_magnifying_glass_000036490728_0.jpg" alt="Man learning things lenders look for in a loan application" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Banks and lenders take a risk whenever they approve someone for a mortgage loan. There's no guarantee, after all, that the borrower will pay the loan back in time.</p> <p>But there are five key financial factors that lenders look for when approving loan applications. And if you have these key financial positives, your odds of qualifying for a mortgage loan will increase dramatically.</p> <h2>1. A FICO Score of 740 or Higher</h2> <p>Your three-digit FICO credit score certainly ranks as one of the most important numbers for loan applicants. This number tells lenders how well you've managed your credit in the past.</p> <p>Plenty goes into your credit score. But here are the basics: Late or missed payments on credit cards, auto loans, student loans, and other forms of revolving credit linger on your three credit reports &mdash; you have one maintained by each of the national credit bureaus of Experian, Equifax, and TransUnion &mdash; for seven years. And they'll cause your score to drop, often by 100 points. Bankruptcy filings and foreclosures will remain on your credit report for seven to 10 years, and will cause even more damage.</p> <p>So if you want a <a href="http://www.wisebread.com/7-ways-to-increase-your-credit-score-quickly">strong FICO credit score</a>, pay your bills on time and pay down your credit card debt. Lenders today consider a FICO score of 740 or higher to be a top-tier score. If your score is too much lower, you'll struggle to qualify for a mortgage loan. And when you do, you'll pay a higher interest rate.</p> <h2>2. A Debt-to-Income Ratio of 43% or Lower</h2> <p>Credit scores get much of the press, but your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">debt-to-income ratio</a> is another key number when applying for a mortgage. Lenders today prefer working with borrowers whose total monthly debts, including their estimated monthly mortgage payments, equal no more than 43% of their gross monthly income.</p> <p>If your debt-to-income ratio is too high, you'll again struggle to qualify for a mortgage loan. Lenders will worry that you won't be able to afford a monthly mortgage payment in addition to your other debts.</p> <h2>3. A Credit Report Free of Negative Judgments</h2> <p>Lenders get nervous when they see bankruptcies or foreclosures on your credit reports. They worry that you'll again run into financial trouble and not be able to make your monthly mortgage payments.</p> <p>The big challenge is that these negative judgments remain on your credit reports for a long time. A foreclosure remains on your reports for seven years, as does a Chapter 13 bankruptcy filing. A Chapter 7 bankruptcy filing doesn't fall off your reports for 10 years. And while the impact on your FICO credit score lessens over time, lenders can still see &mdash; and stress over &mdash; these negative judgments.</p> <h2>4. A Two-Year Employment History in Your Field</h2> <p>Lenders want to be as certain as possible that your income won't disappear. After all, if that happens, the odds that you'll stop making your mortgage payments will soar. That's why lenders prefer working with borrowers who can show that they've worked in their field for at least two consecutive years.</p> <p>It <em>is</em> possible to get a mortgage loan without this. But having a stronger work history can only help boost your odds of qualifying for a mortgage.</p> <h2>5. Savings</h2> <p>Taking out a mortgage isn't inexpensive. You'll need thousands of dollars to cover your loan's closing costs. And you'll need even more for a down payment. A down payment of 5% on a mortgage loan of $200,000 comes out to a hefty $10,000, for example.</p> <p>But being able to afford these upfront costs is only part of the puzzle. Lenders also want you to have savings in reserve. That way, if your regular monthly income stream dries up because of a job loss or pay cut, you'll have enough money in savings to keep paying your mortgage while you rebuild that income.</p> <p>How much savings you'll need varies by lender. Most lenders, though, will require you to have from two to six months' worth of mortgage payments &mdash; including the money you are paying for property taxes and insurance each month &mdash; saved up.</p> <p><em>Would you qualify for a mortgage according to these guidelines?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-an-fha-home-loan-right-for-you">Is an FHA Home Loan Right for You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit">3 Terrible Things Foreclosure Does to Your Credit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-prepare-for-a-home-purchase-in-2010">How to Prepare for a Home Purchase in 2010</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit score debt-to-income ratio employment history fico lenders loans mortgages Wed, 02 Mar 2016 10:30:28 +0000 Dan Rafter 1665555 at http://www.wisebread.com 6 Ways Peer Lending Can Boost Your Wallet http://www.wisebread.com/6-ways-peer-lending-can-boost-your-wallet <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-ways-peer-lending-can-boost-your-wallet" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/hand_holding_piggybank_000018119999.jpg" alt="Learning ways peer lending can boost your wallet" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Alternative finance is a seriously hot topic right now. From worthy projects like a <a href="https://www.indiegogo.com/projects/flow-hive-honey-on-tap-directly-from-your-beehive#/">beehive design </a>that received millions on Indiegogo &mdash; to the completely comic, like the crowdfunding campaign to <a href="http://www.huffingtonpost.com/2014/09/28/potato-salad-kickstarter-party_n_5893386.html">make a potato salad</a> &mdash; you can't really avoid the media buzz about alternative finance.</p> <p>But there is more to alternative finance than hype. And there could be ways that the new products, services, and platforms can benefit you. (No potato salad required.) Here's how.</p> <h2>1. Invest While You Help Others With Peer Lending</h2> <p>Peer-to-peer lending is an increasingly popular choice for individual investors, who lend out their spare cash in the form of loans to individuals and small businesses. Peer lending is an attractive investment because it&rsquo;s simple to get started, returns can be solid, and you can open accounts with very low minimum investments. The segment is getting increasingly sophisticated, with prospective borrowers vetted and classified according to risk, allowing investors to diversify their portfolio of investments according to their risk tolerance levels (riskier loans produce higher potential returns). Both <a href="http://prosper.evyy.net/c/27771/27132/994">Prosper</a> and <a href="http://track.flexlinks.com/a.ashx?foid=1029882.227343&amp;fot=9999&amp;foc=1">Lending Club</a> also offer tax-smart IRA products. (See also: <a href="http://www.wisebread.com/everything-you-need-to-know-about-peer-to-peer-investing-with-lending-club">Everything You Need to Know About Peer Lending</a>)</p> <p>The key to investing intelligently in peer lending is in diversification. By splitting your money across dozens or even hundreds of different loans, you reduce your exposure to default.</p> <h2>2. Get a Loan Without Visiting a Bank</h2> <p>Peer lending, of course, works both ways. Not only can you invest your money, you can also become a borrower using one of the alternative finance platforms listed above. Accessing funds this way tends to involve less paperwork than visiting a bank, although interest rates will vary according to your circumstances.</p> <p>There are peer lending platforms offering consumer and business loans, both secured and unsecured, ranging from small loans for individuals to the greater funds you might need for expanding your business. For example, <a href="https://www.fundingcircle.com/us/">Funding Circle</a> offer loans to small businesses that might not be able to access finance through mainstream institutions. If you're thinking of taking a loan, it is worth evaluating alternative providers alongside traditional bank offerings. You might be pleasantly surprised.</p> <h2>3. Kickstart Your Business Idea With Crowdfunding</h2> <p>Alternative finance offers several options if you're thinking of starting a business. One popular option is reward-based crowdfunding, where backers pledge money in return for non-financial rewards. Not only does this provide a way of collecting some cash, but you can also test the feasibility of your idea &mdash; if people fund your campaign, then you've likely got a viable product!</p> <p><a href="https://www.kickstarter.com/">Kickstarter</a> is one of the best known crowdfunding sites and accepts &ldquo;creative&rdquo; projects &mdash; perfect if you're a writer, artist, chef, or looking to fund a business in the world of art, design, technology, or music. The rules prohibit offering financial incentives to backers, so you have to get inventive to come up with ways to say thank you to the people who fund your campaign!</p> <p><a href="https://www.indiegogo.com/">Indiegogo</a> is another great alternative. Simply sign up to start a campaign, and receive funding through PayPal from backers all over the world.</p> <p>If reward-based crowdfunding doesn't suit your project, then you could look to equity-based crowdfunding from a platform like <a href="https://www.crowdfunder.com/">Crowdfunder</a>, or find an &ldquo;angel investor&rdquo; over at <a href="https://angel.co/">AngelList</a>.</p> <h2>4. Use Crowdfunding to Fund Your Worthy Cause</h2> <p>Donation-based crowdfunding allows individuals, charities, and nonprofit organizations to raise funds for specific projects, with no reward or payback to the individuals who choose to become backers.</p> <p><a href="https://www.gofundme.com/">Gofundme</a> is the go-to site for donation based crowdfunding &mdash; whether you are raising cash to study abroad, pay for medical expenses, or upgrade your home. The site focuses on charitable causes, which can really take off if the cause is good and has viral appeal. Some popular Gofundme causes have received hundreds of thousands of dollars in donations.</p> <h2>5. Become a Business Part-Owner With Equity-Based Crowdfunding</h2> <p>If you have money to invest, but aren&rsquo;t ready to start your own entrepreneurial endeavor just yet, then equity-based crowdfunding can offer a way to become a part-owner of a business you believe in.</p> <p>With equity-based crowdfunding, entrepreneurs offer a slice of their business to investors in return for their cash. You might choose a project you're excited about in your neighborhood, a product that makes sense to you, or an entrepreneur who has the energy and passion needed to really make their idea a success. Equity-based crowdfunding is working right now for many investors and small businesses &mdash; an impressive 120,000 backers have backed over 30,000 projects so far on Crowdfunder, alone.</p> <h2>6. Get Discounts and Offers Through Reward-Based Crowdfunding</h2> <p>Reward-based crowdfunding projects offer some form of non-monetary reward to those who back them. This might mean that you can get your hands on an early edition or personalized version of the product you're backing, have your contribution acknowledged on the company website or magazine, or get some form of exclusive reward direct from the founders. Generally, rewards are tiered based on the level of money put up, meaning the more you offer, the better the reward you can get your hands on.</p> <p>Kickstarter and Indiegogo are two of the best-known sites for reward-based crowdfunding, but there are also niche sites which might suit your particular interests. If you're into music and love discovering new sounds, then specialist sites help budding artists raise funds in return for great gifts to backers. Give <a href="http://www.pledgemusic.com/">Pledge Music</a> a whirl if this is your bag.</p> <p><em>Have you crowdfunded a business or project? How'd it go?</em><em><br /> </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/claire-millard">Claire Millard</a> of <a href="http://www.wisebread.com/6-ways-peer-lending-can-boost-your-wallet">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-fed-raised-rates-then-something-weird-happened">The Fed Raised Rates — Then Something Weird Happened</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-you-need-to-know-about-credit-scores">5 Things You Need to Know About Credit Scores</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you">15 Surprising Ways Bad Credit Can Hurt You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-lenders-that-love-millennials">4 Lenders That Love Millennials</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance alternative finance crowdfunding loans peer to peer lending Thu, 25 Feb 2016 10:30:34 +0000 Claire Millard 1662556 at http://www.wisebread.com 3 Terrible Things Foreclosure Does to Your Credit http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-terrible-things-foreclosure-does-to-your-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_foreclosure_sign_000016301916.jpg" alt="Learning what foreclosure does to your credit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're about to lose your home to foreclosure. Will it destroy your credit? Unfortunately, yes &mdash; your three-digit FICO credit score will plummet following, and leading up to, a foreclosure.</p> <p>There is hope, though. Even after a foreclosure, you <em>can </em>rebuild your credit score. You'll even be able to qualify for a mortgage loan again one day. Just be prepared to wait.</p> <p>&quot;If there is a bright side to foreclosure, it is that credit scores will recover with time and reestablishing a good payment history,&quot; said J.D. Crowe, president of Lawrenceville, Georgia-based Southeast Mortgage and president of the Mortgage Bankers Association of Georgia. &quot;The most important thing for people to know about a foreclosure absolutely, without question, is to always pay everything on time, especially a mortgage payment.&quot;</p> <h2>The Credit Score Drop</h2> <p>Lenders of all kinds rely heavily on your FICO credit score to determine whether they should approve you for a loan, and at what interest rate. If your FICO score is too low, lenders will hesitate to loan you money. When they do, they'll charge you higher interest rates to make up for the risk.</p> <p>Today, most lenders consider a FICO score of 740 or higher to be a good one, indicating a borrower with a history of paying bills on time and not running up too much credit card debt.</p> <p>How far will your FICO score drop if you suffer a foreclosure? There's no one single answer. The actual fall your score takes depends on what your score was before you went through foreclosure, how many missed mortgage payments you accumulated, and whether you had any other missed payments on your credit reports.</p> <p>In general, though, a foreclosure will drop your credit score by at least 100 points &mdash; usually more. And typically, consumers' credit scores have already taken a hit before foreclosure. That's because they usually miss several mortgage payments before lenders start the foreclosure process.</p> <p>Crowe estimates that depending on your individual circumstances, your FICO credit score will fall by 100 to 300 points. If you started with a solid 750 score, it could fall to the low 500s by the time your foreclosure closes.</p> <p>That foreclosure will remain on your credit report for seven years. This means that borrowers will see it every time they pull your credit during this period.</p> <h2>Waiting for Another Mortgage</h2> <p>Don't plan on applying for a new mortgage anytime soon after a foreclosure. First, your credit score will probably be too low. Secondly, mortgage lenders impose mandatory waiting periods for borrowers after a foreclosure.</p> <p>If you want to apply for a conventional mortgage loan &mdash; one not insured by the federal government &mdash; you'll have to wait at least seven years after a foreclosure. You might be able to qualify for a conventional loan after just three years if you can prove extenuating circumstances led to your foreclosure, such as a job loss, illness, or divorce. However, Crowe said that it is very rare for lenders to shorten the mandatory waiting period no matter what you list as the cause of your foreclosure.</p> <p>If you want to apply for a loan insured by the Federal Housing Administration, better known as an FHA loan, you'll have to wait three years from your foreclosure. However, if you can prove that a job loss led to your foreclosure, you will only have to wait one year to apply for a new FHA loan. You will have to prove, though, that the job loss reduced your regular income by at least 20%. You'll also have to provide documents showing that your income has since returned to its previous level or higher.</p> <p>You can apply for a loan insured by the U.S. Department of Veterans Affairs as soon as two years after your foreclosure. But you do have to meet the eligibility requirements to qualify for a VA loan.</p> <h2>Rebuilding Your Credit</h2> <p>Once your score has fallen, it's time to start rebuilding. You can do this by paying all of your bills on time and cutting down on credit card debt. Don't close any unused credit cards, though. Having available credit that you aren't using actually <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">improves your credit score</a>.</p> <p>Over time, your score will slowly improve. And lenders will care less about your foreclosure as the years move on, as long as you don't make any other late or missed payments.</p> <p>Eventually, and usually before the seven-year wait for foreclosures to fall off your credit reports, you will again be able to qualify for auto loans, credit cards, and other loans as long as you show that you are now managing your finances responsibly and paying your bills on time.</p> <p>See also: <a href="http://www.wisebread.com/what-are-secured-credit-cards?ref=seealso">Sign Up for a Secured Credit Card to Raise Your Score</a></p> <p>&quot;If you have had a foreclosure, accept responsibility, pick yourself up, and move on with your life,&quot; Crowe said. &quot;It is not the end of the world. What you must do from this point forward is to pay every creditor on time.&quot;</p> <p><em>Have you gone through a foreclosure? What steps did you take to repair your credit?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-money-moves-to-make-for-tomorrows-mortgage">6 Money Moves to Make for Tomorrow&#039;s Mortgage</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-it-makes-sense-to-apply-for-a-mortgage-loan-without-your-spouse">When It Makes Sense to Apply for a Mortgage Loan Without Your Spouse</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-an-fha-home-loan-right-for-you">Is an FHA Home Loan Right for You?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit reports credit scores FHA fico foreclosures loans mortgages Mon, 22 Feb 2016 10:30:22 +0000 Dan Rafter 1656523 at http://www.wisebread.com 8 Signs You've Crossed From "Healthy" Debt to "Problem" Debt http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-signs-youve-crossed-from-healthy-debt-to-problem-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_tied_up_000012430983.jpg" alt="Learning signs you&#039;ve crossed from healthy debt to problem debt" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We here at Wise Bread generally preach that all debt is bad &mdash; but there is such a thing as a healthy level of debt. Most people can get by with a modest amount of debt, especially if it's for constructive things like college or a mortgage, which can help you build wealth long term. Debt becomes a problem, however, when it reaches a certain magnitude or is wrapped up in credit cards or other unnecessary, high-interest loans.</p> <p>Here are some signs your debt level has crossed from healthy to problematic.</p> <h2>1. Your Debt-to-Equity Ratio Is Holding You Back</h2> <p>Lenders, especially those offering mortgage loans, will often evaluate loan candidates based on a measure of debt versus income. People with a higher ratio of debt to equity are often denied the ability to borrow more. It's very difficult to get a mortgage loan if your debt-to-equity ratio is above 40%, and many lenders shy away from anything above 30%. People with high ratios are considered less likely to have the ability to repay money they owe. If you find that banks and other lenders are turning you down, it's time to reduce your debt load.</p> <h2>2. Your Debt Is Not in Student Loans or a Mortgage</h2> <p>It's debatable whether there is such a thing as &quot;good&quot; debt, but at the very least, student loans and mortgages can play a role in building wealth over the long term. Credit cards, however, are often what you use to buy &quot;stuff&quot; &mdash; clothes, gadgets, and other items that accumulate in your life and don't build any real value. If you have a <a href="http://www.wisebread.com/5-tricks-to-consolidating-your-debt-and-saving-money">mountain of debt</a>, and most of it is the result of consumer spending, it's time to recognize that you have a problem.</p> <h2>3. Your Credit Score Is Sinking</h2> <p>Having <em>some </em>amount of debt isn't going to kill your credit score. In fact, it can help it, as long as you've consistently shown you can pay in full. But there's a point at which debt can be too high for credit bureaus to view positively. Order a copy of your credit report &mdash; you can get a copy from each bureau for free once a year &mdash; and check your score. A score above 700 means you're doing well. But lower scores could negatively impact the interest rate if you borrow for a home, a car, or other need. A score that's too low could make it impossible for you to borrow at all. (See also:&nbsp;<a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score?ref=seealso">10 Surprising Ways to Negatively Affect Your Credit Score</a>)</p> <h2>4. You're Maxing Out Those Credit Cards</h2> <p>When you are finding yourself increasingly in the hole due to credit card borrowing, that's a bad sign. Interest rates on credit cards are often very high, so if you can't pay off the balance in full each month, your debt problem only grows. Credit cards have borrowing limits, and you should rarely come close to hitting them. If you're hitting those limits &mdash; or even worse, opening new credit cards to allow for more spending &mdash; that's a sign that your debt problem is severe.</p> <h2>5. You're Not Paying on Time</h2> <p>You can have debt and maintain a solid credit score, as long as you pay your bills when they are due. People see their credit scores decline when they begin paying bills late. <a href="http://www.tkqlhce.com/click-2822544-10809829-1284618439000?sid=lemke-1658760">Credit Karma</a> reports that for people with with fair to excellent credit scores (600 or above), the on-time payment rate was more than 95%. But that dipped to 75% for those with scores between 500 and 599, and 60% for those with scores under 500.</p> <h2>6. You've Considered Ignoring Important Bills</h2> <p>I once had a friend who was struggling with debt to the point that he would consider pushing back or even blowing off payment of his rent, utilities, and other key bills. His feeling was that as long as he wasn't evicted and the lights stayed on, he'd be able to manage. But this is living on the edge and a sign your debt level is absolutely unhealthy.</p> <h2>7. You Have No Emergency Fund</h2> <p>If debt has you stretched so thin that you can't save anything for a rainy day, that's a problem. You may feel like you're getting by okay, but all it takes is one dead heat pump, one surprise medical emergency, or a blown car engine for you to face true financial hardship.</p> <h2>8. It's Hurting Your Relationships</h2> <p>Couples argue about money frequently, even when they're financially stable and have money in the bank. But the carriage of heavy debt can lead to serious strain between your loved ones. If you're constantly arguing about the level of debt that you have, it's not healthy and bears paying down.</p> <p><em>Do you recognize yourself in any of these signs of unhealthy debt?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-times-when-its-okay-to-take-a-loan">6 Times When It&#039;s Okay to Take a Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-ever-okay-to-cosign-a-loan">Is It Ever Okay to Cosign a Loan?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-these-4-important-questions-before-signing-any-loan">Ask These 4 Important Questions Before Signing Any Loan</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-is-that-loan-too-big-for-your-wallet">Stop! Is That Loan Too Big For Your Wallet?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-paying-off-student-loans-early-can-boost-your-finances">7 Ways Paying Off Student Loans Early Can Boost Your Finances</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management borrowing credit scores emergency funds equity loans overspending Fri, 19 Feb 2016 10:30:30 +0000 Tim Lemke 1658760 at http://www.wisebread.com Speed Past Car Debt With This Simple Timing Trick http://www.wisebread.com/speed-past-car-debt-with-this-simple-timing-trick <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/speed-past-car-debt-with-this-simple-timing-trick" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_new_car_000063781465.jpg" alt="Woman speeding past car debt with simple timing trick" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I like goals that are challenging, but achievable. Accordingly, I set a goal to keep a car for 12 years before burying it. A few decades ago that would have been unrealistic. Thankfully today's vehicles, if properly maintained, can run for 200,000 miles or more.</p> <p>This is good news for the frugal, because it creates an opportunity to be without monthly car payments for years. Even if you're a two-car household, with a little creativity and discipline, you can still eliminate those nasty car payments for years at a time. (See also:&nbsp;<a href="http://www.wisebread.com/7-easy-ways-to-calculate-your-new-car-budget?ref=seealso">7 Easy Ways to Calculate Your New Car Budget</a>)</p> <p>Why is it so important to be vehicle debt-free? Because cars and trucks are bad investments. They lose value. To make matters worse, while their value falls, they also drain your monthly income as you make loan (or worse still, lease) payments along with maintenance and repair expenditures. That's money you could otherwise put to much better use. (More on that later.)</p> <h2>How to Stagger Car Purchases and Minimize Debt</h2> <p>So, how do you minimize the financial damage by staggering purchases? Here's a schedule to consider following (it's the one we follow in our household):</p> <ul> <li>Now through year six: Household member #1 buys a car, takes out a loan, and pays it off in three years.<br /> &nbsp;</li> <li>Year six: Household member #2 buys a car, takes out a loan, and pays it off in three years.<br /> &nbsp;</li> <li>Year 12: Household member #1 replaces 12-year-old car with a new one; takes out a loan and pays it off in three years.<br /> &nbsp;</li> <li>Year 18: Household member #2 replaces 12-year-old care with a new one; takes out a loan and pays it off in three years.<br /> &nbsp;</li> <li>So on and so forth.</li> </ul> <p>This allows you to spread out new car purchases every six years. Because each car is paid off in three years, you never have more than one car payment to make at a given time, and 50% of the time you don't have any. If we assume a loan payment of $400/month, then for each three-year period when you have no payments, you can save $12,000, or $24,000 in a single 12-year cycle.</p> <p>What will you do with that extra cash? Prepay another debt. For example, pay off your unpaid credit card balance. Or maybe a student loan. Doing so frees up even more monthly cash flow. Maybe then you'll have saved enough for a down payment on a house.</p> <p>See where this is going? You're getting ahead financially, big time! And it all started with spreading out and staggering your vehicle purchases.</p> <p>So take financial advantage of advances in automobile technology. Change the oil regularly, free up cash flow, and use it to get farther ahead on other debts.</p> <p>And while you're at it, consider saving up for any future vehicle purchases, thus avoiding car notes, in the first place. By doing so, you'll eventually stop the cycle of car debt altogether.</p> <p><em>How long do you keep a new (or new to you) car before replacing it?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/keith-whelan">Keith Whelan</a> of <a href="http://www.wisebread.com/speed-past-car-debt-with-this-simple-timing-trick">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-easy-ways-to-calculate-your-new-car-budget">7 Easy Ways to Calculate Your New Car Budget</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt">The Fastest Method to Eliminate Credit Card Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-why-you-should-never-buy-a-new-car">3 Reasons Why You Should Never Buy a New Car</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-need-to-know-before-leasing-a-car">What You Need to Know Before Leasing a Car</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-mistakes-everyone-makes-when-buying-their-first-car">7 Money Mistakes Everyone Makes When Buying Their First Car</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Cars and Transportation debt loans new cars pay schedules payment plans staggering Tue, 26 Jan 2016 14:00:03 +0000 Keith Whelan 1642987 at http://www.wisebread.com 6 Important Things You Need to Know About the Housing Market in 2016 http://www.wisebread.com/6-important-things-you-need-to-know-about-the-housing-market-in-2016 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-important-things-you-need-to-know-about-the-housing-market-in-2016" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/housing_market_000074855705.jpg" alt="Learning important changes coming to housing market in 2016" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Buying a home is still part of the American dream.</p> <p>According to a survey from Trulia, 75% of Americans dream of owning a home, up 1% from 2015. This dream is even more pressing among Millennials because 80% of those surveyed would like to buy a home &mdash; and 31% would like to do so by 2018.</p> <p>Whether you're looking to buy a home this year or already own one, there are important factors that will affect your investment. Here are the six important things you need to know about the housing market in 2016.</p> <h2>1. Mortgage Rates Are Staying Low (For Now!)</h2> <p>The Fed's December 2015 interest rate hike had many consumers worried that rock-bottom mortgage rates would finally come to an end. However, the economic events of the first two weeks of 2016 show that low mortgage rates will stick around for a bit longer.</p> <p>Given the lackluster performance of the stock market, many investors are buying bonds and driving down the yields of these investment vehicles. This is great news for those looking for a home loan, because the interest rates on 30-year mortgage loans are highly correlated with the yield of the U.S. Treasury 10-year bond. According to data from the Federal Reserve Bank of St. Louis, the average 30-year fixed rate mortgage average in the U.S. was <a href="https://research.stlouisfed.org/fred2/series/MORTGAGE30US">3.97% on January 7, 2016</a>, down from 4.1% in December 31, 2015.</p> <h2>2. HARP Refinance Deadline Receives Extension</h2> <p>Many experts expect mortgage interest rates to increase further down the road. Those mortgage holders that haven't been able to refinance to a lower rate yet should think about doing so this year &mdash; especially homeowners that are underwater on their mortgages.</p> <p>As of January 2015, about 700,000 borrowers who owed more than their homes were worth were <a href="http://www.nytimes.com/2015/01/24/your-money/700000-homeowners-could-still-benefit-from-us-harp-refinancing-program.html?_r=0">still eligible to refinance</a> their loans through the HARP program from the Federal Housing Finance Agency (FHFA). HARP was originally set to expire at the end of 2015, but it was extended for an additional year, until the end of 2016.</p> <p>Nearly 3.3 million Americans have benefited from a HARP refinance to lower their monthly payments on their mortgages. The five basic requirements to qualify for a HARP refinance are:</p> <ul> <li>Loan was originated on or before May 31, 2009.<br /> &nbsp;</li> <li>Property is a primary residence, one-unit second home, or one- to four-unit investment property.<br /> &nbsp;</li> <li>Loan is owned by Freddie Mac or Fannie Mae.<br /> &nbsp;</li> <li>Current loan-to-value ratio must be greater than 80%.<br /> &nbsp;</li> <li>Borrower is current on the mortgage, with no over-30-day late payments in the last six months and no more than one in the past 12 months.</li> </ul> <p>There are still close to 430,000 HARP-eligible loans out there and you can check the <a href="http://harp.gov/Default.aspx?Page=363">eligibility of loans</a> by zip code.</p> <h2>3. Home Prices Are Rising Less Than in Previous Years</h2> <p>One of the <a href="http://www.wisebread.com/8-necessities-that-will-be-cheaper-in-2016">necessities that will be cheaper in 2016</a> is the single-family home. In 2016, the national average price for a single-family home is expected to be 3% higher than last year, a much slower rate of growth than 2015's 5% increase.</p> <p>However, some markets will experience bigger price bumps, such as Sacramento, California with an expected 15% increase, and other markets will experience smaller price bumps, such as Houston, Texas with an expected 1.1% increase.</p> <h2>4. Rent Prices Are Increasing Faster</h2> <p>On the other hand, rent prices are expected to increase sharply. In the third quarter of 2015, U.S. home buyers were spending <a href="http://www.zillow.com/research/q3-2015-mortgage-rent-affordability-11197/">15% of their monthly income</a> on the mortgage payment of a typical home, while U.S. renters were spending 30% of their monthly income on the rent payment of a median-valued property.</p> <p>Higher rent prices will continue to be norm in 2016. According to a survey of more than 500 large U.S. property managers, <a href="http://www.rent.com/blog/2015-rental-market-report/">rental inventory</a> is at the lowest level in over 20 years.</p> <p>A smaller inventory of available units for rent enables landlords to demand higher prices from renters. Of the surveyed property managers, 55% reported to be &quot;less likely to offer concessions or lower rents to fill vacancies&quot; and 68% of them expected to continue raising their rental rates in 2016 by an average of 8%.</p> <h2>5. New FHA Loan Limits Take Effect</h2> <p>On December 9, 2015, the Federal Housing Administration (FHA) announced its new schedule of <a href="http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2015/HUDNo_15-156">loan limits for 2016</a>. FHA home loans allow homebuyers to access financing with a minimum 3.5% down payment of the market value of the property, among other requirements.</p> <p>Given the changes to median house prices in certain metropolitan areas, in 2016 the maximum FHA loan limit is higher in <a href="http://portal.hud.gov/hudportal/documents/huddoc?id=limitsincreasedcy15_cy16.pdf">188 counties</a>. However, the maximum nationwide FHA loan limit remains at $625,500 (here is a <a href="http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/lender/origination/mortgage_limits">list of areas</a> that are at the ceiling or that are considered &quot;high cost.&quot;)</p> <p>On the other hand, in 2016 the minimum FHA loan limit doesn't decrease for any areas in the country.</p> <h2>6. Fannie Mae Loosens Some Requirements</h2> <p>The Federal National Mortgage Association (FNMA), better known as Fannie Mae, is giving Americans a break in 2016. Through its new <a href="https://www.fanniemae.com/singlefamily/homeready">HomeReady mortgage program</a>, Fannie Mae aims to broaden access to home financing to credit-worthy low-to-moderate income borrowers.</p> <p>Some of the <a href="https://www.fanniemae.com/content/fact_sheet/homeready-overview.pdf">loosened requirements</a> from Fannie Mae include:</p> <ul> <li>Borrower isn't required to be a first-time homebuyer;<br /> &nbsp;</li> <li>Down payment can be as low as 3% of property's market value;<br /> &nbsp;</li> <li>Gifts, grants, and cash-on-hand are acceptable funds to cover downpayment and closing costs;<br /> &nbsp;</li> <li>Nontraditional credit is allowed;<br /> &nbsp;</li> <li>Income from non-borrower household members can be counted as part of the debt-to-income ratio of the borrower; and<br /> &nbsp;</li> <li>Underwriting process includes additional flexibilities.</li> </ul> <p>To learn more details about the HomeReady program, call 1-800-7FANNIE (1-800-732-6643) or visit <a href="http://www.fanniemae.com">FannieMae.com</a>.</p> <p><em>Do you expect 2016 to be better for the housing market &mdash; and your plans of owning a home?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/6-important-things-you-need-to-know-about-the-housing-market-in-2016">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit">3 Terrible Things Foreclosure Does to Your Credit</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-your-real-estate-agent-wishes-you-knew">5 Things Your Real Estate Agent Wishes You Knew</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-i-sold-my-house-in-48-hours">How I Sold My House in 48 Hours</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing fannie mae FHA HARP housing market loans mortgage rates rent Thu, 21 Jan 2016 14:00:03 +0000 Damian Davila 1642416 at http://www.wisebread.com Ask These 4 Important Questions Before Signing Any Loan http://www.wisebread.com/ask-these-4-important-questions-before-signing-any-loan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/ask-these-4-important-questions-before-signing-any-loan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_with_papers_000021456485.jpg" alt="Woman asking important questions before signing any loan" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're ready to apply for that big loan, whether it's a mortgage for a new house, student loans to pay for your college education, or a way to finance your first new car. But the debt you take on will be with you for years in the form of regular monthly payments. How can you be certain that you're ready for this financial commitment?</p> <p>Financial experts say it's normal to be nervous before taking on a new loan, no matter what it's for. Still, you can ease some anxiety by asking the right questions before taking on your new responsibility. What you learn might surprise you &mdash; and help you decide whether that loan is really what you need.&nbsp;</p> <h2>1. How Much Do I Really Need to Borrow?</h2> <p>Before applying for any new loan, determine how much you <em>really </em>need to spend. Many times, lenders might offer you the option to take out a larger loan than you actually need. If you're taking out a mortgage, for instance, you might be able to take out a loan for more than what the home is worth, and then use the extra dollars to pay for improvements to the property. (See also:&nbsp;<a href="http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home">Ask Yourself These 5 Questions Before Buying a Home</a>)</p> <p>But Andrew Josuweit, chief executive officer of Student Loan Hero, warns borrowers to only take out loans for what they really need.</p> <p>&quot;It can be tempting to take on a larger loan than necessary and have some extra play money,&quot; Josuweit said. &quot;But that extra play money will end up costing you down the line. The larger the loan, the more interest you will pay. Only borrow what you need to avoid paying thousands of dollars in additional interest charges.&quot;</p> <h2>2. Can I Afford My Monthly Payment?</h2> <p>This is the most important question of all: Can you afford to make your monthly payments after taking out a loan? If not, whatever you are borrowing money for will seem like a burden, not a pleasure.</p> <p>A rule of thumb for determining whether a monthly loan payment is in your budget is to calculate your gross monthly income &mdash; your income before taxes are taken out &mdash; and your total monthly housing expenses, including whatever your new loan payment will be. You'll want your housing expenses to total 36% or less of your gross monthly income.</p> <h2>3. How Much Will My Loan Cost Me on Closing Day?</h2> <p>It's also important to determine whether you can afford the closing costs associated with your actual loan. Some loans come with high upfront fees. David Hosterman, branch manager with Castle &amp; Cook Mortgage in Greenwood Village, Colorado, says this is especially true with a mortgage loan. Closing costs for such loans &mdash; everything from property taxes to underwriting fees &mdash; can run thousands of dollars. Can you come up with the money to pay for these, or will you have to roll these costs into your loan, increasing your monthly payment?</p> <p>&quot;Such items as taxes, insurance, and mortgage insurance can have a major impact on a customer's payment,&quot; Hosterman said. &quot;Customers need to make sure these items are explained to them and that the information is provided to them so they can have a clear picture as to what the total payment on the loan would be.&quot;</p> <h2>4. How Much Does This Loan Cost Each Year?</h2> <p>When shopping for loans, consumers too often focus on only the interest rate. This number is important, of course, but what's even more important is something called the annual percentage rate, or APR.</p> <p>This figure tells you how much your loan will cost &mdash; including fees &mdash; over the course of one year, and is a more accurate measure of how much you're really spending on your loan.</p> <p>&quot;APR is the holy grail of loan cost,&quot; said Priyanka Prakash, finance specialist at FitBiz Loans. &quot;You should never commit to a loan without knowing the APR.&quot;</p> <p>Anthony VanDyke, president of ALV Mortgage in Salt Lake City, gives a good example of how important APR is. Say you are taking out a 60-month auto loan for $10,000 and are offered either a loan with an interest rate of 5% and $500 in upfront fees, or one with an interest rate of 7% and no fees. Which loan is better?</p> <p>This isn't easy to discover without knowing the APR. But if you do know the APR, you'll know that the second loan, despite its higher interest rate, is actually cheaper over its lifespan. The first loan choice comes with an APR of 7.124%, while the second loan comes with an APR of just 7%.</p> <p>&quot;The loan with the highest interest rate is actually the cheapest loan option, but most people see the lower interest rate and unwisely choose option A,&quot; VanDyke said.</p> <p><em>Have you borrowed recently? What questions did you ask before signing the paperwork?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/ask-these-4-important-questions-before-signing-any-loan">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-14"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">8 Signs You&#039;ve Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; Debt</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-times-when-its-okay-to-take-a-loan">6 Times When It&#039;s Okay to Take a Loan</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-ever-okay-to-cosign-a-loan">Is It Ever Okay to Cosign a Loan?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-paying-off-student-loans-early-can-boost-your-finances">7 Ways Paying Off Student Loans Early Can Boost Your Finances</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-loan-options-for-those-with-good-credit">5 Loan Options for Those With Good Credit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management affordability borrowing loans monthly payments questions to ask Mon, 18 Jan 2016 14:00:03 +0000 Dan Rafter 1638137 at http://www.wisebread.com 6 Smart Auto Finance Options http://www.wisebread.com/6-smart-auto-finance-options <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-smart-auto-finance-options" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/buying_new_car_000033988744.jpg" alt="Learning smart auto finance options" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Finding the right auto financing is one of the most important parts of the car buying process. But how do you figure out which option is right for you? We've come up with some general guidelines to help you find the best financing for your budget, credit, and personal needs. (See also: <a href="http://www.wisebread.com/17-things-car-salesmen-dont-want-you-to-know?ref=seealso">17 Things Car Salesmen Don't Want You to Know</a>)</p> <h2>1. Direct Lending Options</h2> <p>Some of the best sources for direct lending include banks, credit unions, and private online dealers. You may want to start your search with any bank or credit union that you already have a relationship with. If you have good history with them, they will likely have special offers on auto financing. If you receive offers from private online lenders or dealerships that you aren't familiar with, make sure to look them up on the Better Business Bureau to ensure they are reputable.</p> <p>When you get a loan directly from a bank or credit union, you may have more flexibility with the dealership. They might work harder to beat the deal you have and offer even better rates. By having an auto financing deal set up before you visit the dealership, you can focus on getting the best price for your new car and the highest price for your trade-in, rather than having to worry about haggling for better financing offers.</p> <h2>2. Benefits of Going With the Dealership</h2> <p>According to the Center for Responsible Lending, eight out of 10 car buyers choose to finance with the dealership. That's partially because choosing the dealership's financing can provide more than just a better APR. For instance, it will be easier for you to negotiate a lower price if you are also working with the dealership on financing. Your business will be even more important to them, so they may be willing to work with you on the total cost of the vehicle, or even throw in some free upgrades.</p> <p>It is often easier to get approved for a loan through a car dealer. However, they don't always have the best rates available, so you may save more with direct lending through a bank or credit union. Before you head into the dealership, it's helpful to have another financing offer in hand. Even if you choose to go with the dealership's financing, you'll have a rate for them to beat.</p> <p>The dealer may be able to offer special manufacturer incentives, such as lower APR, no down payment offers, or cash back. You may also be able to negotiate the APR, loan term, or monthly payment. Even if you do decide to finance with your dealership, going in empty-handed will make you an easy target.</p> <h2>3. Know What You Can Afford</h2> <p>When comparing auto financing offers, there are certain things you will want to take note of, including:</p> <ul> <li>Annual percentage rate (APR): A lower rate will save you more money.<br /> &nbsp;</li> <li>Loan term: A shorter term means higher monthly payments, but less interest paid overall, and possibly a lower APR. Most dealerships offer loan terms between 36&ndash;60 months.<br /> &nbsp;</li> <li>Down payment: The higher your down payment, the shorter your loan term will be, and you may possibly enjoy a lower APR.<br /> &nbsp;</li> <li>Monthly payment: This will be affected by the APR, loan term, and down payment.</li> </ul> <p>Keep in mind that determinants like the length of the loan term and how much of a down payment you can afford will change your monthly payment and the APR. For instance, if you can put down a larger down payment or pay off the loan faster, the interest rate will likely go down.</p> <h2>4. Know Your Credit Standing</h2> <p>Your credit is a huge determining factor of how good a financing offer you will receive. If you aren't sure of what your credit is looking like, visit AnnualCreditReport.com for your free credit report. If you notice any errors, make sure to have them corrected before you apply for auto financing.</p> <p>If you have bad credit or no credit at all, there are still loan options available to you. However, you may not be eligible for favorable rates or loan terms. If you need a car now, consider getting the best loan available to you at the moment and then refinance it in the future when your credit has improved. You might also consider applying with a co-signer.</p> <h2>5. Shop Around</h2> <p>Don't settle for the first offer you find. In fact, you should have at least three offers in hand before visiting a dealer. Make sure you have done your homework and compared various offers before stepping foot into the dealership. This will give you more bargaining power and a greater understanding of what to expect.</p> <h2>6. Lease It</h2> <p>When all else fails, you can lease. This is similar to a long-term rental agreement. This is a great option if you aren't concerned about owning a car, or if you like to frequently upgrade your vehicle.</p> <p>You will receive various leasing offers from the dealership based on your credit and ideal loan term. Be sure to consider the number of months and miles that you need the vehicle for. At the end of the lease agreement, you may be able to buy the vehicle at an agreed-upon discounted price, or you can simply return it and pay any remaining fees.</p> <p><em>Do you have other tips for finding the right auto financing offers? Please share your thoughts in the comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/6-smart-auto-finance-options">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-easy-ways-to-calculate-your-new-car-budget">7 Easy Ways to Calculate Your New Car Budget</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/17-things-car-salesmen-dont-want-you-to-know">17 Things Car Salesmen Don&#039;t Want You to Know</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-buy-a-used-car-without-getting-ripped-off">How to Buy a Used Car Without Getting Ripped Off</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-used-car-salesman-reveals-dirty-tricks-and-how-to-beat-them">A Used Car Salesman Reveals Dirty Tricks (and How to Beat Them)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-need-to-know-before-leasing-a-car">What You Need to Know Before Leasing a Car</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Cars and Transportation auto financing car dealerships credit leasing loans price comparisons Tue, 22 Dec 2015 22:00:04 +0000 Andrea Cannon 1621621 at http://www.wisebread.com This Is How Much the Fed's Interest Rate Hike Might Cost You http://www.wisebread.com/this-is-how-much-the-feds-interest-rate-hike-might-cost-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-is-how-much-the-feds-interest-rate-hike-might-cost-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_interest_rates_000058699918.jpg" alt="Woman learning how much the fed&#039;s interest rate hike might cost her" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>As expected, the Federal Reserve raised its benchmark interest rate today, <a href="http://www.bloomberg.com/news/articles/2015-12-16/fed-ends-zero-rate-era-signals-4-quarter-point-2016-increases">ever so slightly</a>, for the first time since 2006, before the economy crashed in 2008. The Fed hasn't done this since the economic meltdown largely to encourage consumers to continue to borrow, even as the economy struggled.</p> <p>Consumers who needed to borrow money for cars or homes, for instance, enjoyed historically low interest rates. Now that the Fed has boosted its federal fund rate, those low rates will rise, at least by a little. Consider mortgage interest rates. The Freddie Mac Primary Mortgage Market Survey in early December found that the average interest rate on a 30-year fixed-rate mortgage loan stood at 3.93%. This rate was an even lower 3.16% for 15-year fixed-rate loans.</p> <p>These are historically low rates. Before the economic crash, interest rates of 6% or 7% on 30-year fixed-rate mortgage loans were considered good. This is likely going to pain many borrowers who have little experience with a world in which interest rates are higher, said Michael Brady, president of Generosity Wealth Management in Boulder, Colorado.</p> <p>&quot;There is a whole generation of borrowers who think that these low interest rates are the norm,&quot; Brady said. &quot;They don't understand what these rates used to be like. We have become used to interest rates decreasing. We will have to adjust our way of thinking about rates.&quot;</p> <h2>Mortgage Interest Rates to Rise?</h2> <p>The higher mortgage rates that will come after the Fed rate hike will make life more expensive for borrowers. Even a small increase in mortgage rates can make a significant impact in your monthly mortgage payment.</p> <p>Say you take out a $200,000 30-year fixed-rate mortgage loan today with an interest rate of 3.9%. Your total monthly payment will be about $943, not including what you'd pay for property taxes and homeowners insurance.</p> <p>But if the interest rate on that same loan jumps to 4.7%, your monthly payment &mdash; again not including taxes or insurance &mdash; will rise to about $1,037. That's a difference of about $94 every month, or about $1,100 a year.</p> <p>The higher interest rates might also make it more difficult for you to qualify for a home loan. That's because higher rates equal higher monthly payments. You might have to choose a smaller home than you would have if interest rates didn't jump.</p> <h2>A Hurt on All Borrowers</h2> <p>When Brady says that borrowers will lose when interest rates rise, it's because mortgage loans aren't all that will become more expensive. So will auto loans, personal loans, and small business loans.</p> <p>&quot;When interest rates decrease, the costs to borrow for car loans, credit cards, and mortgages all become cheaper,&quot; Brady said. &quot;Now we are talking about the opposite, so the things we saw get cheaper will become more expensive.&quot;</p> <p>If you want to buy a car, that tiny 1.9% interest rate might soon jump. If you want to expand your small business and you need a loan to do so? Expect your monthly loan payments to jump as soon as interest rates rise.</p> <h2>Credit Card Debt Gets Even Worse</h2> <p>It's never a smart idea to carry credit card debt. But once the Fed raises its rate, carrying credit card debt will get even more expensive.</p> <p>Expect the interest rates attached to credit cards, already high, to get even higher. Most consumers today carry cards that come with variable interest rates. These rates can change according to <a href="http://www.wisebread.com/9-reasons-why-the-us-economy-is-kicking-the-worlds-butt">what is happening in the economy</a>. If the Fed raises its rate, credit card providers will boost yours, too.</p> <p>This can be a tough financial blow. Say you have credit card debt of $5,000 at an interest rate of 15.8%, and you make the minimum required payment of $200 every month. It will take you 10 years and six months to pay off that debt, if you don't make any new purchases with that card.</p> <p>But if the interest rate on that same debt rises to 21.2%, it will take you 12 years and four months to pay it off.</p> <h2>A Bit of Good News?</h2> <p>It's not all bad news. If you have money saved in CDs or savings accounts, you should see higher returns once the Fed raises its rate. Investing in new bonds and other fixed-income investments will also become more attractive.</p> <p>Since the Fed lowered rates, the interest rates on CDs and savings accounts have been at historic lows. The FDIC reported that the national average rate on savings accounts was a paltry 0.06% as of November 16. Expect that figure to rise &mdash; and the interest you earn on your savings to increase, too &mdash; if the Fed does indeed raise its federal fund rate this December.</p> <p><em>How will you deal with the end of the era of super cheap credit?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/this-is-how-much-the-feds-interest-rate-hike-might-cost-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-fed-raised-rates-then-something-weird-happened">The Fed Raised Rates — Then Something Weird Happened</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/best-of-personal-finance-credit-where-credit-is-due-edition">Best of Personal Finance: Credit Where Credit Is Due Edition</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-the-best-way-to-get-out-of-debt">What&#039;s the Best Way to Get out of Debt?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-financial-moves-you-will-always-regret">9 Financial Moves You Will Always Regret</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-10-biggest-lies-we-tell-ourselves-about-money">The 10 Biggest Lies We Tell Ourselves About Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance borrowers debt federal reserve loans raise interest rates the fed Wed, 16 Dec 2015 22:00:05 +0000 Dan Rafter 1619704 at http://www.wisebread.com 6 Things You Should Never Do When Applying for a Credit Card http://www.wisebread.com/6-things-you-should-never-do-when-applying-for-a-credit-card <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-things-you-should-never-do-when-applying-for-a-credit-card" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_holding_credit_cards_000034382550.jpg" alt="Woman learning things to never do when applying for credit card" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're ready to move up to a better credit card, one with a <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards">lower interest rate</a> and a generous rewards program. (See also: <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards">Best Travel Rewards Cards</a>)</p> <p>But how do you boost your chances of actually qualifying for one of these credit cards?</p> <p>Here are six mistakes to avoid if you want banks to approve you for new credit.</p> <h2>1. Make a Late Payment</h2> <p>Don't ever pay a bill late if you want a new credit card. Every late payment will cause your credit score to fall, often by as much as 100 points. They will also remain on your credit reports &mdash; you have three, one each maintained by the national credit bureaus Experian, Equifax, and TransUnion &mdash; for seven years.</p> <p>Don't panic, though, if you're a day late on a credit card payment, auto loan payment, or mortgage payment. Late payments usually aren't &quot;officially&quot; late until they are at least 30 days past due. Most lenders won't report late payments to the credit bureaus before you hit that 30-day mark.</p> <p>The lesson is clear, though: Do not let a late payment linger. Credit card providers will take a long look at your credit score and credit reports. A late payment can make you look irresponsible.</p> <h2>2. Run Up the Balances on Your Other Credit Cards</h2> <p>If you use too much of your available credit, your three-digit credit score can take a tumble, making it less likely that financial institutions will approve you for a new credit card.</p> <p>If you have three credit cards with a total available credit limit of $20,000 and you owe charges for a total of $18,000, you are using far too much of your available credit &mdash; giving you a dangerously high credit-utilization ratio. The providers of credit cards generally want to see your credit-utilization ratio at 35% or lower.</p> <h2>3. Cancel Your Other Cards</h2> <p>Along the same lines, it's never a good idea to cancel existing cards (even if you have no balances on them) when applying for a new credit card. Again, this goes back to your credit-utilization ratio. If you cancel a card that you're not using, you will automatically lower this ratio.</p> <p>Say you have four credit cards with a total available credit of $30,000, and you have $5,000 worth of charges spread across three of those cards. Say, too, that your fourth credit card, which has no balance, has $10,000 worth of available credit. If you close that card, you now have $5,000 worth of charges against just $20,000 of available credit &mdash; a less attractive credit-utilization ratio in the eyes of credit providers.</p> <h2>4. Apply for Too Many Credit Cards at Once</h2> <p>You might think it makes sense to apply for several credit cards at once. You can then pick and choose from the resulting offers to find the card with the strongest rewards program and lowest interest rate.</p> <p>But applying for five, six, or more credit cards at once could actually cause providers to consider you too much of a risk.</p> <p>When they pull your credit, providers will see the recent credit inquiries made by other financial institutions. When they see several inquiries all at once, that raises their suspicions. Are you shopping for the card with the best interest rate or are you applying for scads of new credit because you are struggling financially? You never want to give credit card providers a reason to wonder about your motives.</p> <h2>5. Co-Sign on a Loan</h2> <p>You might think of co-signing on a child's car loan as a nice thing to do. But doing so can trash your credit score, and ruin your chances of qualifying for a credit card.</p> <p>If the person who takes out the loan defaults on its payments, it will damage your score. That's because when you co-sign, you are telling a lender that you agree to be responsible for the loan, too.</p> <p>The lender behind the loan will also come after you if the primary borrower stops making payments. That's bad, too. But when it comes to applying for a credit card, the damage that a co-borrower can do to your credit score is the bigger problem.</p> <h2>6. Skip Ordering Your Credit Reports</h2> <p>There is no reason not to check your three credit reports for errors before you apply for a credit card. You can order one free copy of each of your three reports once a year from AnnualCreditReport.org.</p> <p>Doing so is important. Your credit report could contain errors. Maybe it lists a late auto loan payment when you know you've always paid your car bill on time. Or maybe it lists a Chapter 13 bankruptcy on your report that should have dropped off it years ago.</p> <p>These mistakes can cause your credit score to drop, and lower your chances of qualifying for a new credit card. If you do spot errors on your report, contact the offending credit bureaus by email. Ignoring mistakes can consign you to a lower credit score than you deserve.</p> <p>Looking for a great cash back credit card? Here are our favorite cards for getting you the <a href="http://www.wisebread.com/5-best-cash-back-credit-cards">most cash back rewards</a>.</p> <p><em>How are you keeping your credit in good shape?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/6-things-you-should-never-do-when-applying-for-a-credit-card">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-strategies-to-wipe-out-your-credit-card-balance">5 Strategies To Wipe Out Your Credit Card Balance</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/worried-about-debt-tips-on-managing-your-loans">Worried About Debt? Tips On Managing Your Loans</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/could-you-determine-someones-creditworthiness-by-his-or-her-looks">Could you determine someone&#039;s creditworthiness by his or her looks?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-the-best-way-to-get-out-of-debt">What&#039;s the Best Way to Get out of Debt?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-expect-when-youre-expecting-a-huge-credit-card-bill">What to Expect When You&#039;re Expecting a Huge Credit Card Bill</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards bills co-signing credit late payments loans Mon, 30 Nov 2015 12:01:30 +0000 Dan Rafter 1616757 at http://www.wisebread.com Is It Ever Okay to Cosign a Loan? http://www.wisebread.com/is-it-ever-okay-to-cosign-a-loan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-it-ever-okay-to-cosign-a-loan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_signing_documents_000029589200.jpg" alt="Man learning if it&#039;s ever okay to cosign a loan" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Cosigning a loan is, generally speaking, a bad idea. That's because you place your own credit at risk and could be responsible for the entire amount of the loan if the other party fails to pay. There are horror stories aplenty of people who cosigned loans for friends or family members &mdash; or even just acquaintances &mdash; and found themselves in debt and with their credit ruined.</p> <p>But there may be cases where placing your name on another person's loan is acceptable, provided that you're clear on the risks. It's not uncommon for parents to cosign loans for children as they look to get established, for instance. Ultimately, cosigning a loan is a personal choice, but it's important to be aware of the downsides.</p> <p>With those words of warning out of the way, here are some times when cosigning a loan may be okay:</p> <h2>1. If You Think of the Loan as a Gift</h2> <p>It's often said that if you lend a friend or relative $500, just treat the $500 as simply a gift. If you're comfortable giving the money away, then lending it is okay, because you won't worry about getting the cash back. Similarly, when cosigning a loan, operate under the assumption that you will be the one paying whatever is owed &mdash; because you might very well end up the person on the hook. If you're comfortable with this, then go ahead and cosign.</p> <h2>2. If It's for a Child's Education</h2> <p>Student loans can be hugely beneficial to a young person, and parents may feel compelled to help children obtain the necessary financing for higher education. You may feel it's worth the risk to help your child in this way, and you may not even mind helping your <a href="http://www.wisebread.com/how-to-financially-educate-your-children">child pay the loans back</a> later. (It may be better, however, to simply help them pay through a 529 plan or similar savings if you can.) If you feel strongly about a child's educational funding needs, cosigning a student loan can be wise &mdash; provided you believe the child understands the responsibility of repayment.</p> <h2>3. If You're Helping a Family Member Build Credit</h2> <p>When you're young, building credit can be a bit of a chicken or egg problem. You can't build credit until you show you're able to pay back loans, but it's hard to get a loan without a credit history. Cosigning a loan for a young person can help them gain financial independence over time.</p> <h2>4. If You're Helping a Loved One Buy a Car So They Can Work</h2> <p>It's often hard for young people to land a good job if they don't have reliable transportation. But they may not have the means or credit history to purchase a car. Cosigning a car loan for this person could make it easier to land that job and earn income of their own. Just make sure the car they buy is affordable; borrowers shouldn't assume monthly payments disproportionate to their income. And frankly, you shouldn't cosign a loan you can't afford, either.</p> <h2>5. To Help a Family Member Secure Safe Housing</h2> <p>I once had a friend who graduated from college and moved to a new city, but wasn't earning a lot of money right away. It was hard for her to secure an apartment in a safe neighborhood because she didn't have much income, credit history, or savings. Ultimately, her father was willing to cosign an apartment lease to ensure she could live in a nicer building. Her dad took a risk, but he rested easier knowing his daughter was comfortable in her new city.</p> <h2>6. If You Know You Won't Need a Loan for Yourself Anytime Soon</h2> <p>When you cosign a loan, you put your own credit score at risk. But this only matters if you plan to borrow money in the future. If you have plenty of money in the bank and own your home and car free and clear, a ding on your credit may not impact you very much. Just be sure you have an emergency fund in place to protect against job loss, disability, and other unexpected problems.</p> <h2>7. If You've Agreed With the Lender to Certain Protections</h2> <p>It is sometimes possible to negotiate certain conditions with a lender when cosigning. For instance, you can insist that you be notified immediately if there are any late payments. This gives you a chance to intervene before the tardiness shows up on your credit history. You may also be able to get the lender to agree that you will only be responsible for the principal of the loan.</p> <h2>8. If It's for a Short Term</h2> <p>There may be ways to remove yourself as a cosigner after a time. For instance, you could ask to have your name taken off when a borrower chooses to refinance a home loan. If you are a cosigner on a credit card, you could have the borrower apply for new credit cards under his or her name only, then close the old accounts. If you can, it makes sense to try and remove yourself as a cosigner after 12 months or so, when a borrower presumably has the credit to stand on their own.</p> <p><em>Have you ever cosigned a loan? How'd it go?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/is-it-ever-okay-to-cosign-a-loan">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-paying-off-student-loans-early-can-boost-your-finances">7 Ways Paying Off Student Loans Early Can Boost Your Finances</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youve-crossed-from-healthy-debt-to-problem-debt">8 Signs You&#039;ve Crossed From &quot;Healthy&quot; Debt to &quot;Problem&quot; Debt</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-refinance-your-student-loan">Should You Refinance Your Student Loan?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-times-when-its-okay-to-take-a-loan">6 Times When It&#039;s Okay to Take a Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management borrowing cosigning credit history giving money loans student loans Mon, 23 Nov 2015 18:00:03 +0000 Tim Lemke 1615573 at http://www.wisebread.com 3 Times a Refinance Is the Wrong Move http://www.wisebread.com/3-times-a-refinance-is-the-wrong-move <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-times-a-refinance-is-the-wrong-move" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000041245128.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It seems that everyone &mdash; your neighbor, brother-in-law, boss &mdash; has a lower interest rate on their mortgage loan than you do. And that's probably not surprising, given that mortgage rates have fallen to historic lows, with rates in the mid to high 3% range for 30-year, fixed-rate loans.</p> <p>That means it's <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance">time for you to refinance</a>, right? Not necessarily.</p> <p>A refinance doesn't always make sense, even if it will reduce your interest rate by more than a point. Several factors play a role in whether a refinance is the right choice: the cost of refinancing in your area, your current interest rate, the amount of time you plan to spend in your home, and how much of your existing mortgage you've already paid off.</p> <p>Too many homeowners, though, only pay attention to how much their rate might drop. Peter Grabel, managing director with Luxury Mortgage Corp. in Stamford, Connecticut, says that this is the wrong approach.</p> <p>&quot;Deciding whether to go ahead with a refinance requires not just an analysis of how much you might save each month, but also a look at your entire life,&quot; Grabel said. &quot;You need to look at your age, your income, your future plans. You need to take on a real study of your life and your goals before deciding whether refinancing makes sense.&quot;</p> <p>Here are three times when a refinance might not be the smart choice.</p> <h2>1. Your Rate Won't Drop Enough to Recover Refi Costs</h2> <p>Refinances aren't free. The Federal Reserve Board estimates that a refinance can cost 3% to 6% of your loan's outstanding balance in closing costs. If your rate doesn't drop by enough, you might not save enough money each month to recover these closing costs for four years or more.</p> <p>Consider this example: You are paying off a $200,000 30-year, fixed-rate mortgage at an interest rate of 4.5%. Your monthly payment at this rate will be about $1,013, not including whatever you pay for insurance and property taxes.</p> <p>You decide to refinance. When you approach a lender, you have a remaining balance on your loan of $190,000. You qualify for an interest rate of 4% for your new 30-year, fixed-rate mortgage. At that rate, your monthly payment will fall to about $907, again not including insurance and taxes. You'll be saving about $106 a month, or about $1,275 a year.</p> <p>But say your refinance costs 3% of your outstanding loan balance of $190,000. That comes out to $5,700 in closing costs. At $1,275 in savings a year, it will take you nearly four-and-a-half years to pay back the costs of the transaction.</p> <p>And remember, that's at the low end of the Federal Reserve Board's estimate when it comes to refinancing costs. Grabel said that homeowners pay different refinancing costs in different parts of the country. So you might pay more to close your refinance, which would mean an even longer payback time.</p> <p>If your payback time is too long? A refinance might not make sense. Especially if...</p> <h2>2. You Plan to Move Soon</h2> <p>Refinancing makes more sense for owners who plan to live in their residences for at least five years. These owners plan to stay put long enough to enjoy more months of savings after they've recovered their closing costs.</p> <p>Grabel recently counseled a couple to skip a refinance. Why? The couple was ready to have their second child and expected to move to a larger home in one or two years. Grabel calculated that the break-even point on their refinance would come a year after they closed it. If this couple did move that soon after hitting this point, the costs and the work involved in a refinance &mdash; you'll need plenty of paperwork to close one &mdash; wouldn't be worth it.</p> <h2>3. You're Too Far Into Your Existing Mortgage</h2> <p>Here's what homeowners sometimes don't consider: In the early days of your mortgage loan, most of your monthly payment goes toward paying off interest and little to actually reducing your principal, the amount of money you originally borrowed.</p> <p>But as the years pass, you slowly begin paying off more principal than interest each month. That's a good thing.</p> <p>When you refinance, though, you start over with a new mortgage. This means that most of your monthly payments will again go toward paying off interest instead of paying down your principal balance.</p> <p>Starting over might not matter much when you've only been paying off your loan for a year or two. But if you're eight, 10, or 15 years into your loan? Starting over means that you'll be paying much more interest over the lifetime of your new loan.</p> <p>You'll also reach the end of your loan later in life. Say you refinance to a new 30-year, fixed-rate mortgage when you are 35. If you take the full three decades to pay off this new loan, you'll be 65 before you make your last payment.</p> <p>This is why Grabel recommends that homeowners who have paid off a significant portion of their existing mortgages take out new loans with shorter terms. Instead of taking out a 30-year mortgage, it might make more sense to refinance to a 15-year or 20-year loan. This way, you'll pay off your loan faster and you won't pay as much interest over the life of your loan.</p> <p>Again, though, the decision requires an in-depth look at your own financial goals.</p> <p>&quot;Maybe cash flow is an issue,&quot; Grabel said. &quot;Then you'd want to refinance to the loan that gives you the lowest monthly payment. That'd usually be a 30-year loan. But if you are more interested in the lifetime costs of your mortgage, then going with a shorter-term loan that doesn't come with as much interest is the way to go.&quot;</p> <p><em>Have you re-fied lately? What was your break even?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/3-times-a-refinance-is-the-wrong-move">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/choosing-the-right-mortgage-loan-15-or-30-years">Choosing the Right Mortgage Loan: 15 or 30 Years?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-secrets-to-refinancing-an-underwater-mortgage">7 Secrets to Refinancing an Underwater Mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing equity interest rates loans mortgage owning a home refinancing Mon, 02 Nov 2015 13:15:15 +0000 Dan Rafter 1603197 at http://www.wisebread.com