Personal Loan Blog

Great Tips and Advice for Managing Your Money

budgeting for car loan

A new car is one of the biggest purchases in an average person's life, perhaps second only to a home. And as of this year, CNet mentions that the average price of a new car is now at least $40,000. But that’s only the cost of buying the car. The AAA states that on top of the purchase price, car owners spend almost $10,000 annually for upkeep. Among the factors that contribute to this are fuel and maintenance.

Budgeting for a new car isn't just limited to the car price, there are also more immediate hidden costs. If you’re saving up and setting a budget for a new car, here are some things to account for as well:

Dealership fees

Dealership fees cover a range of payments. For one, registration fees are costs for the title and license, averaging around $8 to $225. Meanwhile, the documentation fee pays the dealer to complete the paperwork related to the sale of your car, such as sales contracts and filings with the DMV, which can set you back $55 to $700. The destination fee, which is around $700 to $1,000, covers the cost for the manufacturer to transport your new car from the factory to the dealer lot.

However, some dealers may try to increase their profits by piling on additional fees. For example, the dealer prep fee can be around $100 to $400, and is supposedly for preparing the vehicle — which should already be part of their services. BusinessInsider.com also talks about how some companies are increasing destination fees without a detailed breakdown of their calculations. As a rule of thumb, when a cost isn't reflected in the manufacturer invoice, you should negotiate to drop the fee. Or you can also haggle the price of your car to offset the fees.

Car insurance

Car insurance gives you some financial protection in case of an accident. Basic car insurance coverages include personal injury protection, comprehensive coverage, and collision coverage. However, these protect only the insurance holder, and AskMoney.com suggests that you should also get third-party insurance. Also called liability coverage, this financially protects a third party in an accident. There are two kinds of third-party insurance — bodily injury coverage, which compensates a person affected by an accident caused by the insured, and property damage coverage, which pays for property damage caused by the insured.

Aside from the basic coverages, you can also opt for add-ons for better protection. For instance, roadside assistance ensures that you get aid and help if the insured car breaks down on the road. The average cost of car insurance is $1,674. However, you might pay more or less depending on where you live, which insurance company you choose, and what coverage you opt for.

Finance charges

When you take out a loan to buy a car, this comes with a financing charge, which is the total amount you pay to get the loan. This includes the interest and origination fees, which the lender charges to process the loan. The interest rate is what you’d be most concerned about, as it’s determined by factors such as your credit score and the type of car you want to buy.

Our Debt To Income Ratio — Why Should I Care? article also discusses that it’s not enough to have a stable income and pay debts on time. You'll also need to be wary of your debt-to-income ratio — the percentage of your gross monthly income that’s used to pay monthly debts — because the higher it is, the less disposable income you have, so the less likely you are to get a loan. A few ways to lower the ratio are avoiding taking on new debt for the time being and working on lowering principal balances on your credit cards and debt.

With a new car comes additional costs, from dealership fees to financing charges. It’s important to take these into account so you don’t get taken by surprise and spend more than you ought to. For more financing pointers, check our blog here on AmericasLoanCompany.com.

Article written by Rose Judd

Exclusively for America’s Loan Company

debt vs income ratio

Ever applied for a loan, whether personal or mortgage, or for a credit card and been denied due to having a high Debt-To-Income ratio (DTI)?  Or maybe you were offered an interest high interest rate for the application for credit due to a high DTI?  If you are someone with a stable income with a long time at your job and who is still paying debts on time, you may have thought it silly to not be given credit or credit with cheaper terms for that reason alone.  However, there is a reason that lenders use that Debt-To-Income measure in conjunction with your credit history and stability to make a determination on credit.  Simply, individuals with DTI considered too high have less disposable income and are a higher risk of default.  So, how can you avoid having your plans put on hold due to a DTI that is too high?

What is a good Debt-To-Income ratio?

Typically, a ratio below 36% is ideal.  Depending on other factors like credit score and job stability some lenders may allow that number to be high and still provide you with credit.  But, remember, the higher the DTI the less favorable the terms will be, meaning higher interest rates and shorter terms.  

How Is The Debt-To-Income ratio Calculated?

DTI is calculated by adding up the monthly minimum payment on debts, divide that number by the gross monthly income, and multiply by 100.  The gross income is the income before tax and other deductions are taken.  Your take home income is not the gross income as it is the left over after taxes and deductions.  Regular monthly payments that are not debt, such are rent, electric, gas, phone, and food, are not considered for DTI.  The minimum payments on debts considered under this calculation would include even the minimum payment on debts that do not show on the credit report.  For instance a lender not on the credit report but that shows on the bank statement, taking regular monthly installments from the bank account, could be counted in the calculation for DTI.

Still Don’t Get It?  Here’s Some Examples

Example 1:  For this example, lets assume that the credit report shows that the minimum payment on credit card 1 is $25.00, the minimum payment on credit card 2 is $30.00, the minimum payment on a Personal Loan is $75.00, and that the minimum payment on a mortgage is $1000.00.  The total of minimum payment on these debts is $1130.00.  Assume no other debts show on the bank statement that are not already on the credit report.  If the gross monthly income totals $4520.00.  The divide the total of the minimum payments, $1130.00, by the gross income, $4520.  Multiply that figure by 100 to get at DTI of 25%. ( ($1130 / $4520) x 100 )

Example 2:  Assume you have the same minimum payments on the credit report as on Example 1.  But now the holidays came and you added extra credit cards and loans with minimum payments totaling $550.00.  So now we have added $550.00 to the minimum monthly payments of debts of $1130.00 from example 1.  The minimum monthly payments on the credit report then equal $1680.00 ($1130.00 + $550.00).  If we have the same gross monthly income as the previous example, $4520.00, then the DTI is 37% ( ($1680 / $4520) x 100 ).

Example 3:  Going back to Example 1, lest say that instead of getting debts during the holidays from companies that report to credit bureaus, you decided to get loans from creditors that don’t report to TransUnion, Equifax, or Experian.  However, the minimum payments for these non-reporting companies do show as deductions on your bank statements and these minimum payments total $600.00.  Even though these debts are not reported to a credit bureau, they can be counted towards the DTI as debt.  So these minimum payments would be added to the total of minimum of payments in the credit report, $1130.00, for a total of $1730.00.  The DTI, still assuming a gross income of $4520.00, would then be 38% ( ($1730 /$4520) x 100 ).

How To Lower The DTI?   

If your DTI is too high and is having and adverse effect on your financial planning, to lower the Debt-To-Income ratio, you could find a job with a higher salary or ask for a raise.  A raise on the gross income would lower the DTI, if more debt is not added.  But, that is may not be practical.  Also, it does not address the root problem which is you have too much debt.  To lower the DTI avoid taking on new debt.  Also, work on lowering the principal balances on the current credit cards and loans to as to pay them off sooner than later.  This may take more discipline.  But, in the end it may provide you with the financial standing to get better terms on future debts.

Must Know About Emergency LoansAn emergency loan is an unsecured loan that you can borrow whenever you're in a pinch. It means that it’s quick and easily approved — you can get the money as fast as the next day. The borrowing limit depends on the amount you need for such an emergency, but they typically range between $250 and $1,000. 

There are many lenders on the internet if you think it would be a struggle to find one. 

Emergency loans are unsecured, which means you don't need to offer collateral to get approved. However, some lenders offer secured loans as emergency loans. The collateral is just the usual, like home equity or some asset. There are also other loans that you can use as emergency loans, like payday loans and credit card cash advances, which we will discuss later.

The most popular option for an emergency loan is personal loans. They are quick, easy, and negotiable. But remember that these factors depend on the lender. The interest rate, borrowing limit, and repayment terms will change depending on your creditworthiness.

For which purpose can emergency loans be used?

One of the most popular uses of emergency loans is the payment of medical bills. If you're struggling with an unexpected medical expense, taking out an emergency loan is the way to go. Other purposes include rent and mortgage payments. We've all been there; your salary will be late, and you're not expecting it for a few days, but the monthly rent or mortgage is slowly dawning. The way to mitigate this disaster is to take out an emergency loan. 

Another common use of emergency loans is payment of utilities. Nobody wants to get their electricity and water cut off. But sometimes, we accidentally go over our budget, sacrificing our payment of utility bills for some reason. 

If you're currently having that problem, call the lender, and tell them that you want to take out an emergency loan. There are plenty more uses of an emergency loan and the list goes on and on. 

Here are some loan options for you if you're in an emergency.

Personal Loans

A personal loan is a type of loan that has many uses. For instance, you can use it for a car loan, pay for mortgages, or even for emergency purposes. Many financial institutions, like banks, online lenders, and even credit unions, offer personal loans. It works like a typical loan— you have to pay it back monthly with interest. 

Some personal loans have fees and other charges, depending on the lender you choose. Personal loans are different from student loans, car loans, or mortgages as they are taken for specific purposes. However, they can be used for any purpose as they are very flexible. With a personal loan, there's typically a fixed date for the loan repayment. 

Title Loans

A title loan is a type of loan that requires collateral. Title loans are popular for two reasons. First, the lender doesn't check the borrower's creditworthiness so tightly. Second, since the approval is loose, a title loan can be quickly approved.

So how does it work? The most common form of a title loan is a car title loan. Before you get a title loan, you have to have a car. The lender will take the car as collateral, appraise it, and lend up to 25% of the car's total value. A car title loan can go up to $1,000, but you could get more depending on your car's total value.

The usual duration of the loan is 15 to 30 days, although that depends on the lender. In terms of repayment, you can agree with your lender to repay the loan in a lump sum after a few weeks, or you can pay it with a multi-year installment.

Payday Loans

Payday loans are instant cash loans, where a lender offers you a high-interest loan with the principal, a certain percentage of your next salary. This type of loan usually has a high interest rate because of the urgency.

Payday loans don't require collateral, making them unsecured loans. These loans can be taken online or in physical stores. Also, they are fast and easy to get, which makes them a better alternative for emergency loans.

Final Thoughts

Emergencies can happen anytime, anywhere, and it becomes a real struggle to pay expenses in the most unexpected times. However, you don't need to struggle with these expenses anymore with the alternative options above. They are all quick and easy and are very convenient when you're in a pinch.

Author Bio: Darcy Andrew is a journalist that specializes in articles about finance, fashion, and engineering. She also tackles topics about politics and socioeconomics. In her free time, she browses the internet to look for new topics about financing, for example, cash loans that are instant and where to find them or tips on how to improve your credit score.

car buying tipsPurchasing a vehicle may not be as much of an investment as it is a cost. 

An pricey cost at that.  Shopping around can save some pennies.  But, ever wonder if buying a used vehicle would be a better way to spend your hard-earned money as compared to a new vehicle?  There are pros and cons to both.  So, you’ll have to bring out the calculator and put some mind to it before making that big a purchase.

Here are some of the advantages of buying a new vehicle.  The first one that comes to mind is that it will have the newest technology and creature comforts.  For instance push start is found on many new vehicles now a days, but, no so on used vehicles.  There are now vehicles that can park themselves.  With older used vehicles you’ll have to rely on what you learned about parallel parking to get the job done.  New vehicles also have the most up to date safety features.  Other pluses to a new vehicle is that it can be customized to your liking and may come with warranties.  It is also less likely to have blemishes that older vehicles may have due to time on the road. There is also the issue of financing.  New vehicles tend to get the better interest rates as compared to used vehicle.  

But before you start checking the credit score to figure out the best interest rate that you may qualify on a car loan, consider some of the benefits of buying a used vehicle with not too heavy a mileage on it.  For one depreciation.  A new vehicle may depreciate up to 10% the moment it’s driven off the lot according to auto.com (https://www.auto.com/advice/car-depreciation-how-much-does-a-new-car-depreciate).  Not so with a used vehicle.  There is also the cost as a used vehicle should cost less that the same vehicle new.  Car insurance is another point to keep in mind.  Insurance tends to be cheaper on used vehicles, but, not always.  Do some homework on the vehicle you want by contacting your insurer.  It also helps that with used vehicles there is a track record that can be considered.  One can more easily find how a 2018 Ford Explorer has performed with owners than a brand new vehicle which may have what are yet unreported issues.

Buying new or old will take some thinking.  But do use that worldwide web to do some homework to help you pick that perfect vehicle.    

question on loan guarantorHave you been asked to act as a guarantor for someone’s loan? Are you wondering what a loan guarantor does?

Of course, we will answer your questions regarding this subject in this blog post. But, first, let me tell you that being a loan guarantor takes some balls. It’s a must to weigh the consequences of taking this role, especially if you don’t fulfill your obligations of being a guarantor. One of these risks is hurting your credit score. 

You’re in the right place before making your big decision: to be or not to be a loan guarantor? Here’s a guide to help you regarding this matter. 

What’s the Responsibility of a Loan Guarantor?

If everything goes smooth - which means if the borrower pays his/her debt on time - the guarantor does nothing at all. The role of the guarantor, after all, is to guarantee that there’s someone who’s going to pay for the loan if the borrower doesn’t or can't pay it. 

In the case of the borrower missing payments or defaulting on the loan, the passive role of a guarantor turns active. He/she will now shoulder the failed obligation of the borrower. Based on the contract, the lender may request the guarantor to continue making the payments for the loan.

The guarantor should follow the terms of the guarantee if the borrower misses making a single payment or the entirety of the loan. If the guarantor won’t continue paying the debt, his/her credit score will get dragged down. That’s the harsh reality of being a loan guarantor. 

Why a Lender May Require the Borrower to Have a Loan Guarantor?

A lender may ask the borrower to get a guarantor for the loan for various reasons, namely:

  • The borrower hasn’t experienced borrowing money in the past (no credit history).
  • The borrower has bad credit or a history of missing payments. 
  • The borrower doesn’t have a sufficient monthly income required for getting the loan. 
  • The borrower owes other debts. 

Who Can Be a Loan Guarantor?

While lenders may differ in setting their requirements for a loan guarantor, we can nevertheless list down the most common of these qualifications. 

  • A would-be loan guarantor has to be 18 years of age and above.
  • A would-be loan guarantor needs to have a good or excellent credit score. 
  • A would-be loan guarantor must have a full-time job and meet the required monthly income. 
  • There must be proof that the would-be guarantor and the loan applicant aren’t married or have shared financial accounts. 

Is It Possible for a Loan Guarantor to Back Out of the Agreement?

As long as you haven’t agreed to any contract yet, you’re good to go. But once you have signed the terms of the guarantee, you can’t back out from your obligation. Thus, it’s crucial to think about it carefully before you decide to be a loan guarantor. You need to consider these questions below to help you make a decision. 

Can You Afford to Continue Making the Payments If the Borrower Can’t?

A loan guarantor must be financially confident in acting for this role, if not to say lots of guts. Think about the worst-case scenario. If you’re going to make the payments that the borrower failed to do, you should make sure that you can afford them. Also, take into account your other essential expenses, such as food or mortgage. 

Do You Know the Risk to Your Credit When You Miss Payments as a Guarantor?

Your credit won’t get affected by you simply being a loan guarantor. However, when the borrower can’t pay back the loan and you need to shoulder the obligation and you also fail to make payments, your credit score will get negatively affected by your action. So, always ponder this scenario before deciding to become a loan guarantor. 

Are You Aware That Your Assets Might Get Repossessed?

Besides hurting your credit score, the lender has the right to take legal action against you and repossess your house or other assets to cover the repayment on the loan. 

How Well Do You Know the Borrower?

You must know the borrower you’re guaranteeing. Make sure that he/she has the capacity to pay back the loan. Check his/her monthly income, assets, and financial resources. Moreover, you have to ensure that the borrower is serious about repaying the debt. You can’t just be a guarantor for someone’s debt if you don’t know that person well. 

Takeaway

Being a loan guarantor is a serious matter. If someone asks you to guarantee his/her loan, you must be aware of the responsibility and the consequences that come with this role. Keep in mind that you have to pay back the borrower’s debt if he/she failed to repay it. Moreover, if you can’t fulfill your obligation, your credit will get affected and the lender might repossess your assets to cover the payment for the loan. 

Author Bio:

Bree Diaz is a blog writer who tackles topics surrounding personal finance. She is well-versed in consumer loans such as secure online payday loan and guarantor loans. Bree is also a hiker and a dog lover.

Affordable Bad Credit Loans

6 Mos. to 5 Yr. Terms

We Report Your Credit

Fast Approval

 

bbb long 300 Google Reviews

America's Loan Company - Notice

Customer Notice: Personal loans, title loans, and car loans have terms 6 months or longer. There are no early payoff penalties. We currently report to one of the 3 major credit bureaus, TransUnion. However, many factors affect your credit score. Therefore, we can't promise that your credit score will improve while having a loan with us.

Requirements: We are able to service Ohio residents only. Approval depends upon meeting legal, regulatory and underwriting requirements. America's Loan Company may, at its discretion, verify application information by using national databases, including but not limited to Teletrack and any of the national credit bureaus. America's Loan Company may take this information into consideration in the approval process. Due to state and verification requirements, not all applicants for loans may be eligible for approval by America's Loan Company. You may be required to submit additional documents due to state law and qualification criteria.

Products & Services: Products and services offered to customers may vary based on customer eligibility and applicable state and federal law. Actual loan amounts vary. The availability of loans and extensions may vary. Auto loans and secured personal loans are subject to minimum auto value requirements.

Further Personal Loan Disclosures: For qualified customers, America’s Loan Company offers bad credit personal loans with terms of 6 months to 5 years, with APR under 35.9%. As an example, you may borrow $1,500.00 over a 24 month period, with a $10.00 credit investigation fee, $100.00 loan origination fee, and $452.32 in interest, for a total payment of $2062.32, with an APR of 32.6514%, and monthly payments of $85.93.

More information can be found on the America's Loan Company Privacy Policy.

Bad Credit Loans by America's Loan Company

Copyright ©2018 America's Loan Company 127 E. Main Street, West Jefferson, OH 43162. All Right Reserved. 
Seeking bad credit installment loans? We offer affordable online personal loans. Ohio based direct lender. Start improving your credit today!

Toll-Free: 877-380-2639 - Ohio: SM.501641.000 CI.550000.000 - Company NMLS ID: 315276

 

Another Design By:
LDR Interactive Website DesignsLDR Interactive Technologies