Many experts say that having no credit can be just as bad as having bad credit, because there is no history to say if you are a good or bad risk when requesting loans.
Building a good credit record is no easy task. It may be frustrating and tedious at first, but following are some tips to make the journey to credit freedom a little easier.
* Try a secured card with a banking institution for 6 to 9 months.
A secured card is very much like a savings account where you may put $500 down as a deposit, which serves as collateral. Some institutions will issue a credit card with a credit limit usually no greater than the amount on deposit. Make sure the issuer reports your timely payments to one of the three major credit bureaus. By using your card responsibly and paying what you've spent every month, you will see your credit score improve.
* Establish credit by applying for one or two credit cards.
Setting up revolving debt credit cards like Visa, MasterCard, American Express, Discover or any department store credit cards is important to your credit history because it's a self-managed account and you know you have to pay an installment at least once a month. Financial advisors warn you to use them carefully and pay them off on time each month, or at the very least, pay the minimum amount required.
* Keep credit card balances low.
Don't "max out" your credit cards. Credit scores are based upon what percentage of the credit line is being used.
* Pay your bills on time.
How you've paid your bills in the past can indicate how you'll pay in the future. Credit scores emphasize your recent payment record, so if you've been late, start paying on time.
* Don't apply for too many loans or new accounts.
Requesting a lot of credit in a short time span may prompt lenders to be concerned that you won't manage your debt well.
Tuesday, June 28, 2005
Monday, June 27, 2005
Beware of home equity loans to buy a car
Is a customer better off to use home equity to buy an automobile? Or is dealer-financing a better option? Let's explore.
Home equity loans became popular after a 1986 law phased out tax deducting consumer interest for installment loans and credit cards. They did, however, leave the deduction available for a second mortgage or home equity loan. The idea was that the deduction would be used for improvements to the household, therefore, improving the value of the property.
Unfortunately, it wasn't foreseen that this opportunity would be misused, mostly for automobile purchases. The use of a person's equity towards a car loan has created a financial burden to many people.
Here's how:
A customer purchases a new vehicle for $25,000. Instead of taking out a car loan, they'll use the equity in their home. At the time of purchase, they receive a free and clear title and a low monthly payment because home equity loans are typically set up with a minimum monthly payment like a credit card, or longer term.
Three years later, the customer decides to purchase another car. Now their car is worth about $12,500, but since they are paying a low monthly payment, they still owe $18,000 or more on their home equity loan. They buy a new car for $30,000 minus their free and clear trade of $12,500 and they now have to finance $17,500 while still owing $18,000 on the previous loan. This is where the vicious cycle begins.
Here's advice from the Federal Reserve Board Consumer handbook on what you should know about home equity lines of credit:
"If you are in the market for credit, a home equity plan may be right for you or perhaps another form of credit would be better. Before making this decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk. And, remember, failure to repay the line could mean the loss of your home."
In other words, home equity loans might not always be the best form of financing for the customer.
But remember, people buy for their reasons, not ours. Pointing out the problems with their choice might not always be the best option. I prefer to take the road that gives us the best opportunity to retain their financing, and not run clown their choice and potentially cause customer dissatisfaction.
Home equity loans became popular after a 1986 law phased out tax deducting consumer interest for installment loans and credit cards. They did, however, leave the deduction available for a second mortgage or home equity loan. The idea was that the deduction would be used for improvements to the household, therefore, improving the value of the property.
Unfortunately, it wasn't foreseen that this opportunity would be misused, mostly for automobile purchases. The use of a person's equity towards a car loan has created a financial burden to many people.
Here's how:
A customer purchases a new vehicle for $25,000. Instead of taking out a car loan, they'll use the equity in their home. At the time of purchase, they receive a free and clear title and a low monthly payment because home equity loans are typically set up with a minimum monthly payment like a credit card, or longer term.
Three years later, the customer decides to purchase another car. Now their car is worth about $12,500, but since they are paying a low monthly payment, they still owe $18,000 or more on their home equity loan. They buy a new car for $30,000 minus their free and clear trade of $12,500 and they now have to finance $17,500 while still owing $18,000 on the previous loan. This is where the vicious cycle begins.
Here's advice from the Federal Reserve Board Consumer handbook on what you should know about home equity lines of credit:
"If you are in the market for credit, a home equity plan may be right for you or perhaps another form of credit would be better. Before making this decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk. And, remember, failure to repay the line could mean the loss of your home."
In other words, home equity loans might not always be the best form of financing for the customer.
But remember, people buy for their reasons, not ours. Pointing out the problems with their choice might not always be the best option. I prefer to take the road that gives us the best opportunity to retain their financing, and not run clown their choice and potentially cause customer dissatisfaction.
Tuesday, June 21, 2005
The Art Of The Deal - buying a car
Homework and a good dealer relationship can save you money.
Ready to buy a new set of wheels? You'll probably head out to your local dealer, let him guide you to models that fit your budget and then take them for a test-drive, right?
If you answered yes, you're practically begging to be taken for a ride, according to Pamela Rodgers and Shirley Gross-Moore. They should know; both sisters are owners of large auto dealerships. Price, while undoubtedly a major factor in your decision, is only part of the equation. And most people calculate the price of a car incorrectly.
Rodgers and Gross-Moore say that before you even set foot inside a dealer showroom, you should know basically what kind of car you're looking for, which features it must have and the absolute maximum price--including taxes, license and fees--you're going to spend. Even then, you're not ready to shop for your car until you've shopped for the right dealer.
"There are plenty of dealers who would love to have your business," says Gross-Moore, owner of Barrington Dodge in Barrington, Illinois, near Chicago. Pamela Rodgers of Rodgers Chevrolet in Woodhaven, Michigan, just outside Detroit, agrees. "Our dollars are our power," she says. "We should not support those dealerships who would take advantage of us based on our race or gender."
Indeed. A study of Nissan Motors Acceptance Corp. conducted by Howard University business professor Debby Lindsey-Taliafero, Ph.D., concluded that on average, Blacks paid as much as 90.9 percent more for car loans than their White counterparts.
If you do your homework ahead of time, you can be in the driver's seat when it comes to buying your next new car. Begin by analyzing your needs and figuring out what your new ride should cost. Rodgers and Gross-Moore recommend that you answer these questions to ease the process.
1. What can you honestly afford? Include maintenance, insurance and registration, which most folks forget when they do the math.
2. What are your driving habits? If you'll be putting lots of miles on the car, fuel efficiency is a major concern. Will a compact pop-up trunk hold the kids' sports gear?
3. What features are most important to you? If you need four-wheel drive, for instance, don't assume that you must buy a sports-utility vehicle. Lots of smaller cars can give you that.
4. Which current models fit your needs? This should be obvious, but a lot of us choose a car based on its looks rather than its functions.
Narrow your choices down to three vehicles, and then do your research. There are many resources you can consult that will help you gather all the data you need to make informed choices. Use the library, newspapers, magazines and the Internet, as well as advice from friends and family who own similar cars.
All of this research may seem tedious, but until you've put in the time and energy you won't know a good value from a bad one. You could get the best price imaginable, but if the car doesn't fit your lifestyle, it just isn't the right car for you. And if the car doesn't serve your needs, you got a bad deal.
Once you figure out what you need, then, and only then, should you visit dealerships--but only to test-drive, not to talk numbers. You might consider taking along a friend who can help rein you in if you get caught up with a fast-talking salesperson. You need to test all the cars on your list before you make a decision. If you feel the salesperson is pressuring you to make a decision right then and there, you've got reason to be distrustful. The best time to test-drive cars is on a weekday when dealerships are slow; you'll find the salespeople are more relaxed than on a weekend.
After you decide on a particular make and model, Rodgers suggests you "shop at least three dealers for price, basing your comparison on the exact same model and options." It is important to note that you are not only looking for a car at this point, you are also looking for a dealer you can feel comfortable working with.
Buying your vehicle should be a pleasant experience, and whom you do business with should be a major part of the equation. Does the salesperson treat you with courtesy and respect? What type of services does the dealership offer?
When you find the car and the dealership, Gross-Moore suggests you wait until the last two weeks of a month to make your deal. Dealers are always anxious to get rid of "old" new cars to make room for "new" new cars. "You will find your salesperson more willing to negotiate at the end of the month to make their numbers," she says.
You should also be aware that like a hot fall wardrobe, new cars have seasons. "The best time to buy is at the end of the model year; that means August through December," says Gross-Moore. So if you can keep your clunker running for a while longer without endangering your safety, it's best to shoot for that window of time. Also be on the lookout for special rebates and incentives. (Web sites such as edmunds.com list them.)
Another major consideration is the relative popularity of the car you're interested in. Rodgers says, "The price of a vehicle is often driven by market demands and fluctuations." If a particular vehicle is in high demand, it may not, be as negotiable as a model that's less popular. Got your heart set on a Corvette or a PT Cruiser? Expect to pay the sticker price. On the other hand, if you're looking at a Malibu or a Neon, you'll find dealers willing to negotiate.
Ready to buy a new set of wheels? You'll probably head out to your local dealer, let him guide you to models that fit your budget and then take them for a test-drive, right?
If you answered yes, you're practically begging to be taken for a ride, according to Pamela Rodgers and Shirley Gross-Moore. They should know; both sisters are owners of large auto dealerships. Price, while undoubtedly a major factor in your decision, is only part of the equation. And most people calculate the price of a car incorrectly.
Rodgers and Gross-Moore say that before you even set foot inside a dealer showroom, you should know basically what kind of car you're looking for, which features it must have and the absolute maximum price--including taxes, license and fees--you're going to spend. Even then, you're not ready to shop for your car until you've shopped for the right dealer.
"There are plenty of dealers who would love to have your business," says Gross-Moore, owner of Barrington Dodge in Barrington, Illinois, near Chicago. Pamela Rodgers of Rodgers Chevrolet in Woodhaven, Michigan, just outside Detroit, agrees. "Our dollars are our power," she says. "We should not support those dealerships who would take advantage of us based on our race or gender."
Indeed. A study of Nissan Motors Acceptance Corp. conducted by Howard University business professor Debby Lindsey-Taliafero, Ph.D., concluded that on average, Blacks paid as much as 90.9 percent more for car loans than their White counterparts.
If you do your homework ahead of time, you can be in the driver's seat when it comes to buying your next new car. Begin by analyzing your needs and figuring out what your new ride should cost. Rodgers and Gross-Moore recommend that you answer these questions to ease the process.
1. What can you honestly afford? Include maintenance, insurance and registration, which most folks forget when they do the math.
2. What are your driving habits? If you'll be putting lots of miles on the car, fuel efficiency is a major concern. Will a compact pop-up trunk hold the kids' sports gear?
3. What features are most important to you? If you need four-wheel drive, for instance, don't assume that you must buy a sports-utility vehicle. Lots of smaller cars can give you that.
4. Which current models fit your needs? This should be obvious, but a lot of us choose a car based on its looks rather than its functions.
Narrow your choices down to three vehicles, and then do your research. There are many resources you can consult that will help you gather all the data you need to make informed choices. Use the library, newspapers, magazines and the Internet, as well as advice from friends and family who own similar cars.
All of this research may seem tedious, but until you've put in the time and energy you won't know a good value from a bad one. You could get the best price imaginable, but if the car doesn't fit your lifestyle, it just isn't the right car for you. And if the car doesn't serve your needs, you got a bad deal.
Once you figure out what you need, then, and only then, should you visit dealerships--but only to test-drive, not to talk numbers. You might consider taking along a friend who can help rein you in if you get caught up with a fast-talking salesperson. You need to test all the cars on your list before you make a decision. If you feel the salesperson is pressuring you to make a decision right then and there, you've got reason to be distrustful. The best time to test-drive cars is on a weekday when dealerships are slow; you'll find the salespeople are more relaxed than on a weekend.
After you decide on a particular make and model, Rodgers suggests you "shop at least three dealers for price, basing your comparison on the exact same model and options." It is important to note that you are not only looking for a car at this point, you are also looking for a dealer you can feel comfortable working with.
Buying your vehicle should be a pleasant experience, and whom you do business with should be a major part of the equation. Does the salesperson treat you with courtesy and respect? What type of services does the dealership offer?
When you find the car and the dealership, Gross-Moore suggests you wait until the last two weeks of a month to make your deal. Dealers are always anxious to get rid of "old" new cars to make room for "new" new cars. "You will find your salesperson more willing to negotiate at the end of the month to make their numbers," she says.
You should also be aware that like a hot fall wardrobe, new cars have seasons. "The best time to buy is at the end of the model year; that means August through December," says Gross-Moore. So if you can keep your clunker running for a while longer without endangering your safety, it's best to shoot for that window of time. Also be on the lookout for special rebates and incentives. (Web sites such as edmunds.com list them.)
Another major consideration is the relative popularity of the car you're interested in. Rodgers says, "The price of a vehicle is often driven by market demands and fluctuations." If a particular vehicle is in high demand, it may not, be as negotiable as a model that's less popular. Got your heart set on a Corvette or a PT Cruiser? Expect to pay the sticker price. On the other hand, if you're looking at a Malibu or a Neon, you'll find dealers willing to negotiate.
Sunday, June 19, 2005
In the house: buying a home before you're thirty
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I became a true believer the day I sold my first home and walked away, at age 32, with more money than I thought I'd make in a lifetime. This is the answer! I shrieked to myself, suddenly aware of the true magic of real estate.
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The check was for four times the price I had paid for my one-bedroom apartment when I had bought it four years earlier at age 28. Before then I had been audited by the, IRS three years running. I was single, with no dependents or other deductions, and it seemed the little extra money I made freelancing always ended up being owed to the government at the end of the year. "Buy something," my boss at the time simply told me one day. He was male, White and rich and knew a thing or two about American capitalism. The main thing, he pointed out, is that it's a system that's set up to benefit property owners.
Bad Credit Home Loans
For starters, as a home owner you can deduct proctically all of your mortgage costs from your income, thus reducing the amount of income on which you will be taxed. You can build up equity (value), or you can hold your property and leverage it (borrow against it) for additional capital to do anything from going back to school or putting the kids through school, to renovating the house or starting your own business.
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Once I became a home owner I got tax relief almost immediately: For three years in a row I had owed money to the government; the first year after I bought my house I got a $7,700 tax refund. Furthermore, with the tidy profit I made four years later, I was able to buy a larger apartment and a vacation home, and I financed my own real-estate business. As I said, I became a true believer.
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Unfortunately, though, buying a home is something too many of us believe can be done only when we're older, married or more financially secure. Yet property ownership is the sure route to financial security--with or without a mate--and today it's easier to achieve than ever before, thanks to a number of first-time home-buyers' programs.
Buying a home is the biggest investment you're likely to make, but the potential for immense profits makes it more than worth taking the plunge.
I became a true believer the day I sold my first home and walked away, at age 32, with more money than I thought I'd make in a lifetime. This is the answer! I shrieked to myself, suddenly aware of the true magic of real estate.
E-LOAN Loan Center
The check was for four times the price I had paid for my one-bedroom apartment when I had bought it four years earlier at age 28. Before then I had been audited by the, IRS three years running. I was single, with no dependents or other deductions, and it seemed the little extra money I made freelancing always ended up being owed to the government at the end of the year. "Buy something," my boss at the time simply told me one day. He was male, White and rich and knew a thing or two about American capitalism. The main thing, he pointed out, is that it's a system that's set up to benefit property owners.
Bad Credit Home Loans
For starters, as a home owner you can deduct proctically all of your mortgage costs from your income, thus reducing the amount of income on which you will be taxed. You can build up equity (value), or you can hold your property and leverage it (borrow against it) for additional capital to do anything from going back to school or putting the kids through school, to renovating the house or starting your own business.
Guaranteed lowest cost Home Equity Loans
Once I became a home owner I got tax relief almost immediately: For three years in a row I had owed money to the government; the first year after I bought my house I got a $7,700 tax refund. Furthermore, with the tidy profit I made four years later, I was able to buy a larger apartment and a vacation home, and I financed my own real-estate business. As I said, I became a true believer.
Free Mortgage Quotes - Apply Now!
Unfortunately, though, buying a home is something too many of us believe can be done only when we're older, married or more financially secure. Yet property ownership is the sure route to financial security--with or without a mate--and today it's easier to achieve than ever before, thanks to a number of first-time home-buyers' programs.
Buying a home is the biggest investment you're likely to make, but the potential for immense profits makes it more than worth taking the plunge.
Friday, June 17, 2005
E-LOAN Delivers Mortgage Monitor to My Yahoo! Users; New Feature Enables People to Quickly and Easily Track and Manage Mortgage Information in One Pla
The E-LOAN Mortgage Monitor's customizable features enable consumers to track the mortgage marketplace in real-time, allowing them to easily and intelligently compare financing alternatives.
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Through an agreement announced earlier this year, E-LOAN teamed with Yahoo! to launch Yahoo! Finance Loan Center (http://loan.yahoo.com) to deliver comprehensive information including custom mortgage quotes, rate monitoring and loan pre-qualification to Yahoo! users. The new Mortgage Monitor service is also integrated into the Loan Center and becomes part of a unique set of financial management tools designed to help users make the most of their portfolio.
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"By making the Mortgage Monitor available to My Yahoo! users and by integrating this within the Yahoo! Finance Loan Center, consumers can make more informed decisions about ways to manage their finances," said Chris Larsen, chief executive officer of E-LOAN. "Giving consumers the ability to proactively manage their debt online in the same way they manage their investments is the cornerstone of E-LOAN's vision."
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To access the Mortgage Monitor feature, My Yahoo! users can simply go to their My Yahoo! page and click on "Personalize This Site." Within the selections offered, users can click on "Business Section" and/or "Personal Finance Section" to add the Mortgage Monitor to their My Yahoo! page from the pull-down menu of customized services.
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"My Yahoo! users are smart about how they leverage information related to personal finances," said Henry Sohn, senior producer with Yahoo! Inc. "By adding the Mortgage Monitor module, we continue to provide Yahoo! users with the tools needed to take their financial management to the next level."
Get cash out when you refinance your home mortgage.
Automated mortgage monitoring is a convenient way for people to ensure they capture savings by acting at the right time. To search and compare loans from the most competitive lenders, users first fill out and submit a short questionnaire. They will then be alerted to desirable loan products and rates via their My Yahoo! page.
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Once users receive notification, they can simply click on the loan product to go to Yahoo! Finance Loan Center. From the Loan Center, consumers can access E-LOAN services to project out a payment schedule for that loan, compare it to other products, get pre-qualified or pre-approved, and apply for and obtain a loan online.
Home Equity Loans
Through an agreement announced earlier this year, E-LOAN teamed with Yahoo! to launch Yahoo! Finance Loan Center (http://loan.yahoo.com) to deliver comprehensive information including custom mortgage quotes, rate monitoring and loan pre-qualification to Yahoo! users. The new Mortgage Monitor service is also integrated into the Loan Center and becomes part of a unique set of financial management tools designed to help users make the most of their portfolio.
Guaranteed lowest cost Home Equity Loans
"By making the Mortgage Monitor available to My Yahoo! users and by integrating this within the Yahoo! Finance Loan Center, consumers can make more informed decisions about ways to manage their finances," said Chris Larsen, chief executive officer of E-LOAN. "Giving consumers the ability to proactively manage their debt online in the same way they manage their investments is the cornerstone of E-LOAN's vision."
Bad Credit Home Loans
To access the Mortgage Monitor feature, My Yahoo! users can simply go to their My Yahoo! page and click on "Personalize This Site." Within the selections offered, users can click on "Business Section" and/or "Personal Finance Section" to add the Mortgage Monitor to their My Yahoo! page from the pull-down menu of customized services.
E-LOAN Loan Center
"My Yahoo! users are smart about how they leverage information related to personal finances," said Henry Sohn, senior producer with Yahoo! Inc. "By adding the Mortgage Monitor module, we continue to provide Yahoo! users with the tools needed to take their financial management to the next level."
Get cash out when you refinance your home mortgage.
Automated mortgage monitoring is a convenient way for people to ensure they capture savings by acting at the right time. To search and compare loans from the most competitive lenders, users first fill out and submit a short questionnaire. They will then be alerted to desirable loan products and rates via their My Yahoo! page.
Low-Rate Mortgage & Home Equity Loans
Once users receive notification, they can simply click on the loan product to go to Yahoo! Finance Loan Center. From the Loan Center, consumers can access E-LOAN services to project out a payment schedule for that loan, compare it to other products, get pre-qualified or pre-approved, and apply for and obtain a loan online.
Thursday, June 16, 2005
E-LOAN Unveils Instant Online Decisioning for Home Equity Loans
Unlike the traditional home equity loan process which typically takes at least a month from start to finish, E-LOAN customers will get an online decision within a minute, enjoy the convenience of a mobile notary service and automated appraisal valuations -- eliminating the need for a physical appraisal -- and receive their loan funds in as little as ten business days. And like E-LOAN's other mortgage customers, home equity borrowers will benefit from no lender fee pricing(1). Home equity customers will receive the same high-level of personal service that E-LOAN's mortgage and auto customers do -- a single point of contact from the beginning to the end of the transaction.
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"For most consumers their home is their largest single asset," said Joe Kennedy, E-LOAN's President and COO. "As real estate values rise, we understand the importance for consumers to be able to easily and quickly leverage the equity in their home, particularly for home improvement or debt management purposes like credit card consolidation. This expansion enables us to build our customer base while providing consumers with a simpler, more convenient way to get the debt management products they need at the most competitive rates available."
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Over the past five years, consumer lending in the national home equity sector has grown at an annual rate of 15 percent(2). As property values rise, consumers' homes provide them with a greater investment to borrow against and a more efficient way to manage their debt. In addition, the interest on home equity loans may be tax deductible(3), making debt consolidation less expensive than other consumer loans such as credit cards and personal loans. Greater consumer awareness to the benefits of home equity loans and the growing trend of consumers to obtain a loan online validates the growing market opportunity for home equity lending.
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"As the home equity sector continues to expand and consumers become more aware of this kind of financing opportunity, E-LOAN provides consumers more convenient and lower cost way for them to take advantage of this type of loan product," said Steve Majerus, E-LOAN's Vice President of Capital Markets and head of home equity lending. "By streamlining the loan process and managing the consumer experience from beginning to end, we ensure that the consumer receives the best service every step of the way."
Get cash out when you refinance your home mortgage.
At E-LOAN, consumers can first shop for rates without entering any personal information. When they're ready to apply, consumers can quickly and easily complete an application and receive a decision within a minute. Once approved, a personal loan consultant contacts the customer within the hour to confirm the loan. In addition, E-LOAN offers a mobile notary service to ease the legal and logistical burden of closing the loan by enabling the customer to certify the documents anywhere at anytime. Once the customer receives their check, they can use it for whatever purpose they choose, such as debt consolidation, college tuition or home improvements.
E-LOAN Purchase Application
Borrowers can also take advantage of other E-LOAN home buying related services such as No Lender Fee Mortgage Loans and E-LOAN Express, a faster, easier mortgage product that dramatically improves the customer experience by eliminating unnecessary steps, costs and documentation requirements.
Home Equity Loans
"For most consumers their home is their largest single asset," said Joe Kennedy, E-LOAN's President and COO. "As real estate values rise, we understand the importance for consumers to be able to easily and quickly leverage the equity in their home, particularly for home improvement or debt management purposes like credit card consolidation. This expansion enables us to build our customer base while providing consumers with a simpler, more convenient way to get the debt management products they need at the most competitive rates available."
Guaranteed lowest cost Home Equity Loans
Over the past five years, consumer lending in the national home equity sector has grown at an annual rate of 15 percent(2). As property values rise, consumers' homes provide them with a greater investment to borrow against and a more efficient way to manage their debt. In addition, the interest on home equity loans may be tax deductible(3), making debt consolidation less expensive than other consumer loans such as credit cards and personal loans. Greater consumer awareness to the benefits of home equity loans and the growing trend of consumers to obtain a loan online validates the growing market opportunity for home equity lending.
E-LOAN Loan Center
"As the home equity sector continues to expand and consumers become more aware of this kind of financing opportunity, E-LOAN provides consumers more convenient and lower cost way for them to take advantage of this type of loan product," said Steve Majerus, E-LOAN's Vice President of Capital Markets and head of home equity lending. "By streamlining the loan process and managing the consumer experience from beginning to end, we ensure that the consumer receives the best service every step of the way."
Get cash out when you refinance your home mortgage.
At E-LOAN, consumers can first shop for rates without entering any personal information. When they're ready to apply, consumers can quickly and easily complete an application and receive a decision within a minute. Once approved, a personal loan consultant contacts the customer within the hour to confirm the loan. In addition, E-LOAN offers a mobile notary service to ease the legal and logistical burden of closing the loan by enabling the customer to certify the documents anywhere at anytime. Once the customer receives their check, they can use it for whatever purpose they choose, such as debt consolidation, college tuition or home improvements.
E-LOAN Purchase Application
Borrowers can also take advantage of other E-LOAN home buying related services such as No Lender Fee Mortgage Loans and E-LOAN Express, a faster, easier mortgage product that dramatically improves the customer experience by eliminating unnecessary steps, costs and documentation requirements.
Wednesday, June 15, 2005
THE BEST WAY TO Finance a New Car - advice: selecting and financing a car
IN today's changing consumer market, with increasing competition between car dealers and financial institutions, securing reasonable financing is easier than ever. But here, as elsewhere, fortune favors the prepared and gives a special bonus to shoppers who are willing to follow a few tried-and-tested rules.
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The first rule is simple. Buy a car that fits your finances. Genevia Fulbright, vice president of Fulbright & Fulbright, CPA, in Durham, N.C., says you should understand your cash flow, and the reason you are buying this car. If it's solely for business, leasing may be an option. Also, you have to be aware of the hidden car costs, like insurance, gas and parking. Make sure all of these are taken into consideration when buying a new car to avoid surprises. A good rule of thumb for car payments is that the monthly total should be no more than 20 percent of your net income.
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The next rule is to pre-shop. Use the Internet, use the library, use your neighbors, use competing car salesmen--use every available medium to find out who is offering the lowest financing and the lowest interest rates. Compare rates at banks, credit unions, car dealers. Check the hidden costs. Does this plan penalize you for paying off the loan early?
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Experts say the informed buyer, or the buyer who seems to be informed, and who can quote the different rates offered by banks, credit unions and car manufacturers, will almost always get the best deal. A former Chicago banker advises new car buyers to make salesmen and financiers work for them by quoting the rates they have been offered and by asking salespersons to match the rates or top them.
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It's also a good idea to obtain a copy of your credit report. This step will make the hunt for financing much easier, experts say. While some specialists say you should have your financing arranged before you arrive at the dealership, others say you should consider the numbers of the dealer's finance officer. Sometimes dealers run special low annual percentage rates for qualified customers (those with good credit who meet income requirements), and also rebates to sweeten the pot, says Alex Elam, a car salesman from Bakersfield, Calif. "You're always wanting to see what the dealer has to offer," Elam says.
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On this level, you must make a clear distinction between the sticker price of the car and the real price of the car--the sticker price plus the money you pay to finance your purchase of the car.
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This means, among other things, that you must understand the three iron rules of car financing: 1.) The less you know (about financing, about available interest rates, etc.), the more you generally pay. 2.) The smaller the downpayment, the higher the total price. 3.) The longer you finance the car, the more you are going to pay.
It's a law. Thirty-six months cost more than 24 months, and 48 months cost more than 36.
Bad Credit? Refinance your home to Get Cash.
Here, as elsewhere, knowledge is, among other things, money.
Once you understand these iron rules, you can make them work for you by seeking and making deals that will let you keep more of your money.
Mary C. Haynes of Lithonia, Ga., turned to the Internet to get more information about buying a car. The 58-year-old human resources specialist at Georgia Tech said she went to a Web site and punched in the options she wanted.
Refinance your home to consolidate debt regardless of credit history. Click here to learn how.
"Four or five hours later," she says, "a representative called me and said that within 48 hours they would locate a car for me."
And they did, at a much lower price than she would have paid otherwise.
While Haynes' story may not be typical, it illustrates the new dynamics of the changing marketplace.
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What hasn't changed in this market is the need for information and planning. Alex Elam, the California car salesmen quoted above, says that the car showroom should be the last, not the first, stop of a serious shopper.
"By the time a customer goes to a dealership," he says, "they're going to a buy a car. You have to understand what you're buying. The key is knowing what you want."
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The first rule is simple. Buy a car that fits your finances. Genevia Fulbright, vice president of Fulbright & Fulbright, CPA, in Durham, N.C., says you should understand your cash flow, and the reason you are buying this car. If it's solely for business, leasing may be an option. Also, you have to be aware of the hidden car costs, like insurance, gas and parking. Make sure all of these are taken into consideration when buying a new car to avoid surprises. A good rule of thumb for car payments is that the monthly total should be no more than 20 percent of your net income.
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The next rule is to pre-shop. Use the Internet, use the library, use your neighbors, use competing car salesmen--use every available medium to find out who is offering the lowest financing and the lowest interest rates. Compare rates at banks, credit unions, car dealers. Check the hidden costs. Does this plan penalize you for paying off the loan early?
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Experts say the informed buyer, or the buyer who seems to be informed, and who can quote the different rates offered by banks, credit unions and car manufacturers, will almost always get the best deal. A former Chicago banker advises new car buyers to make salesmen and financiers work for them by quoting the rates they have been offered and by asking salespersons to match the rates or top them.
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It's also a good idea to obtain a copy of your credit report. This step will make the hunt for financing much easier, experts say. While some specialists say you should have your financing arranged before you arrive at the dealership, others say you should consider the numbers of the dealer's finance officer. Sometimes dealers run special low annual percentage rates for qualified customers (those with good credit who meet income requirements), and also rebates to sweeten the pot, says Alex Elam, a car salesman from Bakersfield, Calif. "You're always wanting to see what the dealer has to offer," Elam says.
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On this level, you must make a clear distinction between the sticker price of the car and the real price of the car--the sticker price plus the money you pay to finance your purchase of the car.
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This means, among other things, that you must understand the three iron rules of car financing: 1.) The less you know (about financing, about available interest rates, etc.), the more you generally pay. 2.) The smaller the downpayment, the higher the total price. 3.) The longer you finance the car, the more you are going to pay.
It's a law. Thirty-six months cost more than 24 months, and 48 months cost more than 36.
Bad Credit? Refinance your home to Get Cash.
Here, as elsewhere, knowledge is, among other things, money.
Once you understand these iron rules, you can make them work for you by seeking and making deals that will let you keep more of your money.
Mary C. Haynes of Lithonia, Ga., turned to the Internet to get more information about buying a car. The 58-year-old human resources specialist at Georgia Tech said she went to a Web site and punched in the options she wanted.
Refinance your home to consolidate debt regardless of credit history. Click here to learn how.
"Four or five hours later," she says, "a representative called me and said that within 48 hours they would locate a car for me."
And they did, at a much lower price than she would have paid otherwise.
While Haynes' story may not be typical, it illustrates the new dynamics of the changing marketplace.
Any Credit Auto Loans
What hasn't changed in this market is the need for information and planning. Alex Elam, the California car salesmen quoted above, says that the car showroom should be the last, not the first, stop of a serious shopper.
"By the time a customer goes to a dealership," he says, "they're going to a buy a car. You have to understand what you're buying. The key is knowing what you want."
Tuesday, June 14, 2005
How to keep good credit - Finance
Maintaining good credit is a cornerstone for financial stability.
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People with good credit have established a good credit history with a proven record of making at least the minimum payments on time--by or before the due date, and staying within their credit limits.
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They've also learned to be temperate in all their purchases and resisted the temptation of applying for more loans or credit cards than they can handle. As you continue to manage your money (JET, November, 4), as well as your debt (JET, November 18), don't forget to keep maintaining your good credit.
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According to the Federal Citizen Information Center (FCIC), there are several ways you can maintain a good credit history:
* OPEN A CHECKING ACCOUNT, A SAVINGS ACCOUNT, OR BOTH. These do not begin your credit file, but may be checked as evidence that you have money and know how to manage it. Cancelled checks can be used to show you pay utility bills or rent regularly, a sign of reliability.
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* APPLY FOR A DEPARTMENT STORE CREDIT CARD. Repaying credit card bills on time is a plus in credit histories.
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* GET A SECURED CREDIT CARD. A secured credit card is a bank credit card backed by money you deposit in a bank account. If you don't pay off your credit card bill, the money in your account may be used to cover that debt.
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* IF YOU'RE TURNED DOWN FOR CREDIT, FIND OUT WHY. It's important to clear up any credit misunderstandings or mistakes, because a bad record can cloud your credit future. Your credit rating is important, so be sure credit bureau records are complete and accurate.
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It bears repeating that if you have been denied credit, employment or insurance because of information on your credit report, you must receive the contact information for the credit bureau that supplied the report. If you contact the bureau within 60 days, you can receive a copy of your report for free. Review your report carefully to make sure there are no errors. It's also a good idea to check your report for errors annually. If there is a mistake on your credit report, contact the credit bureau in writing and explain the situation.
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Keeping good credit can be a challenge, but armed with sound financial knowledge, it's a challenge that can be met.
Home Equity Loans
People with good credit have established a good credit history with a proven record of making at least the minimum payments on time--by or before the due date, and staying within their credit limits.
Guaranteed lowest cost Home Equity Loans
They've also learned to be temperate in all their purchases and resisted the temptation of applying for more loans or credit cards than they can handle. As you continue to manage your money (JET, November, 4), as well as your debt (JET, November 18), don't forget to keep maintaining your good credit.
Refinance your car loan with E-LOAN today
According to the Federal Citizen Information Center (FCIC), there are several ways you can maintain a good credit history:
* OPEN A CHECKING ACCOUNT, A SAVINGS ACCOUNT, OR BOTH. These do not begin your credit file, but may be checked as evidence that you have money and know how to manage it. Cancelled checks can be used to show you pay utility bills or rent regularly, a sign of reliability.
E-LOAN Loan Center
* APPLY FOR A DEPARTMENT STORE CREDIT CARD. Repaying credit card bills on time is a plus in credit histories.
Guaranteed Personal Loans - Unsecured Loans
50,000 satisfied clients a year can't be wrong!
Bad Credit OK - Click Here
* GET A SECURED CREDIT CARD. A secured credit card is a bank credit card backed by money you deposit in a bank account. If you don't pay off your credit card bill, the money in your account may be used to cover that debt.
Quicken Loans
* IF YOU'RE TURNED DOWN FOR CREDIT, FIND OUT WHY. It's important to clear up any credit misunderstandings or mistakes, because a bad record can cloud your credit future. Your credit rating is important, so be sure credit bureau records are complete and accurate.
Free Mortgage Quotes - Apply Now!
It bears repeating that if you have been denied credit, employment or insurance because of information on your credit report, you must receive the contact information for the credit bureau that supplied the report. If you contact the bureau within 60 days, you can receive a copy of your report for free. Review your report carefully to make sure there are no errors. It's also a good idea to check your report for errors annually. If there is a mistake on your credit report, contact the credit bureau in writing and explain the situation.
HFC Personal Loans
Keeping good credit can be a challenge, but armed with sound financial knowledge, it's a challenge that can be met.
Monday, June 13, 2005
E-loans save time, appease customers - finance companies' use of electronic decision-making in car loan applications
Few greater aggravations in the car retailing business exceed having the customer fill out a loan application, which will be faxed to several lending institutions, studied, and - after hours or even days - gets rejected.
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Even if the loan is approved, the financing process can extend the amount of time required to complete the transaction into a demoralizing ordeal. Small wonder that the financing part of buying or leasing a vehicle is what consumers find the most distasteful, according to customer satisfaction surveys.
E-LOAN Loan Center
So what if the process could be streamlined to a matter of minutes rather than hours?
The Internet has already made it possible for consumers to arrive at the dealership "preapproved." That is, they've conducted their own online credit bureau check and determined their credit-worthiness.
But what if that customer's loan application could be shopped electronically and accepted or rejected in, say, 15 minutes? Would that improve the shopping experience for the customer and also spare the finance manager a few points of rising blood pressure?
E-LOAN Purchase Application
Indeed, relief from the credit application blues is at hand. Several finance companies are using electronic decision-making and the like to quicken loan rejections and approvals.
Meanwhile, Credit Management Solutions, Inc. (CMSI), currently connects more than 200 dealerships with 20 lenders in the U.S. and Canada via CreditConnection, an Internet-based electronic transmission link for processing car loan applications from dealerships.
Apply for a car loan today!
CMSI's lender list includes NationsBank, Bank of Montreal, Wachovia, First Union, Bank of America, Wells Fargo, Nissan Motor Acceptance and GMAC, among others.
But just being a CMSI client doesn't automatically make the dealership a customer of the lending institutions, says Nancy Weil, senior vice president of marketing for the two-year-old Annapolis, MD-based firm.
"It's up to the dealership to establish a relationship with each lender, as finance managers presently do by non-electronic means," she says. "Just because you become a CMSI customer doesn't mean you can send your paper to any CMSI lender.
Apply Now and Drive Off Today
"We can make the introduction, so to speak. One of the things our service does is make it easier for dealers and lenders to contact each other. For instance, if a dealership wanted to expand its list of sub-prime lenders it does business with, we would facilitate the connection of that dealership with a CreditConnection sub-prime lender."
Using CMSI's electronic link to lenders, finance managers can submit loan applications and receive approval even during evening hours, weekends and holidays, when banks are closed.
Dealers need a 486 PC (or better), Windows 95, NT or 98, a modem and an Internet service provider (ISP), such as Mindspring, America Online, or similar carrier. This is equipment that most dealerships already have, says Ms. Weil.
Car loans for people with bad credit
CreditConnection costs vary according to the volume of usage, from a low of about $500 per month to as high as $1,500 when used as a stand-alone system purchased directly from CMSI. There is also a start-up fee of $250.
CreditConnection is integrated with ADP and UCS computers, she reports. Interested ADP and UCS customers can purchase the service through their computer companies, which set their own pricing structures.
Although electronic loan processing is a relatively new concept, it could be poised for rapid growth, says Ms. Weil.
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She cites a Killen & Associates study. It says that although today fewer than 1% of auto loan applications are taken online, that number could jump to 40% by 2005.
The main factor that will spur growth in electronic loan processing is consumer demand for speedier loan application processing, asserts Kevin Clements, director of retail services marketing for Reynolds and Reynolds.
Credit and Debt Management at E-LOAN.
"Consumers will eventually insist that the sales cycle be shorter, and they will have the capability to select the financing institution themselves," he says.
That could reduce dealership profits in the long run. But the ability to dramatically speed up the loan application process through electronic transmission would also allow the dealership to process more loans and sell more vehicles.
Consolidate your debt!
Electronic loan processing could give captive financing institutions an advantage in the marketplace, Mr. Clements speculates. Reynolds and Reynolds currently provides electronic lending capability to some dealers through Chrysler Credit.
"The captives already have an edge in the marketplace," Mr. Clements reports, "because, through DCS communications between dealers and the factory, the captives gather a lot of data, such as what kind of payment history you have, and they're constantly trying to find ways to pre-approve a customer's loan application.
Bad credit? E-LOAN Can help you get a home loan!
"Now, in some states, once you're a customer of one department of a bank - a credit card holder, for instance that division of the bank can pass your credit information to another division, such as the consumer loan department. Then a consumer may start receiving preapproved offers for car loans from the bank.
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"Currently, 75% to 80% of car financing is indirect. The percentage of preapproved lending is inching up, but we're not seeing a groundswell yet. But as EFF (electronic funds transfer) grows, we may see more consumers going directly to lenders without using the dealer as an intermediary."
Calculate Your Auto Payment
Competition among lenders has slowed rather than encouraged the growth of electronic car financing, says Mr. Clements.
He explains, "One of the main obstacles is that in every state but California each lending institution has its own credit application form requesting some unique detail of information. So, there's no one-size-fits-all credit application that would allow the dealership to shotgun the credit application to a number of lenders simultaneously.
"The banks may have to make the loan application process easier if they want to receive information directly from the consumer. A number of them already have. There's potential here for everyone - the bank, the dealership and the customer - to benefit"
Refinance your car loan with E-LOAN today
Even if the loan is approved, the financing process can extend the amount of time required to complete the transaction into a demoralizing ordeal. Small wonder that the financing part of buying or leasing a vehicle is what consumers find the most distasteful, according to customer satisfaction surveys.
E-LOAN Loan Center
So what if the process could be streamlined to a matter of minutes rather than hours?
The Internet has already made it possible for consumers to arrive at the dealership "preapproved." That is, they've conducted their own online credit bureau check and determined their credit-worthiness.
But what if that customer's loan application could be shopped electronically and accepted or rejected in, say, 15 minutes? Would that improve the shopping experience for the customer and also spare the finance manager a few points of rising blood pressure?
E-LOAN Purchase Application
Indeed, relief from the credit application blues is at hand. Several finance companies are using electronic decision-making and the like to quicken loan rejections and approvals.
Meanwhile, Credit Management Solutions, Inc. (CMSI), currently connects more than 200 dealerships with 20 lenders in the U.S. and Canada via CreditConnection, an Internet-based electronic transmission link for processing car loan applications from dealerships.
Apply for a car loan today!
CMSI's lender list includes NationsBank, Bank of Montreal, Wachovia, First Union, Bank of America, Wells Fargo, Nissan Motor Acceptance and GMAC, among others.
But just being a CMSI client doesn't automatically make the dealership a customer of the lending institutions, says Nancy Weil, senior vice president of marketing for the two-year-old Annapolis, MD-based firm.
"It's up to the dealership to establish a relationship with each lender, as finance managers presently do by non-electronic means," she says. "Just because you become a CMSI customer doesn't mean you can send your paper to any CMSI lender.
Apply Now and Drive Off Today
"We can make the introduction, so to speak. One of the things our service does is make it easier for dealers and lenders to contact each other. For instance, if a dealership wanted to expand its list of sub-prime lenders it does business with, we would facilitate the connection of that dealership with a CreditConnection sub-prime lender."
Using CMSI's electronic link to lenders, finance managers can submit loan applications and receive approval even during evening hours, weekends and holidays, when banks are closed.
Dealers need a 486 PC (or better), Windows 95, NT or 98, a modem and an Internet service provider (ISP), such as Mindspring, America Online, or similar carrier. This is equipment that most dealerships already have, says Ms. Weil.
Car loans for people with bad credit
CreditConnection costs vary according to the volume of usage, from a low of about $500 per month to as high as $1,500 when used as a stand-alone system purchased directly from CMSI. There is also a start-up fee of $250.
CreditConnection is integrated with ADP and UCS computers, she reports. Interested ADP and UCS customers can purchase the service through their computer companies, which set their own pricing structures.
Although electronic loan processing is a relatively new concept, it could be poised for rapid growth, says Ms. Weil.
E-LOAN
She cites a Killen & Associates study. It says that although today fewer than 1% of auto loan applications are taken online, that number could jump to 40% by 2005.
The main factor that will spur growth in electronic loan processing is consumer demand for speedier loan application processing, asserts Kevin Clements, director of retail services marketing for Reynolds and Reynolds.
Credit and Debt Management at E-LOAN.
"Consumers will eventually insist that the sales cycle be shorter, and they will have the capability to select the financing institution themselves," he says.
That could reduce dealership profits in the long run. But the ability to dramatically speed up the loan application process through electronic transmission would also allow the dealership to process more loans and sell more vehicles.
Consolidate your debt!
Electronic loan processing could give captive financing institutions an advantage in the marketplace, Mr. Clements speculates. Reynolds and Reynolds currently provides electronic lending capability to some dealers through Chrysler Credit.
"The captives already have an edge in the marketplace," Mr. Clements reports, "because, through DCS communications between dealers and the factory, the captives gather a lot of data, such as what kind of payment history you have, and they're constantly trying to find ways to pre-approve a customer's loan application.
Bad credit? E-LOAN Can help you get a home loan!
"Now, in some states, once you're a customer of one department of a bank - a credit card holder, for instance that division of the bank can pass your credit information to another division, such as the consumer loan department. Then a consumer may start receiving preapproved offers for car loans from the bank.
Finance your Motorcycle today
"Currently, 75% to 80% of car financing is indirect. The percentage of preapproved lending is inching up, but we're not seeing a groundswell yet. But as EFF (electronic funds transfer) grows, we may see more consumers going directly to lenders without using the dealer as an intermediary."
Calculate Your Auto Payment
Competition among lenders has slowed rather than encouraged the growth of electronic car financing, says Mr. Clements.
He explains, "One of the main obstacles is that in every state but California each lending institution has its own credit application form requesting some unique detail of information. So, there's no one-size-fits-all credit application that would allow the dealership to shotgun the credit application to a number of lenders simultaneously.
"The banks may have to make the loan application process easier if they want to receive information directly from the consumer. A number of them already have. There's potential here for everyone - the bank, the dealership and the customer - to benefit"
Sunday, June 12, 2005
Beware pitfalls of consolidating loans - Your Life
With interest rates near rock bottom, many consumers are consolidating their higher interest loans, especially credit cards. Consolidation can be a good strategy, but could cost far more in interest charges and even bad credit if you're not careful, cautions the Financial Planning Association, Denver, Colo.
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Consumers typically consolidate loans for several reasons--to bundle multiple loans under a single lender, lower their overall interest rates, or dig their way out of debt, Before rushing out to consolidate, though, weigh whether it is your best option and, if it is, be careful how you consolidate.
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First, don't confuse loan consolidation with debt consolidation programs, whose offers frequently appear in the mail or through e-mail and are designed for people with severe debt problems. The debt consolidation service renegotiates loan terms with your creditors and consolidates the loans into a single payment through the debt service. The use of a debt consolidation program can hurt your credit rating.
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Loan consolidations, on the other hand, are generally available only to those people with good credit ratings. They take many forms, the most common being home equity loans, home equity lines of credit, "cash out" home refinancing, student loan consolidation programs, and personal loans through financier institutions.
Refinance your home and take advantage of great rates!
Assume you want to consolidate multiple higher-rate loans into a single lower-rate Joan. To do this cost effectively, keep the following points in mind:
Are you disciplined enough to take advantage of consolidation? This may sound like a silly question, but it's not uncommon for people to consolidate multiple loans, lower their overall interest rates and payments, and then go out and rack up new debt. This defeats the entire purpose of consolidation.
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Don't confuse lower payments with lower rates. Just because the monthly payments for a consolidated loan are lower doesn't mean you actually are paying lower interest rates. This is especially true with plans offered by some debt consolidation programs. The lower monthly payments occur because the consolidation stretches out the life of the loan. A similar mistake is transferring lower-interest-rate loans into a higher-interest-rate consolidation loan. For ease of bill paying, and because most of their loans can benefit from consolidation, people may consolidate all of their loans. Yet, one or more of the original loans may actually have lower rates.
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!
Undoubtedly the biggest mistake occurs when consumers confuse lower monthly consolidation payments with saving overall finance charges. The college loan consolidation program, offering its lowest interest rates in its history, illustrates this point. Graduating students typically end up with multiple loans from multiple lenders, so consolidation makes paying easier, and the consolidation rates typically are lower than the rates for the original loans. However, here's the catch. Say an individual has $20,000 in student loans. In one example from a commercial lender, a consolidation loan would cost the student $222 a month for 10 years. Total interest payments would be $6,640. The student could lower that monthly payment to $143 a month by paying off the loan over 20 years--tempting considering the tight budgets of students just out of school. Yet, the total interest payments over the life of the loan would run $14,320!
Another example occurs when consolidating a five-year car loan into a 15-year refinanced mortgage or 10-year home equity loan. Even at lower rates, you probably will end up paying more in interest for the car than if you had stuck with the original loan or refinanced the car loan itself for a live-year period. A loan should be consolidated for no longer than the periled of the original loan.
Bad credit? E-LOAN Can help you get a home loan!
Another drawback in the above example is that you are transferring more loan risk to your home, and home bankruptcies right now ale among the highest in history. Do you want to risk the loss of your home for a car? A worse situation occurs when people consolidate their credit cards into a home equity loan, thus transferring unsecured debt to secured debt.
Guaranteed lowest cost Home Equity Loans
Consumers typically consolidate loans for several reasons--to bundle multiple loans under a single lender, lower their overall interest rates, or dig their way out of debt, Before rushing out to consolidate, though, weigh whether it is your best option and, if it is, be careful how you consolidate.
E-LOAN-Home Equity Loans
First, don't confuse loan consolidation with debt consolidation programs, whose offers frequently appear in the mail or through e-mail and are designed for people with severe debt problems. The debt consolidation service renegotiates loan terms with your creditors and consolidates the loans into a single payment through the debt service. The use of a debt consolidation program can hurt your credit rating.
Bad Credit Home Loans
Loan consolidations, on the other hand, are generally available only to those people with good credit ratings. They take many forms, the most common being home equity loans, home equity lines of credit, "cash out" home refinancing, student loan consolidation programs, and personal loans through financier institutions.
Refinance your home and take advantage of great rates!
Assume you want to consolidate multiple higher-rate loans into a single lower-rate Joan. To do this cost effectively, keep the following points in mind:
Are you disciplined enough to take advantage of consolidation? This may sound like a silly question, but it's not uncommon for people to consolidate multiple loans, lower their overall interest rates and payments, and then go out and rack up new debt. This defeats the entire purpose of consolidation.
E-LOAN Zero Down Mortgage
Don't confuse lower payments with lower rates. Just because the monthly payments for a consolidated loan are lower doesn't mean you actually are paying lower interest rates. This is especially true with plans offered by some debt consolidation programs. The lower monthly payments occur because the consolidation stretches out the life of the loan. A similar mistake is transferring lower-interest-rate loans into a higher-interest-rate consolidation loan. For ease of bill paying, and because most of their loans can benefit from consolidation, people may consolidate all of their loans. Yet, one or more of the original loans may actually have lower rates.
Refinance your car loan with E-LOAN today
Undoubtedly the biggest mistake occurs when consumers confuse lower monthly consolidation payments with saving overall finance charges. The college loan consolidation program, offering its lowest interest rates in its history, illustrates this point. Graduating students typically end up with multiple loans from multiple lenders, so consolidation makes paying easier, and the consolidation rates typically are lower than the rates for the original loans. However, here's the catch. Say an individual has $20,000 in student loans. In one example from a commercial lender, a consolidation loan would cost the student $222 a month for 10 years. Total interest payments would be $6,640. The student could lower that monthly payment to $143 a month by paying off the loan over 20 years--tempting considering the tight budgets of students just out of school. Yet, the total interest payments over the life of the loan would run $14,320!
Another example occurs when consolidating a five-year car loan into a 15-year refinanced mortgage or 10-year home equity loan. Even at lower rates, you probably will end up paying more in interest for the car than if you had stuck with the original loan or refinanced the car loan itself for a live-year period. A loan should be consolidated for no longer than the periled of the original loan.
Bad credit? E-LOAN Can help you get a home loan!
Another drawback in the above example is that you are transferring more loan risk to your home, and home bankruptcies right now ale among the highest in history. Do you want to risk the loss of your home for a car? A worse situation occurs when people consolidate their credit cards into a home equity loan, thus transferring unsecured debt to secured debt.
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