Do You Need a Co-signer for Your Auto Loan?

If you don’t have enough income or good enough credit, you may need a co-signer

As with any type of loan, your income and credit history will be major determinants of whether you are approved for an auto loan application. If you’ve been denied for an auto loan, you may want to consider using a co-signer.

Understanding how a lender determines loan approval
According to a January 2016 article in The Balance by author of “The Everything Improve Your Credit Book” Justin Pritchard, the lending company or financial institution must have reason to believe you will pay back the loan in order for you to be deemed worthy to receive the auto loan. A financial institution looks at two factors to determine whether you are credible: your credit score and your income.

Your credit history is a true indicator of how well you repay your loans; if you’ve borrowed money through loans previously and have successfully paid them off, or are making on-time payments, the lender will be more likely to believe you are a safe bet and will approve your loan application. On the other hand, if you have a poor credit score from defaulting on loan repayments, or don’t have any borrowing history, the financial institution may not want to approve you for a loan, explains Pritchard. To the financial institution, such a person is a bad investment, as the likelihood of the financial institution being repaid decreases.

Lenders also consider the income of the individual in deciding on a loan application, says Pritchard. In fact, the financial institution often calculates a debt to income ratio to determine if you make enough income to cover the expense of the loan payment each month.

Larger vehicles are generally more expensive than smaller ones, but smaller cars can also be more costly depending on the make and the engine build. The price of the vehicle and its calculated monthly payments under a loan in comparison to your monthly income will determine whether you have a low enough debt to income ratio to afford the monthly payments.

When to bring in a co-signer on your auto loan
If you have poor or no credit history, or your debt to income ratio is deemed too high by the lender, you will likely not be approved for a loan. In essence, the financial institution has determined you are too risky and will likely struggle to repay the loan, so it is unwilling to work with you.

A co-signer can help you meet the income and credit score requirements of the financial institution, as the financial institution considers the added income and credit history of the co-signer to the loan terms, explains Pritchard.

“Co-signing happens when somebody promises to pay a loan for somebody else. This happens when a [financial institution] won’t approve a loan (or it won’t approve the original application, but it’s willing to lend if a co-signer is involved),” says Pritchard in an October 2016 article in The Balance.

To the financial institution, the co-signer acts as a backup plan to collect payment if you default on the loan repayment. And if the co-signer has good credit history, the financial institution knows that at least one person on the loan has experience borrowing and repaying loans on time, adds Pritchard.

“The co-signer (who presumably has strong credit and income) promises to ensure that the loan gets repaid by signing the loan agreement with you. In other words, the cosigner takes full responsibility for the debt — if you don’t pay off the loan, your co-signer will have to do it.

“As a borrower,” Pritchard explains, “you need to have sufficient income and good credit to qualify for a loan. Using a co-signer therefore boosts your appeal as a borrower to the financial institution if you can’t meet the loan application requirements on your own.”

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Three Things You Need to Do to Your Student Loans Right Now

Stay ahead of this big expense

Recent college graduates already have enough on their plates worrying about getting a job and supporting themselves — the last thing they want to do is stress over student loan repayment. For most, paying off student loans takes a long time, so no matter where you are in that process, there are three things you should stop and do right now.

1. Get organized
Take an inventory of your student loans. You can get a list by signing up at http://www.nslds.ed.gov/. After a short enrollment process, you will have a handy list of all guaranteed loans that were issued to you by the government, as well as those made by private lenders through June 2010. If you have a private nonguaranteed loan, those should all be present and detailed on your credit report, which you can find for free online.

Create a spreadsheet chronicling the name of each lender, the web address, your username and password (ensure your device is locked or encrypted), the loan balance, and the interest rate. The latter will be helpful if you opt to consolidate or pay off any interest early down the road. But be sure to keep your list up to date, as interest rates on student loans can be fixed or variable.

2. Know your repayment options
“The standard repayment schedule extends your loan payments over ten years, or 120 payments,” explained Maggie McGrath of Forbes. “However, if the standard monthly payments aren’t manageable on your budget — or if you’re unemployed or otherwise unable to repay your loans — the federal government has some alternative repayment plans for you, as well as some deferral options.”

Income-based repayment (IBR) and income-contingent repayment (ICR) extend your payment period to 25 years, capping your monthly payments at a fixed percentage of your income. The income on which payments are based and the actual percentage differ between the two plans. Pay-as-you-earn is a 20-year repayment period, with yet another varying percentage of your discretionary income.

You can read about other repayment options from the government here: https://studentaid.ed.gov/sa/repay-loans/understand/plans. Be wary, as these types of programs can cause your interest costs to increase over time, so always pay as close to your original amount due as you can.

3. Be aware of loan forgiveness opportunities
There are three primary programs that forgive the balance of your loan: Public service loan forgiveness, teacher loan forgiveness and Perkins loan cancellation.

“To qualify for forgiveness, your loans can’t be in default, meaning they’ve gone unpaid for more than nine months,” noted higher education expert Brianna McGurran of Nerdwallet. “Also, private student loans don’t offer forgiveness, though some lenders will let you make interest-only payments or take a temporary interest rate reduction if you’re having trouble affording your bill.”

Public service loan forgiveness requires you to have been working for a nonprofit or the government for at least 10 years in roles including, but not limited to, firefighting, teaching, the military and nursing. In the teacher-specific program, you must work full time as an educator for five consecutive years. The Perkins loan forgiveness also cancels the balance of that loan if you’ve worked as a teacher, firefighter, nurse, police officer, school librarian or public defender for about five years or more. For a complete description of eligibility requirements, visit https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation.

If you take the time to do your homework and gather yourself before — or even while — you are repaying your student loans, the process will seem a lot less scary, and a lot more manageable.

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Tips for Making Safe Credit Card Purchases Online

In today’s digital age, you need to be especially careful when making online purchases

With online shopping becoming the norm, people have also become more susceptible to identity theft. It’s imperative that you be careful and mindful of how you shop online.

A November 2016 article in The Balance by contributor LaToya Irby outlines seven tips for safe online shopping:

Conduct your online shopping only on websites you trust
It may sound obvious, but using your credit card to make online purchases only on those websites you know and trust could save you from becoming a victim of fraud. Never click on links provided via email; instead, type the entire URL of the website into your browser to open the site.

Never shop from a public place
Public computers are susceptible to hacker technology, such as software that captures your keystrokes and retains your personal and credit card information. Additionally, public Wi-Fi is unsecured and, as such, could redirect your device to a fake internet connection that an identity thief can monitor and use to intercept your personal information.

Keep your devices protected from viruses
Always stay up to date with virus and spyware protection software, and make sure you are using antivirus software that is reputable, not the type for which you receive an ad via email or in a pop-up window.

Check with the BBB first
The Better Business Bureau marks websites with poor customer service records, so make sure to check out the credibility of the site in question using the BBB before making a purchase.

Use credit cards, not debit cards
Credit cards have better protection services against fraud than debit cards, so you’re liable for fewer fraudulent charges if they occur. Additionally, you could lose access to your account and your funds while the financial institution sorts out a debit card that has been compromised, whereas with a credit card the only access that’s affected is that line of credit.

Make sure the website you use is secured
Always look for the green lock symbol at the start of your URL browser, and make sure you type in the website using “https” to ensure the site is secured to encrypt your information when making online purchases.

Keep track of your purchases with receipts
Just as with in-store purchases, printing a copy of the receipt of your online transaction will help you track your credit card activity. Use the printed copy to compare against your monthly credit card statement and watch for fraud.

In a November 2016 article in the Better Business Bureau by APR, CFEE Janet C. Hart recommends checking both your credit card activity and your bank account activity once a week, rather than waiting for the monthly statement. This ensures you catch fraudulent activity shortly after it’s occurred instead of finding out weeks later.

Hart also advises that we be wary of phishing scams—emails seemingly from a business claiming an error with your order or your account and asking you to confirm personal and identifying information. Legitimate businesses do not send these types of emails.

“Beware of ‘GREAT’ deals — if you find a website offering deals that seem too good to be true, they probably are. You may get a knock-off product, a product that is not the brand you ordered, or you may get nothing at all,” adds Hart.

Lastly, Hart recommends always checking the website’s privacy policy before making purchases online, so you know exactly how your personal information will be used.

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What to Know About Trading in Your Existing Car

The steps you should be taking as you head to the dealership
Are you thinking about trading in your current car for a new one? Before rushing to the dealership and signing any papers, there are a few things you should consider.

What is your current car’s appraisal value?
“To determine [whether] you’re being offered a reasonable price on your trade-in, you first must know what your car is worth,” says Edmunds senior consumer advice editor Ronald Montoya.

You can do this via any appraisal resource, like Edmunds’ True Market Value tool or Kelley Blue Book (KBB). Be honest with yourself when assessing options and condition, or you may find yourself with a vastly inaccurate assessment.

What does the dealership say?
Next, you will want to take your current vehicle to a dealership to have the experts there appraise it and give you a trade-in amount offer. This number will not be the same at all dealerships, as it depends on various factors, including current inventory levels, probability of sale and current trade-in promotions.

How much do you still owe on your vehicle?
Find out how much you owe on your current car by requesting the payoff amount from your lender.

“This is the amount it will take to pay off your existing loan, and it may be different from any outstanding balance listed on your statement or [in your] coupon book. This difference may be because of a prepayment penalty or the way interest is calculated,” the Consumer Financial Protection Bureau website explains.

Compare that amount to the appraisal quote and the trade-in value given to you by the dealership. If you still have equity in your vehicle (that is, you are not “upside down” — owe more than your car is currently worth), you can use that to your advantage.

Can you negotiate?
As previously mentioned, don’t settle for the first number spit out at you. The first offer always starts low, as dealerships expect buyers to negotiate. Use your original appraisal from Edmunds or KBB as a basis for what is fair and see if they’ll match that number. If you are upside-down on your current car, see if they will give you a bit more for your trade-in if you plan to get your new car there that day. However, be sure to keep negotiations for your trade-in and your new car separate. In most cases, your trade-in can be used as a form of down payment and will be written into your new car contract as a credit against the price of the car.

Following these steps will set you on the right path to having a positive vehicle trade-in experience.

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Is It Still Important to Know How to Balance a Checkbook?

Even in the digital age, knowing how to balance your checkbook is still relevant

People used to learn to balance a checkbook with a registrar log of all their daily marchfeatured_balcheckbooktransactions to better keep track of their money. The digital age, and the immediate access we now have to our bank accounts online, has made this skill less necessary. Yet it’s still important for several reasons.

To start, it’s still a tried-and-true method for verifying your financial institution’s statements, reports an October 2016 article on financial resource website The Balance by contributor Deborah Fowles. Although it’s rare, financial institutions can still make mistakes; they typically allow a maximum of 60 days to inform them of an error, so it’s important to stay up to date on your transactions.

Keeping a written record of all your daily transactions, as with balancing your checkbook, is also a helpful way to ensure you don’t overdraw on your account’s funds, reports an article in Investopedia by contributor Amy Fontinelle.

“In the age of electronic banking, checkbook balancing is not as straightforward as it once was – most people have money entering and leaving their accounts through methods other than writing and depositing traditional paper checks, such as direct deposits from an employer and ACH transfers to pay your bills online,” says Fontinelle. Keeping a written log will ensure you don’t forget about any transactions that haven’t yet posted to the account.

An example, adds Fontinelle, is a check you’ve written and sent to someone for his or her birthday. Sometimes, people hold on to checks for a while before depositing them, and if you’ve forgotten about the check you’ve written, you may not have sufficient funds in your account when the check is finally processed. Not only will you incur an overdraft fee from your financial institution, but the person depositing the check could also incur a fee, and may ask you to pay it.

“Because we have the electronic means, we don’t feel compelled to balance our checkbook. But by not looking at what you’re doing on a monthly basis, you’re not keeping good track of what’s going on with your finances,” says owner of Boucher Financial Planning Services Frank Boucher in a January 2013 article on Bankrate.com. And if you’re not keeping track of your finances, you’re bound to overspend and will end up paying fees you could have avoided.

There have also been cases when a financial institution has moved extra money into an individual’s account, reports Fontinelle. Although it is the financial institution’s error, you will be billed a theft fee if you spend this money and can’t maintain funds to cover the extra money. It’s important to monitor your balance so you can notify the institution immediately if such an error occurs.

According to a January 2013 article on Bankrate.com by contributor Marcie Geffner, reconciling or comparing your written checkbook registrar to the financial institution’s monthly statement is also a good way to detect fraud or unauthorized transactions made to your account. In addition, having a written record of your daily transactions can help protect you from identity theft, especially in an age rife with cybercriminals.

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Financial Skills Everyone Should Have

Basic money management skills every adult should havemarchfeatured_essnfinskills
Basic money management skills are key to a financially successful life. Conversely, if you don’t learn the basics of your finances, you can end up in serious debt and struggle to make ends meet.

Basic management skills
As an adult, you should be able to manage your money, including income coming in and bills and purchases going out. This is not to limit yourself but rather to free yourself, enabling you to spend realistically based on how much money you actually have, so as to avoid going into debt.

According to Jesse Campbell in a May 2015 article in Money Management, a financial counseling and education service provider, one of the foremost skills every person should have is how to maintain a budget. Campbell suggests starting simple and making a plan for your income based on your bills, spending needs and savings. As budgeting tends to become more complicated with age (adding in mortgages, retirement accounts and even college savings plans), it’s crucial to know how to budget and stick to a plan.

A February 2016 article in The Balance written by contributor Miriam Caldwell adds that understanding how to set financial goals, including how to break them down and actually meet them in a realistic amount of time, is essential to planning for long-term savings and spending needs, like emergencies or even retirement. This will further help you budget as you set aside money for different spending goals.

Caldwell also reports that with the digital age and the advent of online banking, many people have forgotten or no longer practice the skill of balancing a checkbook. This basic skill is a must for all adults. Computers can still make mistakes and it’s important to still know how to check your spending each month to ensure your accounts reflect the correct balance. Clerical errors or fraud can go unnoticed and hurt you in the long term if not taken care of immediately.

Understanding credit and financial agreements
Even in the digital age, you should be able to know how to read a bank or credit card statement.

Whether your financial statements are printed out or available online, understanding them and the information provided is imperative to managing your money and maintaining organization. You should also get in the habit of reviewing your statements on a regular basis, whether daily, weekly or monthly, Campbell reports.

When opening a new credit card or debit card, or applying for a loan, you should be able to read through and understand the terms of your loan or line of credit, including interest rates and fees, Campbell adds. An offer that looks great on paper may end up sinking your budget if you overlook or don’t know the conditions and terms of your agreement.

Furthermore, every adult should know how to build good credit and understand the benefits of good credit history. Caldwell notes that it’s especially important to know how to manage your credit cards and pay your bills on time to keep your debt low and help build good credit.

Although it’s tempting to avoid using credit altogether, doing so is essentially the same as creating a bad credit history, Campbell adds. In the long term, it will only hurt your ability to get credit when you need it later, like for a mortgage, a car or another major expense.

Should you have concerns about your financial life, don’t shy away from consulting a financial adviser of other resource.

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How Online Banking Can Help You Budget Better

Benefits of online banking that can aid in your budgeting process

Online bankingfebruaryfeatured_onlineacctaccess can make a personal budget much easier to manage. Enrolling will offer you numerous benefits to constantly ensure that your finances are on track, such as the following:

It will list all your accounts in one place. With online banking, you don’t have to worry about how much money per paycheck you need to avoid spending in order to save enough for that summer vacation. Make that expenditure or savings goal its own account and either manually or automatically transfer that amount. That way, you will be able to see your total amount of assets, but you won’t be tempted to, or accidentally, spend the money you needed for the plane ticket while shopping at the department store.

You may be able to organize your expenditures by category. Some software that your financial institution may utilize, like FinanceWorks, as well as third-party apps or web browser extensions such as Mint allow you to create expense categories-or better yet, do it automatically for you. This is beneficial for future budgeting purposes or to make adjustments, because you can see how much was paid in a specific area (e.g., electricity, groceries, phone service).

“This saves time and confusion from sorting through months of paper statements and allows you to compare spent amounts with budgeted amounts – so your budget resembles your real life as closely as possible,” says professional money manager and Investopedia contributor Ryan Barnes.

Scheduling and alerts allow you to avoid late payments or overdraft fees. These little charges can take a toll on your finances if you don’t stay ahead of them. Automatic bill paying and scheduling recurring payments will send a set amount of money to a certain payee on the exact date you request, so you can avoid late fees. You can also schedule alerts to tell you if your account balance is getting low, which is helpful to avoid both overdraft and returned check fees, as you can immediately transfer money from another account and conveniently get the information you need to adjust your budget.

You can see your finances in real time. Paying bills and other financial operations are almost immediate (or at least more so than writing a paper check, sending it through the mail and having to wait for it to clear). The widespread adoption of mobile banking (online banking, but not tied to a personal computer) has also facilitated these benefits.

“Consumers have a greater handle on their money since they only need a mobile connection to access their accounts. No Internet service is required,” says Bankrate.com Editor Janet Stauble. “There are fewer surprises, as customers can check their balances and transactions anytime.”

Being able to analyze your finances in real time is especially helpful in the small business realm, says Chris Joseph of Small Business Chronicle, as you can see all your accounts and expenditures right in front of your eyes, while knowing exactly what is liquid and what assets are tied up.

Whether you use it for personal or for business reasons, online banking offers many advantages that can be vital to keeping a successful budget. Check out MyBranch Online Banking by visiting our site!

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