Loans

How Wise Are Lengthy Auto Loans?

October 24, 2015 By Twila Van Leer

When you buy a new car with terms stretching five years or even more, what are the financial consequences?

Obviously, you’ll pay more interest. But in the meantime, your earnings likely will grow and the monthly payments will be more affordable. You might be able to increase your payments, erasing the effects of the interest.

Car buyers are increasingly using this tactic to pay for vehicles, which are becoming more expensive all the time. Experian Automotive reports that 30 percent of all new vehicles purchased in the first three months of this year were financed over six to seven years. Sixteen percent of used vehicles, ditto.

Lower interest rates, more extensive manufacturer warranties and the better durability of today’s vehicles make the longer pay-off periods acceptable to many buyers. People today tend to keep a vehicle longer as well, on average about eight years, according to automotive sources.

Before diving into a long-term loan for a car, consider these factors:

Look at overall costs, not just the monthly payment. The salesman on the lot will try to focus your attention on monthly element, but consider total price, down-playing sticker total and interest. Keep in mind that the interest on an auto, unlike mortgage interest, is not tax deductible.

If you can come to the lot with a preapproved financial guarantee in hand, you can negotiate based on total cost and consider the details later. Compare the preapproved amount with the dealer’s offer and then make a decision. An Edmund’s interest rate calculator will provide an honest appraisal of how much you will pay over the term of a six or seven year loan. The calculator can be accessed at http://www.edmunds.com/calculators/simplified-pricing.html

How long do you estimate you will have the vehicle? If you expect that you will have it for some time after it is paid off, you can look forward to a period free of car payments. The trade-off may be more costs for car repairs and upkeep. The amount you can expect for trade-in value also will have declined.

Most experts in the field discourage using a long-term loan to purchase a used vehicle. Suppose your choice of a used vehicle is three years old. If you are still paying on it seven years later, it is 10 years old and for many vehicles, that is approaching the end of its usefulness.

Depreciation is a factor. In the case automobiles, it begins the moment you drive it off the dealer’s lot. If you choose to sell the car in the first few years, you are looking at a loss if depreciation has outstripped the value. And the potential for accidents may enter into the picture. If you total your vehicle when it is three years old, for instance, it’s likely you still owe more on the loan than the vehicle’s current worth. That’s known in the trade as being upside down on the loan.

A long-term loan may be the answer to your desire for a newer, safer car, but don’t leap until you are sure of all the financial facts.

Zero Percent Interest Rates On Car Loans

August 31, 2015 By Twila Van Leer

What could be better? Your new car and no interest to pay for 72 months. But be sure you understand the implications.

A recent J.D. Power Dealer Finance Study said that offering zero percent interest is considered to be one of the most successful motivators to get car buyers into dealerships. The catch is that to qualify for it, the buyer must have an excellent credit rating. Many people don’t qualify for the zero percent interest rate.

For those with less than stellar credit, dealerships arrange financing for your car they often add on 1-2% interest that goes directly into their profits. Although these numbers may seem small, they often add thousands of dollars to the price of your loan.

Before latching onto the no-interest deal, look around. Many car dealers are currently offering cash-back offers that could be the more financially advantageous than the interest-free option. Some car sellers actually offer a choice between a no-interest and cash-back deal. Fiat Chrysler, for instance, will sell you its 2015 Jeep Cherokee SUV for no interest or a $2,000 cash rebate. Experts say the rebate is the better bargain, reducing the loan amount from $27,213 to $25,213. At 2 percent interest, that makes the monthly payment just $440, compared with $452 per month under the zero interest terms.

Car buying is best in the late summer and early fall, when dealers try to clear their lots of the current year’s leftovers. The zero-interest offers are escalating, with many of the producers hoping to snag buyers to help in that process.

The secret to getting in on the best bargains is to nurture your credit rating. A credit score of 754 can probably earn you a 1 percent interest rate. The rates go up as the scores go down. Getting preapproved for a car loan through a bank or credit union enhances your bargaining stance. The dealer is anxious to have you finance through him and may be willing to dicker on the interest issue.

The important thing is to do the math before facing the decision. Factor in your credit score with the understanding that the higher it is, the more likely you will be to get a lower interest rate. There will come a point in the math at which you will find that zero interest actually can lower your payments.

Regional incentive programs, down payments and trade-in values also will affect the bottom line. Remember, too, that zero interest deals usually apply only to certain cars on the lot. If you have something very specific in mind, it may not apply. Once you reach the point at which you qualify for zero interest, the dealer may lose his tendency to haggle. Just be sure before you sign that you have made the best deal possible.

Debt May Outlive A Student. What Then?

October 18, 2014 By Twila Van Leer

Who is responsible for a student's school loan debt if the pass away? — Who is responsible for a student’s school loan debt if the pass away?

Young people are expected to live long enough to pay off student debt, but it happens sometimes that they don’t. Parents or other survivors may find themselves assuming debt for which they are not prepared.

Federal students loans are automatically cancelled upon the death of the recipient, but private lenders are not required to forgive such debt. Seeking relief through bankruptcy is not an option in most cases.

Consider the case of a California couple whose daughter died of liver failure before her education debt was paid. The parents took on the care of three grandchildren and because they cosigned on the private student loan they had to assume the daughter’s debt, which she had acquired to attend nursing school. Over the next five years, the balance ballooned to $200,000 and the lender would not forgive the debt, news outlets reported.

The odds of a 27-year-old dying are less than 1 percent, according to the Commissioners Standard Ordinary Mortality Table, but that is small comfort to the California parents whose loss has been complicated by their daughter’s residual debt.

Outstanding student loan debt in the United States has reached an all-time high of $1.3 trillion. Just to earn a bachelor’s degree, the total in loans is likely to reach almost $30,000, the Project on Student Debt at the Institute for College Access & Success, Oakland, Calif., reported.

Most private student loans require a co-signer. About 90 percent of such loans issued in 2011 had co-signers, the Consumer Financial Protection Bureau reported.

Sallie Mae, the country’s largest private lender, offers a Smart Option Student Loan that automatically forgives the debt if the primary signer dies. This lender also has a provision that lowers the interest rate on a regular loan if the parents or some other credit-worthy co-signer must assume the debt. Loans made before 2009 are not covered by the provision, but Sallie Mae may choose to forgive the debt under particular circumstances.

Attorneys with the National Consumer Law Center, Boston, believe there are too few safeguards for students and co-signers who take out student loans. “Ideally, there should be some kind of relief for borrowers in that situation,” said Persis Yu, a staff attorney with the center. The double-whammy of losing a young person pursuing higher education and then being required to repay student loans is “salt in the wound,” he said.

Yu suggests a life insurance policy on the student is the best option to protect co-signers from the financial pain. A policy covering the amount of the loan would pay the debt in full. That provision would spare people already suffering the loss of a family member the additional burden of financial stress related to student loans. Or you could go the safe route and go for the federal loans. Whichever route you choose, wise planning will help in the long run.

How To Apply For A Government Grant

March 17, 2010 By Sherry Tingley

: Image by Francisco Diez via Flickr

There are many different types of grants. The United States Government offers over 1,000 grants and a total amount of $500 billion dollars is available for these grants. Grants are awarded to people who have demonstrated that there is a public benefit for their project or research.

There are twenty one different categories that government grants fall into. There are environmental grants, educational grants, energy grants and many others. For a full list of the categories, you can go to www.grants.gov.

Grants are available to companies or organizations and to individuals. There are more grants available to organizations than there are to individuals. The government website lists 27 grants for individuals and hundreds of grants available for organizations.

One example of a grant for individuals is offered by the United States National Fish and Wildlife Service. They want to promote interest in conservation, and ecology. There is $5,000,000 available to be awarded for this project and they will give 40 awards out. The highest amount awarded can be up to $500,000 and the lowest amount awarded will be $1,000. So what does this grant require you to do?

They are looking for people interested in natural resource careers and would like to provide individuals with guidance and training by professionals. You will be working in wildlife refuges, fish hatcheries, and ecological services offices as an intern. You will be assigned seasonal work sometime between June 1 and Sept. 30. Award recipients need to be willing to administer a program for identifying and recruiting people for assignments at various stations in the United States.

After you have found a grant that fits your expertise and interest, you will need to go through an online application procedure at www.grants.gov. There are multiple steps involved in applying, however there are videos to help you walk through the entire process.

You first will need to register with the website and then you need to apply for the grant you want. This procedure can take time to do, so plan on several weeks for this process.

Writing a successful grant proposal can be very challenging and competitive. You have several options. One is that you can hire someone to write it for you or you can train yourself to write a good proposal. There are classes you can take that can prepare you for this.

If you are going to write the grant yourself, you will need to summarize your project in two or three paragraphs. You will need to communicate important information about your organization that shows that you can be trusted to use their funds wisely. You’ll need to state what your organization’s track record is with similar achievements. One thing to remember when writing your proposal is to describe the problem you are attempting to solve with the same magnitude as the solution you provide.

Although the procedure for applying is lengthy and requires you to write a very good proposal, you should try your best and see if you qualify. A federal grant could be just what you need.

How to Qualify for a Home Loan

November 14, 2009 By Sherry Tingley

Owning a home has been considered a logical investment, as it gives a sense of security. It is asset than can be passed on to the next generation. With the recent turn in the economy, buying a home is becoming more enticing as property prices are going down. Although this is true, purchasing a home can still be expensive. Obtaining a home loan can help in being able to purchase property.

To apply for a home loan, banks normally check the applicant’s background, whether they have a good, steady job or some other stable source of income. Credit line is also checked, whether the applicant has been responsibly paying his/her debts well. An applicant must also have collateral as financial back up, as an assurance that the applicant will be paying back the loan in full.

Do some research on how much you can ask from lenders. This will give a general idea in figures of how much you can borrow, how much of your income is needed for the down payment as well as for the succeeding payments. Evaluate how much you can afford to spend for the house loan, in consideration with other existing monthly payments. It is recommended that less than a third of the applicant’s monthly income be spent on the payments for the loan and property.

Start saving money for the purchasing of the house before attempting to apply for a home loan. Possible ways of saving for the home loan and property purchase include taking a second job or reducing unnecessary expenses. This initial investment is a good demonstration to the lender of the applicant’s good intent in purchasing a house. There are also other options to be considered in obtaining financial support when purchasing a house such as the Veteran’s Administration loan for veterans. Consult with your real estate agent regarding other financial support options.

As a result of the recent development in the economy, banks are becoming more stringent in assessing applications. However, there are ways of improving chances when applying for a home loan. In order to prepare for qualifying for a home loan, it is recommended that the applicant obtain a copy of their credit report from a qualified agency. There are services which can send a report annually or directly contact the agencies for an immediate copy. Take note of outstanding or unpaid credit, as this is an important aspect that banks check for. Pay back all debts. If this is not completely possible, then make it as low as possible. This is important as it sends a note to the lender of the applicant’s reliability in paying back the loan.

Banks normally ask for collateral as an assurance that the applicant will pay back his/her loan. Other properties in real estate or investments in the stock market are possible sources of collateral.

There are no definite rules that can assure the applicant will obtain the home loan. Loans are approved on a case to case basis. However, following these tips increases the chances of getting the home loan. Do not despair if you are denied a home loan but see it as a sign that there may be areas in your application that need improving.

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