Should You Use a Car-Buying Service?

The last two new cars I’ve bought, I never spoke to a salesman.

I bought my current vehicle in 2004 after emailing every dealer within a 50-mile radius of my house. I haggled via email with a half-dozen of them — probably spending about the same amount of time it would have taken to visit a couple of showrooms.

My car before that, a brand-new 1996 Oldsmobile, was an easier experience. I simply hired a car broker I learned about from a co-worker. The broker called me, asked what I was looking for, discussed prices and options, and went on his merry way. A week later, he found the perfect car at a near-perfect price. He even had it delivered to the parking lot at my office building.

Best I can tell, I saved a couple thousand buying a car online, and slightly less buying a car through a broker. Whether either option is right for you depends on several things.

If you want to try a new way to buy a car, here are six things you need to know first.

1. Not all services are the same

The broker I hired didn’t cost me a dime. He made his money by charging the dealer. (Some brokers charge the customer a fee instead.) Brokers often have close relationships with a handful of dealers in the area who are willing to give them a discounted price because of the volume of sales.

I could’ve gone to a car concierge, who does the same thing. However, concierges generally charge customers a flat fee or a percentage of the savings they generate for the buyer. So what’s the advantage? Generally, a concierge scores deals by casting a wider net. As the name implies, concierges excel at buying luxury or harder-to-find vehicles.

Finally, there are club car-buying services available through membership organizations, such as the AAA Auto Buying Service and the Costco Auto Program. Many credit unions also offer this service, like this one from PenFed. It’s a free perk of membership, but these services are limited to the dealers that sign up with the organization.

Which service you select should depend on the answers to two questions:

  • How is the service paid? If the service is getting paid by the dealership, what gives it the incentive to find you the best possible price?
  • What services are included? Will the contract be ready for your signature? Will the car be delivered to you? Is the service simply introducing you to potential sellers? What else is involved?

2. Try selling your old car on your own

In my case, the car broker offered to include my old car in the deal for a new one. But I quickly figured out I could sell my ancient, no-frills Nissan hatchback on my own for a few hundred more. Then I had a change of heart and let the broker handle the trade-in. Why? Because I was willing to lose some value if I could gain some free time.

Do this math for yourself. If you’re willing to put in the hours, sell your trade-in and pocket the cash. If it’s too much hassle – and if you live in a small town where your customer base may be limited – consider doing what I did.

3. Do your own research

A broker, concierge or buying service can save you legwork, but you still need to do your homework. Spend some time online studying what vehicle you want, with the particular options you both crave and could do without. You want to give the service as much detail as possible.

In my case, the broker said I would save both time and money if I didn’t care what color my Oldsmobile was. So I ended up with a red car, which was fine with me.

4. Line up your financing in advance

In the video above, Stacy was adamant about financing: “Shop it and have it lined up.” He’s right. There’s no point in shopping for a car, or anything else, until you know you have the money to buy it. Shopping for a car before securing the loan is like stepping on the gas before you’re in gear: You may make a lot of noise, but you’re not going anywhere.

5. Ask what happens afterward

What happens if you get a lemon? What if you just don’t like the car when you show up on the lot or it’s delivered to your door?

Also, if you want to keep it maintained by a dealership, where’s the nearest one that services your make?

Besides the potential savings, a major advantage to embracing one of these services is sparing you time and hassle. If you don’t ask these questions up front, you could be facing complications and demands on your time after the sale.

6. Decide what your time is worth

If I had to do it all over again, would I use another broker or buy on my own? At the time I called the broker, I was starting a new job, so it was invaluable to me to have someone else handle the purchase — even worth forgoing a few hundred dollars on the sale of my old car — so I could focus on proving my value at work. And I ended up getting a great deal on the car.

Also, there wasn’t the Internet we have today, so hunting down the best deals on a new car and selling my old car would have been a time-sucking task. By 2004, that situation had changed. If you’re willing to put in the time online, you can save more – especially if you’re buying a popular, mid-priced model that many dealers have stacked on their lots.

As for me, after talking to Stacy Johnson, who’s wealthy and has never bought a new car in his life, I think I’m going to buy “pre-owned” next time.

This post originally appeared on Money Talks News.

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Source: credit.com

Can Your Credit Score Save You Money on a New Car?

Generally, the credit bureaus consider anything over 670 a good credit score.

If your score is 671 or higher, you’re doing fairly well. The best credit score and the highest credit score possible is 850 for both FICO® and VantageScore models. FICO considers a score between 800 and 850 to be “exceptional,” while VantageScore considers a score above 780 to be “excellent.” It’s possible to get an 850 credit score, but it’s tough to achieve.

In This Piece

FICO and VantageScore Credit Score Charts
What Credit Scores Mean
Do Lenders Prefer FICO or VantageScore
What Makes a Good Credit Score
What Else Do Lenders Consider
How to Get Your Credit Scores
How to Improve Your Score


Credit Score Charts for FICO and VantageScore

Credit scores calculated using the FICO or VantageScore 3.0 scoring models range from 300 to 850. Those scores are broken down into five categories, though the breakdowns differ slightly.

For FICO, a good credit score is 670 or higher; a score above 800 is considered exceptional. For VantageScore 3.0, a good score is 661 or higher, and a score of 781 to 850 is excellent.

On the flip side, FICO scores below 670 fall into the fair and poor range, while VantageScore 3.0 scores below 660 are considered fair, poor, or very poor.

FICO and VantageScore aren’t the only credit scoring models. However, they are the most commonly used models and the ones used by the three major credit bureaus: Experian, Equifax, and TransUnion. Some lenders even have their own scoring models. But most lenders and credit card companies use FICO scores or VantageScores.

>> Learn more about how Vantage Score compares to FICO.

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What Do Credit Scores Mean?

The three-digit numbers called credit scores are how the scoring institutions break down your credit profile. That number is calculated based on the information in your credit report at a credit bureau. Each bureau has its own file, which explains why your score might differ from one scoring institution to the next. Your file is a picture of how you’ve used credit to date.

Your score and where it falls tells lenders and credit card issuers how likely you are to pay off a loan, pay off a credit card, make late payments, and default on payments. In other words, it tells them if you’re an acceptable risk and if they should approve you for a loan or credit card.

A low score doesn’t necessarily mean lenders won’t give you a loan or card. Instead, it can mean they do so at a higher interest rate and with inferior loan terms. In other words, to offset the risk you pose, they charge you more interest or a higher annual fee.

For example, if you’re buying a $300,000 house with a 30-year fixed mortgage and you have good credit, you can end up paying around $94,000 less for that house over the life of the loan than if you had bad credit.*

Scores are also used by landlords, cell phone companies, and even employers to check how risky you are.

Do Lenders Prefer a Good VantageScore Score Over a Good FICO Credit Score?

Lenders don’t necessarily prefer one score over the other. It’s likely, though, that a given lender uses only one credit scoring institution.

FICO reports that 90% of the top US lenders use FICO scores when deciding whether to loan money to an applicant. On the other hand, VantageScore states that between July 2018 and June 2019, approximately 12.3 billion VantageScore credit scores were used.

The VantageScore model offers these advantages to lenders and consumers:

  • It was developed by the three major credit bureaus to offer a model across all bureaus that’s more consistent than FICO.
  • It calculates scores for more people by giving a score to people with a shorter credit history.

Both models are consistent enough that knowing where you stand in one gives you a reliable indication of your credit in general.

What Makes a Good Credit Score?

The same primary considerations go into calculating VantageScore credit scores and FICO credit scores:

Payment History

A history of late and missed payments for either scoring model lowers your credit score more than any other factor.

When determining your score, the FICO and VantageScore scoring models look at how recently you missed a payment or were late, how many accounts you were late on, and how many total payments on each account were missing or late.

Credit Utilization Ratio

Your credit utilization ratio is the amount of credit you’ve used divided by your total available credit limit. For example, if you have credit cards with a combined credit limit of $8,000 and balances of $3,000, your credit utilization ratio is 37.5%.

A good credit score requires a credit utilization ratio of 30% or less, although 10% or less is ideal.

Credit Age

Your credit age is how long you’ve used credit. More specifically, the length of your credit history is how long your credit accounts have been reported open, and your credit age is the average of how long all of your accounts have been open.

Say your oldest account was closed and fell off your file, and the next oldest account is 10 years “younger” than the account that fell off. Now, instead of showing how long you’ve actually used credit overall, credit files may show the age of the oldest account on file and your score may decrease.

To maintain a high credit age, keep at least one account on your credit file that is at least six months old. As you grow older, it should be easier to maintain a higher credit score as your accounts continue to grow in credit age.

Account Mix

Account mix is how many installment accounts and revolving accounts you have.

  • Installment accounts are loans—such as mortgages, car loans, or personal loans—with a fixed monthly payment for a specific term (number of months or years).
  • Revolving accounts are credit cards and credit lines with a credit limit that you can charge against.

Lenders want to see you can handle both types of accounts, so a good mix of the two makes for a better credit score.

Credit Inquiries

Hard inquiries happen when a lender looks at your credit report because you’ve applied for credit. A hard inquiry affects your credit score—lowering it by 5 to 10 points. The inquiry can stay on your credit report for up to two years, but it will impact your score for only 12 months. Though hard inquiries make up only 10% of your score, try to minimize credit inquiries to maximize your score.

When you need an auto loan or mortgage, it’s normal to shop around to find the best rates. Depending on the scoring model used, if you do your loan shopping in a 14- to 45-day span, the inquiries can be lumped into a single inquiry and affect your score less. FICO score models allow 45 days. On the other hand, the VantageScore model uses only a 14-day span.

Soft inquiries don’t affect your credits score.

Is a Credit Score the Only Thing Lenders Consider?

Lenders look at more than credit scores. The score plays a large factor, but so does your full credit report—sometimes from one bureau, sometimes from all three. Lenders may also look at your annual income and your debt-to-income ratio or overall debt.

Your debt-to-income ratio is calculated by dividing the total recurring monthly debt you have by your gross monthly income. This determines the percentage of debt you have compared to your income.

Credit card issuers and lenders may also look at how many reported delinquencies you have, how many hard inquiries were added to your credit file, your overall credit card utilization rate, your annual income, and your credit history’s health.

How Do I Get My Credit Scores?

You can get your full credit report from each credit bureau free once a year from AnnualCreditReports.com. Through April 2022, you can get a free copy of your credit report from each bureau weekly to help protect your financial health during the COVID-19 coronavirus pandemic. Those reports don’t include your credit score.

Most online options for viewing your credit score—free or paid—are limited to one or two scores. ExtraCredit from Credit.com takes it twenty-six steps further by offering you 28 of your FICO scores from all three major credit bureaus. When you sign up for an ExtraCredit account, you can also earn money when you get approved for select offers, monitor your accounts with $1 million identity theft insurance, and get exclusive discounts on credit repair services. All for less than $25 a month.

If you’re not ready for ExtraCredit, Credit.com’s free Credit Report Card offers you your Experian VantageScore 3.0 credit score for free for life.

What if My Credit Score Is Less Than Good?

Now that you know what’s a good credit score, it’s crucial to act on yours. If your credit is fair or poor, find out why. Then you can address the factors and work to improve your score.

Do you want to boost your credit profile? Our new ExtraCredit Build It feature can help. ExtraCredit identifies rent and utility bills you’re already paying and adds them to your credit reports as new tradelines. This allows the credit bureaus to see additional payment information from you, which can help build your credit profile.

*Assuming someone with poor credit (620–639) gets a 30-year fixed-rate loan at 4.03% APR compared to someone with excellent credit (760+) getting a 2.441% APR. Interest for the borrower with poor credit would total $217,478. Interest for the borrower with excellent credit would total $123,425. The difference of $94,053 is based on calculations made on 9/30/20 from https://www.myfico.com/credit-education/calculators/loan-savings-calculator/.


Source: credit.com

Why Are Auto Loans the Easiest Loans to Get?

According to Kelley Blue Book, the average price for a light vehicle in the United States was almost $38,000 in March 2020. Of course, the sticker price will depend on whether you want a small economy car, a luxury midsize sedan, an SUV or something in between. But the total you pay for a vehicle also depends on a number of other factors if you’re taking out a car loan.

Get the 4-1-1 on financing a car so you can make the best decision for your next vehicle purchase.

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Decide Whether to Finance a Car

Whether or not you should finance your next vehicle purchase is a personal decision. Most people finance because they don’t have an extra $20,000 to $50,000 they want to part with. But if you have the cash, paying for the car outright is the most economical way to purchase it.

For most people, deciding whether to finance a car comes down to a few considerations:

  • Do you need the vehicle enough to warrant making a monthly payment on it for several years?
  • Does the monthly payment work within your personal budget?
  • Is the deal, including the interest rate, appropriate?

Factors to Consider When Financing a Car

Obviously, the first thing to consider is whether you can afford the vehicle. But to understand that, you need to consider a few factors.

  • Total purchase price. Total purchase price is the biggest impact on how much you’ll pay for the car. It includes the price of the car plus any add-ons that you’re financing. Depending on the state and your own preferences, that might include extra options on the vehicle, taxes and other fees and warranty coverage.
  • Interest rate, or APR. The interest rate is typically the second biggest factor in how much you’ll pay overall for a car you finance. APR sounds complex, but the most important thing is that the higher it is, the more you pay over time. Consider a $30,000 car loan for five years with an interest rate of 6%—you pay a total of $34,799 for the vehicle. That same loan with a rate of 9% means you pay $37,365 for the car.
  • The terms. A loan term refers to the length of time you have to pay off the loan. The longer you extend terms, the less your monthly payment is. But the faster you pay off the loan, the less interest you pay overall. Edmunds notes that the current average for car loans is 72 months, or six years, but it recommends no more than five years for those who can make the payments work.

It’s important to consider the practical side of your vehicle purchase. If you take out a car loan for eight years, is your car going to still be in good working order by the time you get to the last few years? If you’re not careful, you could be making a large monthly payment while you’re also paying for car repairs on an older car.

Buying a Car with No Credit

You can buy a car anytime if you have the cash for the purchase. If you have no credit or bad credit, your options for financing a car might be limited. But that doesn’t mean it’s impossible to get a car loan without credit.

Many banks and lenders are willing to work with people with limited credit histories. Your interest rate will likely be higher than someone with excellent credit can command, though. And you might be limited on how much you can borrow, so you probably shouldn’t start looking at luxury SUVs. One tip for increasing your chances is to put as much cash down as you can when you buy the car.

If you can’t get a car loan on your own, you might consider a cosigner. There are pros and cons to asking someone else to sign on your loan, but it can get you into the credit game when the door is otherwise barred.

Personal Loans v. Car Loans: Which One Is Better?

Many people wonder if they should use a personal loan to buy a car or if there is really any difference between these types of financing. While technically a car loan is a loan you take out personally, it’s not the same thing as a personal loan.

Personal loans are usually unsecured loans offered over relatively short-term periods. The funds you get from a personal loan can typically be used for a variety of purposes and, in some cases, that might include buying a car. There are some great reasons to use a personal loan to buy a car:

  • If you’re buying a car from a private seller, a personal loan can hasten the process.
  • Traditional auto loans typically require full coverage insurance for the vehicle. A personal loan and liability insurance may be less expensive.
  • Lenders typically aren’t interested in financing cars that aren’t in driving shape, so if you’re buying a project car to work on in your garage during your downtime, a personal loan may be the better option.

But personal loans aren’t necessarily tied to the car like an auto loan is. That means the lender doesn’t necessarily have the ability to repossess the car if you stop paying the loan. Since that increases the risk for the lender, they may charge a higher interest rate on the loan than you’d find with a traditional auto loan. Personal loans typically have shorter terms and lower limits than auto loans as well, potentially making it more difficult for you to afford a car using a personal loan.

Steps You Should Follow When Financing a Car

Before you jump in and apply for that car loan, review these six steps you should take first.

1. Check your credit to understand whether you are likely to be approved for a loan. Your credit also plays a huge role in your interest rate. If your credit is too low and your interest rate would be prohibitively high, it might be better to wait until you can build or repair your credit before you get an auto loan. Sign up for ExtraCredit to see 28 of your FICO scores from all three credit bureaus.

2. Research auto loan options to find the ones that are right for you. Avoid applying too many times, as these hard inquiries can drag your credit score down with hard inquiries. The average auto loan interest rate is 27% on 60-month loans (as of April 13, 2020).

3. Get your trade-in appraised. The dealership might give you money toward your trade-in. That reduces the price of the car you purchase, which reduces how much you need to borrow. A few thousand dollars can mean a more affordable loan or even the difference between being approved or not.

4. Get prequalified for a loan online. While most dealers will help you apply for a loan, you’re in a better buying position if you walk into the dealership with funding ready to go. Plus, if you’re prequalified, you have a good idea what you can get approved for, so there are fewer surprises.

5. Buy from a trusted dealer. Unfortunately, there are dealerships and other sellers that prey on people who need a car badly. They may charge high interest or sell you a car that’s not worth the money you pay. No matter your financial situation, always try to work with a dealership that you can trust.

6. Talk to your car insurance company. Different cars will carry different car insurance premiums. Make a call to your insurance company prior to the sale to discuss potential rate changes so you’re not surprised by a higher premium after the fact.

Next to buying a home, buying a car is one of the biggest financial decisions you’ll make in your life, and you’ll likely do it more than once. Make sure you understand the ins and outs of financing a car before you start the process.

Source: credit.com

How to Get the Best Price for Your Used Car

In the mid-’90s, a neighbor in my apartment building taped a “for sale” sign in the rear window of his Nissan 240SX. A few days later, he knocked on my door and asked if I had any magazines I wasn’t reading. Puzzled, I handed him my girlfriend’s old Cosmopolitan.

“Thanks,” he said. “I’m selling my car.”

“Yeah, I noticed,” I said. “But how does this help?”

He motioned for me to come outside, and I watched him flip through a small stack of magazines and pull out the perfume and cologne ads – you know, the ones with the aromatic samples. He tossed these under the front seats.

He was convinced a good-smelling car would fetch a better price.

I never found out what he got for that Nissan or if those ads added to the price. But it showed me just how creative we can get when we’re selling our old cars.

Let’s look under the hood at some advice for selling your used car.

1. Get detailed about the detailing

Just like selling your house, the cheapest way to add value to a car is to clean it thoroughly. Seems obvious, but we don’t always notice the grime on something we see every day.

Also sprinkle baking soda on the carpets and cloth seats, then vacuum it up to remove odors you might not smell but potential buyers will. Arm & Hammer recommends waiting at least 15 minutes before turning on the vacuum, “or longer for strong odors.” If you’re a smoker, that can mean letting it sit overnight – and not smoking in the car for at least a week.

You can scrub your floor mats, but if they still look bad, replace them. Clean out the glove box, removing everything but the owner’s manual.

While you’re cleaning the windshield, make sure the windshield wipers are in good condition and that they function properly. If they don’t, it’s a sign that other parts of the vehicle may also have been neglected.

2. Let there be more light

Make sure all the lights work. Do your headlights, taillights and brake lights work? How about the dome light (which illuminates the interior when you open the door)? Map lights? Do you have a vanity mirror that lights up?

Your headlight covers can yellow with age. Instead of replacing the entire headlight, spend less than $20 on products like the 3M Headlight Restoration System. While they won’t make your headlights look like new, they’ll go a long way to clearing up the cloudiness. Plus, your headlights will shine brighter than before.

3. Be solid on your fluids

Knowledgeable buyers are not only going to check the oil level to make sure you have enough, but also whether it’s bright and clean – because long-term driving with low or old oil means years off the life of the engine. If necessary, top off the other fluids, like the windshield washer fluid (front and back), and the antifreeze.

4. Treat your tires

If you paid for a car wash and the tires aren’t glistening, get out that box of baking soda. Add just enough water to make a paste, use a scrub brush to rub it in, and let it sit for a few minutes. Rinse it off and marvel at the results. Also spend a few quarters at a nearby gas station to properly inflate those tires.

5. Check the “check engine” light

Philip Reed at Edmunds says, “The light could mean a costly problem, like a bad catalytic converter, or it could be something minor, like a loose gas cap.” Ask your trusted mechanic to diagnose the problem if the “check engine” light is on and make the needed repair.

6. Remove scratches and dings

Getting rid of scratches on a car’s finish isn’t easy. It’s so complicated that Popular Mechanics even developed a step-by-step guide. Forget about DIY dent repair. If you’re not adept at it, you could make the problem worse. If you have anything more than minor scratches and dings, take the car to an expert.

7. Gather your records

Neatly order the maintenance and repair invoices you had stashed in your glove box. Didn’t keep meticulous records of your repairs? Consider using a service like Carfax. These services are usually used by buyers who want to check a used car’s history of accidents, recalls and repairs. Pay for a report yourself and show it off.

8. Set the price

Now that your car looks and smells as nice as possible, it’s time to settle on an asking price. Don’t depend solely on Edmunds and/or Kelley Blue Book. Check sites like eBay, Craigslist and other online classified ads to see what cars like yours are fetching where you live. Always ask for more than you’ll settle for; buyers love to negotiate.

9. Write the ad

Now you have to promote your ride. AutoTrader offers an incredibly detailed list of do’s and don’ts for writing an ad that can serve as your guide. AutoTrader also offers 10 tips for writing an effective online ad for your car. One of those tips: Be honest about repairs.

10. Take buyers out for a spin

Stacy suggests that before you let a prospective buyer take a test drive, you chauffeur them yourself. Emphasize the car’s features – fine leather, a smooth ride, excellent speakers. Without coming on too strong, let no selling point of your vehicle go unnoticed.

More From Money Talks News:

Image: Comstock

Source: credit.com

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Will 2014 Be the Year to Buy a New Car?

This Article was Updated July 5, 2018

When you are looking to buy a vehicle, the first thing you should do is apply for a preapproved loan. The loan process can seem daunting, but it’s easier than you think and getting preapproval prior to going to the car dealer may help alleviate a lot of frustration along the way.

Here are five steps for getting a car loan.

  1. Check Your Credit
  2. Know Your Budget
  3. Determine How Much You Can Afford
  4. Get Preapproved
  5. Go Shopping

1. Check Your Credit

Before you shop for a loan, check your credit report. The better your credit, the cheaper it is to borrow money and secure auto financing. With a higher credit score and a better credit history, you may be entitled to lower loan interest rates, and you may also qualify for lower auto insurance premiums.

Review your credit report to look for unusual activity. Dispute errors such as incorrect balances or late payments on your credit report. If you have a lower credit score and would like to give it a bit of a boost before car shopping, pay off credit card balances or smaller loans.

If your credit score is low, don’t fret. A lower score won’t prevent you from getting a loan. But depending on your score, you may end up paying a higher interest rate. If you have a low credit score and want to shoot for lower interest rates, take some time to improve your credit score before you apply for loans or attempt to secure any other auto financing.

2. Know Your Budget

Having a budget and knowing how much of a car payment you can afford is essential. You want to be sure your car payment fits in line with your other financial goals. Yes, you may be able to cover $400 a month, but that amount may take away from your monthly savings goal.

If you don’t already have a budget, start with your monthly income after taxes and subtract your usual monthly expenses and how much you plan to put in savings each month. For bills that don’t come every month, such as Amazon Prime or Xbox Live, take the yearly charge and divide it by 12. Then add the result to your monthly budget. If you’re worried, you spend too much each month, find simple ways to whittle your budget down.

You’ll also want to plan ahead for new car costs, such as vehicle registration and auto insurance, and regular car maintenance, such as oil changes and basic repairs. By knowing your budget and what to expect, you can easily see how much room you have for a car payment.

3. Determine How Much You Can Afford

Once you understand where you are financially, you can decide on a reasonable monthly car payment. For many, a good rule of thumb is to not spend more than 10% of your take-home income on a vehicle. In other words, if you make $60,000 after taxes a year, you shouldn’t spend more than $500 per month on car payments. But depending on your budget, you may be better off with a lower payment.

With a payment in mind, you can use an auto loan calculator to figure out the largest loan you can afford. Simply enter in the monthly payment you’d like, the interest rate, and the loan period. And remember that making a larger down payment can reduce your monthly payment. You can also use an auto loan calculator to break down a total loan amount into monthly payments.

You’ll also want to think about how long you’d like to pay off your loan. Car loan terms are normally three, four, five, or six years long. With a longer loan period, you’ll have lower monthly payments. But beware—a lengthy car loan term can have a negative effect on your finances. First, you’ll spend more on the total price of the vehicle by paying more interest. Second, you may be upside down on the loan for a larger chunk of time, meaning you owe more than the car is actually worth.

4. Get Preapproved

Before you ever set foot on a car lot, you’ll want to be preapproved for a car loan. Research potential loans and then compare the terms, lengths of time, and interest rates to find the best deal. A great place to shop for a car loan is at your local bank or credit union. But don’t stop there—look online too. The loan with the best terms, interest rate, and loan amount will be the one you want to get preapproved for. Just know that preapproved loans only last for a certain amount of time, so it’s best to get preapproved when you’re nearly ready to shop for a car.

However, when you apply, the lender will run a credit check—which will lower your credit score slightly—so you’ll want to keep all your loan applications within a 14-day period. That way, the many credit checks will only show as one inquiry instead of multiple ones.

Get matched with a personal loan that’s right for you today.

Learn more

When you’re preapproved, the lender decides if you’re eligible and how much you’re eligible for. They’ll also tell you what interest rate you qualify for, so you’ll know what you have to work with before you even walk into a dealership. But keep in mind that preapproved loans aren’t the same as final auto loans. Depending on the car you buy, your final loan could be less than what you were preapproved for.

In most cases, if you secure a pre-approved loan, you shouldn’t have any problems getting a final loan. But being preapproved doesn’t mean you’ll automatically receive a loan when the time comes. Factors such as the info you provided or whether or not the lender agrees on the value of the car can affect the final loan approval. It’s never a deal until it’s a done deal.

If you can’t get preapproved, don’t abandon all hope. You could also try making a larger down payment to reduce the amount you are borrowing, or you could ask someone to cosign on the loan. If you ask someone to cosign, take it seriously. By doing so, you are asking them to put their credit on the line for you and repay the loan if you can’t.

When co-signing a car loan, they do not acquire any rights to the vehicle. They are simply stating that they have agreed to become obligated to repay the total amount of the loan if you were to default or found that you were unable to pay.

Co-signing a car loan is more like an additional form of insurance (or reassurance) for the lender that the debt will be paid no matter what.

Usually, a person with bad credit or less-than-perfect credit may require the assistance of a co-signer for their auto financing and loan.

5. Go Shopping

Now you’re ready to look for a new ride. Put in a little time for research and find cars that are known to be reliable and fit into your budget. You’ll also want to consider size, color, gas mileage, and extra features. Use resources like Consumer Reports to read reviews and get an idea of which cars may be best for you.

Once you have narrowed down the car you are interested in, investigate how much it’s worth, so you aren’t accidentally duped. Sites such as Kelley Blue Book or Edmunds can help you figure out the going rate for your ideal car. After you’re armed with this information, compare prices at different car dealerships in your area. And don’t forget to check dealer incentives and rebates to get the best possible price.

By following these steps, you’ll be ready to make the best financial decision when getting a car loan. Even if you aren’t ready to buy a car right now, it doesn’t hurt to be prepared. Start by acquiring a free copy of your credit summary.

It is always a good idea to pull your credit reports each year, so you can make sure they are as accurate as they should be. If you find any mistakes, be sure to dispute them with the proper credit bureau. Remember, each credit report may differ, so it is best to acquire all three.
If you want to know what your credit is before purchasing a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Image: istock

Source: credit.com

Where to Find the Best Price on Popular Used Cars

This Article was Updated July 5, 2018

When you are looking to buy a vehicle, the first thing you should do is apply for a preapproved loan. The loan process can seem daunting, but it’s easier than you think and getting preapproval prior to going to the car dealer may help alleviate a lot of frustration along the way.

Here are five steps for getting a car loan.

  1. Check Your Credit
  2. Know Your Budget
  3. Determine How Much You Can Afford
  4. Get Preapproved
  5. Go Shopping

1. Check Your Credit

Before you shop for a loan, check your credit report. The better your credit, the cheaper it is to borrow money and secure auto financing. With a higher credit score and a better credit history, you may be entitled to lower loan interest rates, and you may also qualify for lower auto insurance premiums.

Review your credit report to look for unusual activity. Dispute errors such as incorrect balances or late payments on your credit report. If you have a lower credit score and would like to give it a bit of a boost before car shopping, pay off credit card balances or smaller loans.

If your credit score is low, don’t fret. A lower score won’t prevent you from getting a loan. But depending on your score, you may end up paying a higher interest rate. If you have a low credit score and want to shoot for lower interest rates, take some time to improve your credit score before you apply for loans or attempt to secure any other auto financing.

2. Know Your Budget

Having a budget and knowing how much of a car payment you can afford is essential. You want to be sure your car payment fits in line with your other financial goals. Yes, you may be able to cover $400 a month, but that amount may take away from your monthly savings goal.

If you don’t already have a budget, start with your monthly income after taxes and subtract your usual monthly expenses and how much you plan to put in savings each month. For bills that don’t come every month, such as Amazon Prime or Xbox Live, take the yearly charge and divide it by 12. Then add the result to your monthly budget. If you’re worried, you spend too much each month, find simple ways to whittle your budget down.

You’ll also want to plan ahead for new car costs, such as vehicle registration and auto insurance, and regular car maintenance, such as oil changes and basic repairs. By knowing your budget and what to expect, you can easily see how much room you have for a car payment.

3. Determine How Much You Can Afford

Once you understand where you are financially, you can decide on a reasonable monthly car payment. For many, a good rule of thumb is to not spend more than 10% of your take-home income on a vehicle. In other words, if you make $60,000 after taxes a year, you shouldn’t spend more than $500 per month on car payments. But depending on your budget, you may be better off with a lower payment.

With a payment in mind, you can use an auto loan calculator to figure out the largest loan you can afford. Simply enter in the monthly payment you’d like, the interest rate, and the loan period. And remember that making a larger down payment can reduce your monthly payment. You can also use an auto loan calculator to break down a total loan amount into monthly payments.

You’ll also want to think about how long you’d like to pay off your loan. Car loan terms are normally three, four, five, or six years long. With a longer loan period, you’ll have lower monthly payments. But beware—a lengthy car loan term can have a negative effect on your finances. First, you’ll spend more on the total price of the vehicle by paying more interest. Second, you may be upside down on the loan for a larger chunk of time, meaning you owe more than the car is actually worth.

4. Get Preapproved

Before you ever set foot on a car lot, you’ll want to be preapproved for a car loan. Research potential loans and then compare the terms, lengths of time, and interest rates to find the best deal. A great place to shop for a car loan is at your local bank or credit union. But don’t stop there—look online too. The loan with the best terms, interest rate, and loan amount will be the one you want to get preapproved for. Just know that preapproved loans only last for a certain amount of time, so it’s best to get preapproved when you’re nearly ready to shop for a car.

However, when you apply, the lender will run a credit check—which will lower your credit score slightly—so you’ll want to keep all your loan applications within a 14-day period. That way, the many credit checks will only show as one inquiry instead of multiple ones.

Get matched with a personal loan that’s right for you today.

Learn more

When you’re preapproved, the lender decides if you’re eligible and how much you’re eligible for. They’ll also tell you what interest rate you qualify for, so you’ll know what you have to work with before you even walk into a dealership. But keep in mind that preapproved loans aren’t the same as final auto loans. Depending on the car you buy, your final loan could be less than what you were preapproved for.

In most cases, if you secure a pre-approved loan, you shouldn’t have any problems getting a final loan. But being preapproved doesn’t mean you’ll automatically receive a loan when the time comes. Factors such as the info you provided or whether or not the lender agrees on the value of the car can affect the final loan approval. It’s never a deal until it’s a done deal.

If you can’t get preapproved, don’t abandon all hope. You could also try making a larger down payment to reduce the amount you are borrowing, or you could ask someone to cosign on the loan. If you ask someone to cosign, take it seriously. By doing so, you are asking them to put their credit on the line for you and repay the loan if you can’t.

When co-signing a car loan, they do not acquire any rights to the vehicle. They are simply stating that they have agreed to become obligated to repay the total amount of the loan if you were to default or found that you were unable to pay.

Co-signing a car loan is more like an additional form of insurance (or reassurance) for the lender that the debt will be paid no matter what.

Usually, a person with bad credit or less-than-perfect credit may require the assistance of a co-signer for their auto financing and loan.

5. Go Shopping

Now you’re ready to look for a new ride. Put in a little time for research and find cars that are known to be reliable and fit into your budget. You’ll also want to consider size, color, gas mileage, and extra features. Use resources like Consumer Reports to read reviews and get an idea of which cars may be best for you.

Once you have narrowed down the car you are interested in, investigate how much it’s worth, so you aren’t accidentally duped. Sites such as Kelley Blue Book or Edmunds can help you figure out the going rate for your ideal car. After you’re armed with this information, compare prices at different car dealerships in your area. And don’t forget to check dealer incentives and rebates to get the best possible price.

By following these steps, you’ll be ready to make the best financial decision when getting a car loan. Even if you aren’t ready to buy a car right now, it doesn’t hurt to be prepared. Start by acquiring a free copy of your credit summary.

It is always a good idea to pull your credit reports each year, so you can make sure they are as accurate as they should be. If you find any mistakes, be sure to dispute them with the proper credit bureau. Remember, each credit report may differ, so it is best to acquire all three.
If you want to know what your credit is before purchasing a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Image: istock

Source: credit.com

How a Car Loan Can Increase Your Credit

The following is a guest post from Paige Williams, a public relations specialist with New Roads Auto Loans

The views and opinions expressed in this article are those of the author only and are not endorsed by Credit.com.

When most people think about credit and a car loan, they’re thinking about what credit score qualifies them for the car loan. However, that’s not the only way that a credit score will affect a vehicle loan. Did you know that a car loan is one way to increase your credit score for the better? The following explains how a car loan can increase your credit.

Your New Car Loan Shows up on Your Credit Report

As with any new credit account that you get, your new car loan will show up on your credit report. Depending on the specific credit bureau or bureaus that your vehicle loan lender reports to, it will only show up on those credit reports. There are three different credit bureaus that are mainly used by all lenders: Experian, Equifax, and Transunion.

When you get a new vehicle loan, information for the loan is reported to these lenders. This is crucial in knowing how a new vehicle loan can increase your credit score. All of the following are reported to the credit bureaus of choice from your vehicle lender:

  • Original Loan Amount
  • Type Of Loan (Installment Loan)
  • Monthly Payment
  • Payment History (On-Time / Late Payments)
  • Current Loan Amount

What Is an Installment Loan?

When you take out a vehicle loan, it’s considered an installment loan. When the loan is on your credit report, it’s reported as an installment account. It signifies to others that the account is a fixed account with a fixed payment over a fixed period of time. There are many different types of installment loans that are reported on credit reports. These include auto loans, mortgage loans, student loans, credit builder loans, and personal loans.

What Contributes to Your Credit Score?

As a consumer, it’s important to realize that each credit bureau manufactures a credit score based on five main factors. By understanding what these five main factors are, you can better work to improve your credit score. The five main factors are your payment history, new credit inquiries, the length of your credit history, your credit mix, and the amount of debt that you owe.

Understanding Your Credit Mix

When it comes to how installment loans affect your credit, you need to first determine your entire credit mix. Your credit mix is what the credit bureaus consider the different types of credit accounts that you have. Your credit mix makes up 10 percent of your overall credit score.

Creditors want to see whether you can handle different types of financing. Your credit mix helps them to determine whether or not you’re financially responsible with multiple different types of credit accounts. When looking at your credit mix, creditors take into account three main types of accounts. These include installment accounts, open accounts, and revolving accounts.

As you learned above, installment accounts are those that have a fixed payment for a fixed term like auto loans. Revolving accounts are usually credit cards and store cards. Accounts have different monthly payments based on the current balance that is on the card or account. Open accounts, also referred to as trade lines, is a general term given to encompass all of the other types of accounts that don’t fit into the installment or revolving account category.

Putting It All Together

Now that you understand what goes on your credit report and what an installment loan is, it’s time to put it all together to see how it can increase your credit score. By getting an installment loan to finance the purchase of a new car, you add to the installment category of your credit mix. The more diversity you have in your credit mix, the higher your credit score is going to be. This is because lenders notice that people who are more reliable in paying multiple different types of accounts are less likely to default on their debts.

When you get an auto loan, you’ve learned that it reports to the credit bureaus. Part of the reporting for that account is the payment history. The payment history is a record of all the payments that you make on a loan. They’re recorded as either on time or late. If a payment is late, it’s recorded as 30, 60, 90, or 120 days late.

Your payment history makes up a very large portion of your credit mix. When you make payments on time, it displays your good payment history, and therefore, your credit score is likely to be impacted positively too. Late payments can report negatively on your credit history. So, they can also decrease your credit score.

What Is a Good Credit Score?

Often, lenders will state that they require a good credit score to qualify for a vehicle loan. It’s important to understand what is considered by the term “good” so that you can ensure that you get the auto loan that you want. In general, credit bureaus refer to anything over 670 as a good credit score.

Get matched with a personal loan that’s right for you today.

Learn more

Your FICO credit score can range anywhere from 300 to 850. Those closer to 300 are considered in the poor range, and those closer to 850 are considered in the excellent range. Those in the excellent range generally will have a wide mix of credit with installment loans, revolving accounts, and tradelines.

Many lenders want to see those closest to the 850 mark, as it signifies to them that they’re reliable borrowers that will repay the loan. These borrowers generally will receive lower interest rates on their auto loans as a reward for being less of a risk for the auto loan lenders. Those in the lower range of 300, 400, or 500 tend to be more unreliable borrowers who may not repay the loan. For this reason, lenders may not approve the installment loan in general. Or, they may charge a higher interest rate on the loan to help mitigate the risk of funding the borrower.

Do you want to write a guest post for us? Check out our guest posting guidelines here and get in touch!

Source: credit.com

Car Insurance Rates Up 43% in Two Decades

This Article was Updated July 5, 2018

When you are looking to buy a vehicle, the first thing you should do is apply for a preapproved loan. The loan process can seem daunting, but it’s easier than you think and getting preapproval prior to going to the car dealer may help alleviate a lot of frustration along the way.

Here are five steps for getting a car loan.

  1. Check Your Credit
  2. Know Your Budget
  3. Determine How Much You Can Afford
  4. Get Preapproved
  5. Go Shopping

1. Check Your Credit

Before you shop for a loan, check your credit report. The better your credit, the cheaper it is to borrow money and secure auto financing. With a higher credit score and a better credit history, you may be entitled to lower loan interest rates, and you may also qualify for lower auto insurance premiums.

Review your credit report to look for unusual activity. Dispute errors such as incorrect balances or late payments on your credit report. If you have a lower credit score and would like to give it a bit of a boost before car shopping, pay off credit card balances or smaller loans.

If your credit score is low, don’t fret. A lower score won’t prevent you from getting a loan. But depending on your score, you may end up paying a higher interest rate. If you have a low credit score and want to shoot for lower interest rates, take some time to improve your credit score before you apply for loans or attempt to secure any other auto financing.

2. Know Your Budget

Having a budget and knowing how much of a car payment you can afford is essential. You want to be sure your car payment fits in line with your other financial goals. Yes, you may be able to cover $400 a month, but that amount may take away from your monthly savings goal.

If you don’t already have a budget, start with your monthly income after taxes and subtract your usual monthly expenses and how much you plan to put in savings each month. For bills that don’t come every month, such as Amazon Prime or Xbox Live, take the yearly charge and divide it by 12. Then add the result to your monthly budget. If you’re worried, you spend too much each month, find simple ways to whittle your budget down.

You’ll also want to plan ahead for new car costs, such as vehicle registration and auto insurance, and regular car maintenance, such as oil changes and basic repairs. By knowing your budget and what to expect, you can easily see how much room you have for a car payment.

3. Determine How Much You Can Afford

Once you understand where you are financially, you can decide on a reasonable monthly car payment. For many, a good rule of thumb is to not spend more than 10% of your take-home income on a vehicle. In other words, if you make $60,000 after taxes a year, you shouldn’t spend more than $500 per month on car payments. But depending on your budget, you may be better off with a lower payment.

With a payment in mind, you can use an auto loan calculator to figure out the largest loan you can afford. Simply enter in the monthly payment you’d like, the interest rate, and the loan period. And remember that making a larger down payment can reduce your monthly payment. You can also use an auto loan calculator to break down a total loan amount into monthly payments.

You’ll also want to think about how long you’d like to pay off your loan. Car loan terms are normally three, four, five, or six years long. With a longer loan period, you’ll have lower monthly payments. But beware—a lengthy car loan term can have a negative effect on your finances. First, you’ll spend more on the total price of the vehicle by paying more interest. Second, you may be upside down on the loan for a larger chunk of time, meaning you owe more than the car is actually worth.

4. Get Preapproved

Before you ever set foot on a car lot, you’ll want to be preapproved for a car loan. Research potential loans and then compare the terms, lengths of time, and interest rates to find the best deal. A great place to shop for a car loan is at your local bank or credit union. But don’t stop there—look online too. The loan with the best terms, interest rate, and loan amount will be the one you want to get preapproved for. Just know that preapproved loans only last for a certain amount of time, so it’s best to get preapproved when you’re nearly ready to shop for a car.

However, when you apply, the lender will run a credit check—which will lower your credit score slightly—so you’ll want to keep all your loan applications within a 14-day period. That way, the many credit checks will only show as one inquiry instead of multiple ones.

Get matched with a personal loan that’s right for you today.

Learn more

When you’re preapproved, the lender decides if you’re eligible and how much you’re eligible for. They’ll also tell you what interest rate you qualify for, so you’ll know what you have to work with before you even walk into a dealership. But keep in mind that preapproved loans aren’t the same as final auto loans. Depending on the car you buy, your final loan could be less than what you were preapproved for.

In most cases, if you secure a pre-approved loan, you shouldn’t have any problems getting a final loan. But being preapproved doesn’t mean you’ll automatically receive a loan when the time comes. Factors such as the info you provided or whether or not the lender agrees on the value of the car can affect the final loan approval. It’s never a deal until it’s a done deal.

If you can’t get preapproved, don’t abandon all hope. You could also try making a larger down payment to reduce the amount you are borrowing, or you could ask someone to cosign on the loan. If you ask someone to cosign, take it seriously. By doing so, you are asking them to put their credit on the line for you and repay the loan if you can’t.

When co-signing a car loan, they do not acquire any rights to the vehicle. They are simply stating that they have agreed to become obligated to repay the total amount of the loan if you were to default or found that you were unable to pay.

Co-signing a car loan is more like an additional form of insurance (or reassurance) for the lender that the debt will be paid no matter what.

Usually, a person with bad credit or less-than-perfect credit may require the assistance of a co-signer for their auto financing and loan.

5. Go Shopping

Now you’re ready to look for a new ride. Put in a little time for research and find cars that are known to be reliable and fit into your budget. You’ll also want to consider size, color, gas mileage, and extra features. Use resources like Consumer Reports to read reviews and get an idea of which cars may be best for you.

Once you have narrowed down the car you are interested in, investigate how much it’s worth, so you aren’t accidentally duped. Sites such as Kelley Blue Book or Edmunds can help you figure out the going rate for your ideal car. After you’re armed with this information, compare prices at different car dealerships in your area. And don’t forget to check dealer incentives and rebates to get the best possible price.

By following these steps, you’ll be ready to make the best financial decision when getting a car loan. Even if you aren’t ready to buy a car right now, it doesn’t hurt to be prepared. Start by acquiring a free copy of your credit summary.

It is always a good idea to pull your credit reports each year, so you can make sure they are as accurate as they should be. If you find any mistakes, be sure to dispute them with the proper credit bureau. Remember, each credit report may differ, so it is best to acquire all three.
If you want to know what your credit is before purchasing a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Image: istock

Source: credit.com

What Does the Phrase ‘Rehab’ Mean in an Apartment Listing?

There’s a reason all those HGTV home-renovation shows are so popular. Folks love historic properties, but they don’t want to give up modern convenience to get it. The same goes with apartments. Often highly desirable, the phrase “rehab apartment” means the unit has been recently renovated, either in full or in part.

What you can expect

When you read “rehab” in an apartment listing, it most likely means that while the property and structure are not new, the living space will feature modern upgrades, such as a renovated kitchen with new appliances, new flooring or lighting fixtures, a sleek bathroom or an alluring combination thereof.

Additionally, it could mean that the building itself – in particular if it’s historic in nature – has been brought up to code, with new plumbing, electrical wiring and HVAC, and that older materials now deemed unsafe, such as lead paint or asbestos insulation, have been removed. Hence, the term “rehab” might even give you peace of mind where your family’s health and safety are concerned.

The bottom line is that it can mean anything from a couple of aesthetic renovations, to more internal (but important!) features that greatly affect your standard of living to a complete overhaul, inside and out – which may mean “dream apartment,” but likely comes with a price tag to match.

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Is a rehab apartment right for you?

Some apartment-hunters want a rehab. Depending on where it is and its current condition, a rehab apartment could have lower or higher than average rent for the area.

For example, a completely rehabbed apartment in restored turn-of-the-century building could be your dream flat – historic digs with modern convenience. But it’s likely to command a high price.

Conversely, the partial rehab in a complex with a desirable location (maybe the floors are new, but the kitchen and bath still need updating) could be a great, cheap find in a neighborhood where your friends are paying hundreds more!

Keep in mind as you begin your search, that the word “rehab” has a broad scope. It’s important to do your research so you know if a rehab is what you’re looking for, or perhaps it will open your mind to options you hadn’t considered.

Find out what you’re getting

Ask the landlord or property manager about the specifics of the rehab apartment in which you’re interested. Check out the photos and, if possible, give the place a drive-by. There’s no need to waste anyone’s time when you’re on the hunt for a new home.

Once you have the information and you’re still interested, set up an appointment to tour the apartment. Bring a list of further questions and don’t be afraid to poke around. If you’re worried about the age of the apartment, check out the plumbing and electrical. If you’re looking for higher-end finishes, pay attention to the countertops, appliances and fixtures.

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