Wismo Review – An App to Organize & Share What You Spend Money On

Wismo Budget is a lightweight mobile budgeting app that takes two forms: a free version and a paid version that more than justifies its modest price. We’ll dive into the differences between the two in the Key Features section.

Getting Started With Wismo Budget

To get started with Wismo Budget, you’ll need to provide your name, email address, and phone number. You’ll then create a username that doesn’t contain personally identifiable information, such as your first and last name or your home address.

Next, you’ll answer some basic questions about your personal finances, covering your monthly income, housing costs, and transportation costs.

Once you’ve done that, you’ll land on your app’s dashboard, which lays out:

  • Your initial Personal Spending Index (more on that below)
  • Your recurring spending based on your answers to the initial questions
  • Your daily budget based on the information you’ve provided so far
  • Your daily spend, which starts at $0 and increases as you enter transactions

Adding Income & Expenses

Now, you’re ready to begin tracking your spending for real.

Daily Spend

On the main dashboard, use the “+” button to add a new one-time transaction. Snap a picture of the transaction receipt, if one exists, then enter the amount and spending category. Or, simply enter the amount of the transaction and its category.

Use “custom” for debit and credit card transactions that don’t neatly fit into preset categories such as “getting around” and “services.” For more detail, you can add the payee’s name and notes about the expense.

When you’ve entered all of your expenses, click “Close the Books” to get your final spend tally for the day and see how it compares with your daily budget. Your daily budget is your monthly income minus recurring expenses, divided by the number of days in the month.

An important word of warning: Wismo shares what you spend money on (your debit and credit card transaction amounts and categories) with other users. In other words, your fellow Wismo users will see that you spent $50 on “fun.” However, this information is anonymized and doesn’t include payee details. Other users will only see your username, not your real name.

Recurring Transactions

You can also enter recurring expenses in about a dozen categories, including housing and transportation, utilities, insurance, subscriptions, health, loans/debt, and savings goals.

Add subcategories for more granular tracking. For instance, your “transportation” category might include fuel, your parking pass, rideshare fares, and public transportation expenses. You can organize expenses however you see fit. If it makes more sense to you to add your car loan under “transportation” rather than “loans/debt,” go for it.

Monthly Income

You can add new income buckets under the monthly income tab. This space gets pretty granular, with categories such as “other jobs,” “support,” “investments,” and “retirement.” Add subcategories to put an even finer point on things – for instance, to track your various streams of freelance income.

Finding Friends & Peers

Use the “Friends” tab to find other Wismo Budget users. You can filter by age, annual income, sex, and occupation to zero in on folks who more or less resemble you. Once you’ve found some users to follow, you can compare your spending habits to theirs as revealed in their public feeds (more on that below).


Key Features

Here’s a closer look at the key features of the Wismo Budget app.

Personal Spending Index (PSI)

Wismo is built around the Personal Spending Index (PSI), a numeric distillation of your cash flow based on your self-reported or verified income and expenses.

The formula is simple:

(Spend ÷ Income) x 100 = PSI

A PSI of 100 indicates that you’re spending exactly as much as you earn. A PSI under 100 indicates surplus income that you can – and probably should – put toward savings, while a PSI over 100 indicates negative cash flow.

For obvious reasons, Wismo recommends keeping your PSI under 100. As long as you’re diligently and comprehensively tracking your income and spending, the app makes that a whole lot easier.

Reports

Wismo Budget isn’t as big on reports as more robust budgeting apps, but it does have some user-friendly visualizations for users who like that sort of thing. Use the Reports tab to visualize:

  • Your total expenses for the month
  • Your daily spending for the month
  • Your recurring expenses for the month
  • Your PSI by month

Public Feed

Your public feed displays other Wismo users’ spending activities in near-real time. The “Everyone” bar is a comprehensive roundup of all non-private users’ spending; the “Friends” bar covers just those you’ve followed. Users are identified by their usernames and avatars.

Remember, if you’re using Wismo’s free version, your spending is visible in other users’ feeds. There’s no way to turn off this feature without upgrading to Premium. Wismo is transparent about its information-sharing practices, advising users to omit obvious clues to their identities from their Wismo usernames. But if you’d still prefer to keep your personal spending under wraps, you may want to consider the Premium version.

Premium Features

When you upgrade to Wismo’s Premium plan, you’ll enjoy these enhanced features.

  • Linked Accounts. Premium users can link financial accounts to Wismo, eliminating the need to enter non-cash transactions manually. Wismo uses bank-grade, 256-bit encryption for security and peace of mind.
  • Privacy Mode. Premium users can set their accounts to Privacy Mode, bypassing Wismo’s social feed feature and rendering their accounts invisible to other users. If you’re leery of sharing financial information, even anonymously, it’s a strong argument for upgrading.
  • Family Plan. Premium users can add up to four family members to track and share expenses together. That’s great for couples who’ve merged their finances and families with income-earning teens and young adults.
  • Ad-Free Experience. Wismo’s Premium version has no ads, reducing the interface’s clutter. As personal finance apps go, Wismo doesn’t feel particularly commercial, but it’s nice to have the option to go completely ad-free.

Wismo’s Premium plan costs less per year than most full-service budgeting apps. That said, it includes features such as Privacy Mode that come standard in some free budgeting apps, such as Mint and its top alternatives.


Advantages of Wismo Budget

Wismo Budget has some notable advantages:

  1. The Free Version Is Totally Free. Wismo Budget’s free version is truly free, with no hidden fees or upsells buried in the interface. As long as you’re willing to tolerate advertising and consent to anonymized data sharing, you’ll never pay a dime out of pocket to use Wismo.
  2. PSI Makes Cash Flow Easy to Understand. Wismo Budget’s Personal Spending Index is a shockingly simple cash flow conceptualization that’s easy for even the most math-challenged to understand. A PSI under 100 means you’re spending less than you earn; a PSI over 100 means it’s time for some strategic spending cuts to get back on track. It’s as close to black-and-white as you can get in the world of money management.
  3. No Need to Disclose Sensitive Personal Information. Wismo doesn’t require users to disclose sensitive personal information, such as Social Security numbers or home addresses, as a condition of use. Indeed, any information you provide to Wismo is anonymized, and linked financial account numbers are protected via bank-grade, 256-bit encryption. Avoid including obvious clues to your identity, such as your first and last name, in your Wismo handle, and no one will ever be the wiser.
  4. No Obligation to Link Bank Accounts or Transfer Funds. Wismo’s Premium users can link bank accounts to the app for a more seamless, hands-off money management experience, but they’re under no obligation to do so. That’s a big advantage over budgeting apps that require – or aggressively nudge – users to take this step. Even with Wismo’s top-shelf encryption, it’s reasonable for users not to want to give yet another third-party app access to their financial accounts. Wismo clearly respects that.

Disadvantages of Wismo Budget

Consider these potential drawbacks carefully before using Wismo – and certainly before upgrading to Premium.

  1. The Free Version Contains Advertising. Wismo’s free version contains ads. In practice, these ads don’t adversely affect the user experience, but they’re still present and unavoidable unless you switch to the paid plan. If you’re not too interested in the paid plan’s other perks, you may not want to upgrade solely to eliminate ads.
  2. Not As Robust As Some Other Budgeting and Spending Apps. Wismo is a pretty lightweight app. That’s great for consumers interested mainly in tracking and controlling spending, but not so great for serious budgeters seeking deep insights into their spending patterns and personal finances.
  3. No Desktop Version. Wismo is a mobile-only app. It’s not compatible with large-screen devices, such as laptops and desktops. If you don’t own a smartphone or prefer to manage your personal finances on a device with an actual keyboard, Wismo isn’t for you.
  4. Other Wismo Users Can See Your Financial Details in the Free Version. To use Wismo’s free version, you must permit the app to share all the financial information you enter with fellow Wismo users. Wismo only shares information anonymously and uses bank-grade encryption to keep account numbers from falling into the wrong hands. Still, Wismo’s open-source approach is sure to give some prospective users pause. Don’t feel bad if you’re among them.

Final Word

Not everyone enjoys budgeting. Managing a traditional household budget is a labor-intensive task involving lengthy spreadsheets with categories galore and cells for every transaction. Modern budgeting apps streamline the process a bit, but they still require time and effort to maintain with any accuracy.

Fortunately, having a formal household budget isn’t a prerequisite of fiscal responsibility. I know a few financially savvy folks who’ve sworn off budgeting yet still manage to spend less than they earn and save for the future.

Wismo Budget is different enough from other budgeting apps to attract folks who can’t be bothered with traditional budgets. Wismo is lightweight, intuitive, and fun to use – perfect for those with no patience for graphs, spreadsheets, and the other trappings of hardcore budgeting apps.

Whether you’ve attempted budgeting or know you don’t enjoy it, give Wismo a try. You might be surprised by the experience.

Source: moneycrashers.com

How to Refinance Your Mortgage with Bad Credit

Refinancing your mortgage can provide you with a lot of financial benefits. You can cash out on some of your home’s equity when you need a large sum of money.

signing refinance papers

You can also take advantage of lower interest rates to save on your monthly payments. It’s also possible to get rid of your private mortgage insurance if you have enough equity in your home.

If your credit has taken a dive since you first bought your house, it may be difficult to refinance. After all, you’ll essentially be taking out a new home loan and will have to go through the entire application process with a mortgage lender.

However, you’re not left without any options. Learn how to make sure refinancing is the right move for you and how you can refinance your mortgage with bad credit.

Make Sure Refinancing Makes Financial Sense

Before applying to refinance your house, analyze the total cost of the transaction to ensure it’s the right move.

Yes, you might save money on your monthly mortgage payments with a lower interest rate, but remember that you also have to pay closing costs and other fees to get a new loan.

Refinancing Usually Extends Your Loan Term

Also, consider that your newly refinanced loan usually extends the length of your loan back to 30 years, regardless of how long you have been paying down your current loan. That means it will take longer to pay off your house and you’ll also be paying that interest for longer.

If you’ve been paying on your home for 10 years, that’s a long time to add back onto your mortgage, especially while making additional interest payments. Before you refinance, make sure you consider all of the financial implications, not just your new monthly mortgage payment.

Your lender can help you estimate what expenses you’re likely to incur so have an in-depth conversation before making a decision.

Refinance a Mortgage with Bad Credit

Credit scores and interest rates go hand in hand. As with all loans, a higher credit score results in lower interest rates, saving you money every month. This really adds up on mortgages because you’re paying the loan off for so long. And even if you don’t have excellent credit, you still might be able to get approved for a home loan.

Shop Around

Start off by shopping around for lenders. You’re under no obligation to use the same lender as your initial mortgage, and it’s good to compare several offers.

Refinanced home loans can be structured in any number of ways and some may work for you better than others. For example, you might want to roll closing costs into the loan rather than paying them in cash up front.

Mortgage Points

If you plan on staying in your home for a long time, it may be worth paying an extra point at closing in order to get a better interest rate. Think about what your goals are in refinancing and talk to each lender about the different ways you can achieve them.

A good lender can also help you prepare to get approved for a mortgage refinance, even with lower credit scores. If you can, demonstrate that you have strong cash reserves by putting extra money in the bank.

You’re more likely to be approved for a loan if you have money on hand that is accessible because it shows that you’ll be able to pay for your loan even if your monthly budget is tight at times.

Pay Off Debt

Another helpful move is to strategically pay down some of your debt. Although each lender’s exact requirements vary, most like to see a debt to income ratio of less than 41%.

That means the number of recurring debt payments you make each month (like your new mortgage, your credit card minimums, and any personal loans), should only take up 41% of your monthly pre-tax income.

For example, let’s say your monthly income amounts to $5,000 before taxes and health insurance are taken out, and you pay $2,000 a month on credit cards and a car loan.

Divide 2,000 by 5,000 and you’ll get 0.4. Multiply that by 100 to find the percentage of your debt to income. In this case, it’s 40%, which is less than most lender’s required minimum.

To strengthen your application, consider making a few extra payments to lower your debt amount even more. It may take a few months for those numbers to be reflected on your credit report, so ask your lender to perform a rapid rescore if you’re in a hurry.

Getting a Co-signer

If a bad credit score is still holding you back from refinancing a mortgage, you also have the option of adding a co-signer to the loan.

This basically means that someone else with better credit can help get you approved without having to be an owner of the property title. They’ll be responsible for the loan until they’re removed, which can only be done through another refinance or selling the home.

The catch with having a co-signer is that they are also financially responsible for paying the mortgage. So if for some reason you can’t make the payments, your co-signer’s credit will also suffer — even if the loan gets all the way to foreclosure.

You definitely want a strong and trusting relationship with a co-signer and talk about what would happen in a worst-case scenario. Would the co-signer help make payments or be ok with having their credit diminished? Have an honest conversation to make sure you’re both comfortable with every possible scenario.

Required Documents

Once you’re ready to apply, you’ll need to supply the lender with similar documentation as you did when you first applied for a mortgage. This could include pay stubs, tax returns, and bank statements so they can determine your ability to repay the loan.

Another important part of the process if the home appraisal where a professional appraiser comes to your house and assesses its current value.

You’ll need to have at least 20% of the home’s value paid off, whether through mortgage payments or equity earned. So if your outstanding loan is $150,000 and the appraised value of the home is $200,000, you have 25% equity in your home and the appraisal should be good to go.

Federal Refinancing Programs

If you can’t get approved to refinance through a traditional lender, check to see if you qualify for one of these government-sponsored programs.

These options for refinancing a mortgage are specifically aimed to help people with bad credit. Each mortgage refinance option has different requirements, so read carefully before proceeding. If you qualify, you might be able to take advantage of significant savings.

Harp 2

This program is specially designed to benefit homeowners whose mortgage is greater than the value of the home, so there are no restrictions on the loan-to-value. However, you do have to meet some basic qualifications to take advantage of this program.

First, your loan has to be owned by Fannie Mae or Freddie Mac and must have been delivered to one of those entities by June 1, 2009. FHA loans don’t qualify and you can’t have already refinanced using Making Home Affordable Refinance Program (Harp 2’s predecessor).

FHA Rate and Term Refinance

If you already have an FHA mortgage, you may be able to qualify for an FHA Rate and Term Refinance. This option allows you to change the terms of your current FHA mortgage and replace them with more favorable terms. The minimum credit score to qualify is 580.

FHA Streamline Refinance Loans

If your current mortgage is not an FHA loan, you may be able to refinance your mortgage with an FHA Streamline Refinance. The minimum credit score is also 580. An FHA streamline refinance can help lower your interest rate, and you sometimes can get approved without having an appraisal performed, so it’s a speedy process.

FHA Cash-Out Refinance Loans

You can also do an FHA cash-out refinance have a minimum credit score of at least 620. The cash-out refinance allows homeowners with equity in their house to receive a lump sum of cash by increasing the principal mortgage amount (and, consequently, monthly payments).

VA Interest Rate Reduction Refinance Loan (VA IRRRL)

If you have an existing home loan backed by the U.S. Department of Veterans Affairs and you want to reduce your monthly mortgage payments, an interest rate reduction refinance loan (IRRRL) may be a good option for you. You can also move from a loan with an adjustable or variable interest rate.

Basically, a VA Interest Rate Reduction Loan lets you replace your current loan with a new one under different terms.

Improve Your Credit Score Before Refinancing

Whether your application to refinance was denied or you want to qualify for even lower interest rates, sometimes it’s worth taking the time to raise your credit score. Start by paying all of your monthly bills on time and in full. If you do that for long enough, you’ll start to see your credit score go up steadily.

You can also increase your credit card limit — as long as you don’t spend extra, you can quickly bump up your credit score.

Hire a Credit Repair Company

For people with a lot of negative items on their credit reports, a credit repair agency may be helpful in disputing those items and getting them removed altogether. Check out our reviews of the leading credit repair companies.

Credit scores are often categorized into five different ranges, from bad to excellent. If you can increase your credit score enough to boost yourself into the next category, you could automatically qualify for better refinance rates.

Don’t give up on your goal of refinancing your mortgage. There’s always room for improvement which means there’s always a way to get a better rate — even if it takes a bit of time.

Source: crediful.com

Here’s What You Need To Know About Becoming A Cosigner

Are you thinking about becoming a cosigner for someone? Have you ever been asked to cosign on a loan before? 

becoming a cosigner

becoming a cosignerMany people have been asked to cosign loans for family members and even friends. However, many people do not understand the full cosigner meaning, and becoming a cosigner is never something you should do unless you completely understand what it means.

If someone asks you to cosign a loan for them, you might be hesitant to say yes at first. You also might not want to offend the person or make them mad.

Whatever you may be thinking, I want you to fully understand what you are getting yourself into.

Becoming a cosigner can actually turn into a big financial mistake if you do it without really thinking it through.

Okay, now some of you may think that I’m a mean person for saying that, but I’ve heard many stories from people who’ve had their credit wrecked, have been stuck paying a loan for someone else, and even had their relationships ruined.

All of that from cosigning a loan.

Perhaps you have cosigned before and it went fine, or you know a friend of a friend who has done it. Perhaps you think that things won’t go bad for you or that you are hurting the person by not cosigning for them.

But, I want you to be careful before becoming a cosigner. I’m saying this to help you!

No matter how well you think you know someone, mixing money and relationships can change things. What you may have thought was a wonderful friendship or family relationship can turn into a nightmare.

It may seem very innocent – you’re just helping a good friend or relative get a loan. 

Really, if it was that simple, I’d tell everyone to do it. But, becoming a cosigner is a major financial decision that you need to seriously think about before agreeing to.

Before you cosign a mortgage or another type of loan for someone, it is always wise to be 100% positive of what cosigning a loan actually means and how it may affect your relationship with the person getting the loan.

Surprisingly, many people don’t know exactly what happens when they agree to being a cosigner. Many people just think that all you’re doing is helping a person get approved, but that’s not just it.

Sorry to break it to you, but the bank, landlord, etc., does not care if the applicant has a friend with a good credit history. 

There’s more that comes with being a cosigner.

As the cosigner, what’s actually happening is that you are taking on the full responsibility of the debt if the original applicant is unable to pay.

And, that happens more often than you might think.

Related content:

According to a survey I found on CreditCards.com, 38% of cosigners had to pay some or all of a loan that they cosigned for because the primary borrower failed to pay. This is a HUGE percentage of cosigners, so please keep that in mind.

Other statistics I found about becoming a cosigner include:

  • 28% of cosigners saw a drop in their credit score because the person that they cosigned on a loan for paid their loan late or skipped a payment.
  • 26% of cosigners said that cosigning damaged the relationship with the person that they cosigned a loan for.
  • 90% of private student loan borrowers who applied for cosigner release were rejected. So, if you think that you are going to cosign for a loan and then remove yourself from the loan later, that is much more difficult than you probably think. Stat from Consumer Financial Protection Bureau)

So, who is finding cosigners for loans?

According to the survey mentioned above, 45% of cosigners are cosigning for their child or stepchild. And 21% of cosigners are cosigning for a friend.

The rest is a mixture of cosigning for spouses/partners and parents.

Today, I am going to answer common questions about becoming a cosigner for a loan.

What to know about becoming a cosigner.

 

What is a cosigner?

If you’ve been asked to become a cosigner on a loan, you may not know what that fully entails.

A cosigner is someone who agrees to be on a loan with another person so that they are more likely to be approved. 

A cosigner may be needed for different things such as a:

  • Car loan
  • Student loan
  • Mortgage
  • Apartment or other type of rental home

And more.

Here’s an example of when someone may want a cosigner: if your child wants to buy a car but doesn’t have a long enough credit history to be approved for the car loan. Your child may ask you to cosign their loan so the lender takes your credit score and financial information into account. This improves your child’s chances of being approved.

Other reasons you might be asked to be a cosigner is if the borrower doesn’t have a high enough credit score or doesn’t make enough money to pay the loan (that is a red flag right there).

However, as a cosigner, you are agreeing to pay off the debt if the original borrower is unable to pay it in the future. So, even if the original borrower doesn’t pay a penny, the cosigner would have to make all of the payments or risk being sued, having credit report damage, and more.

In that example I gave, the parent would be responsible for the car loan if their child could no longer make their payments. Not only that, if the child for some reason refused to make payments (I’ve heard of situations like this), the parent would be responsible.

Remember, like I stated above, 38% of cosigners had to pay some or all of a loan that they cosigned for because the primary borrower failed to pay. 

And in some circumstances, even if the borrower files bankruptcy, while their other loans might be discharged, the cosigner may still be responsible for paying the cosigned loan.

Related: Everything You Need To Know About How To Build Your Credit Score

 

How does a co signer work?

Here’s what happens when you agree to become a cosigner for a friend or family member. 

You will start by giving your personal information to the bank or lender. This is information like bank statements, tax returns, paycheck stubs, and so on.

You will also have to complete the loan application, and once you agree with all of the loan terms, then you sign it.

But, becoming a cosigner doesn’t mean that you will own or have partial ownership of the vehicle, house, or whatever else you are cosigning for. It does mean that you are taking full financial responsibility and promising to pay the loan yourself if the borrower does not pay.

Becoming a cosigner is nothing to take lightly.

Does cosigning hurt your credit? Is it bad to be a cosigner?

Becoming a cosigner can hurt your credit score and prevent you from future loans in some circumstances.

Here’s why:

  • If the person doesn’t pay the monthly payments on time, then you may be rejected for a loan in the future. Missed payments can damage your credit score and your credit report.
  • As a cosigner, you are increasing your debt-to-income ratio. So, even if your friend/family member pays every single bill on time, a lender will still see this as YOUR debt. Unfortunately, this may prevent them from approving your loan because they will think you have too much debt on your plate.

If you might be buying something soon that will need financing (house, car, etc.), you should think long and hard before you decide to be a cosigner on someone else’s loan.

Can cosigning a loan hurt a relationship?

Unfortunately, many cosigning relationships go sour. 

I have heard many stories where someone cosigned a loan for someone else and then didn’t talk to them for years or even decades because of a falling out of some sort.

I have always been a firm believer that money and relationships do not mix well. 

If you are going to cosign or lend money to someone, then you should consider it a gift because there is a chance that you will never see that money again.

 

Can you remove yourself from a loan as a cosigner?

Remember the statistic above – 90% of private student loan borrowers who applied for cosigner release were rejected. 

There’s not much you can do to remove yourself from a loan that you cosigned on. If the person isn’t making payments, you are stuck with it for the most part.

The loan would have to be refinanced to take yourself off the loan, and there are many horror stories out there where the original borrower refused to refinance because then they wouldn’t be able to force the cosigner to continue to pay the monthly bill.

Plus, there are instances in which refinancing is impossible because of the value decreasing, the economy changing, a person’s financial situation getting worse, and so on. 

So, while the original borrower may be okay with getting you off of the loan and refinancing, it’s still up to the lender whether or not they will refinance the loan.

How do I protect myself as a cosigner?

There is no guarantee that becoming a cosigner is going to work out, but if you’re determined to do it, you will want to know both of these two things for sure:

  1. That you can trust the person you are cosigning for.
  2. That YOU can make the payment.

Many people who are thinking about becoming a cosigner may not think about that last one, but it is just as important as the first one. Being stuck with the loan payment would be awful, but not being able to make the payment could cause you to go into serious debt and destroy your credit.

You may be certain you won’t be stuck making the payment, but you don’t want to be stuck in a bad financial situation.

Should I cosign a loan?

Even though those cosigning horror stories are real cautionary tales, most people don’t believe they would ever happen to them. 

However, don’t you think most (if not all) cosigners felt the same way in the beginning?

It’s up to each person to decide if they will cosign, and you should never feel forced to do it. However, I want you to remember that if you cosign, then you should make sure that you can afford to make the monthly payment.

You never know, one day those payments are being made and everything is going well. The original borrower may be a great person, but then they may lose their job, have an unexpected expense come up, or something else that prevents them from paying their bills.

Then, what if something happens to you and you can’t make those payments either? Unfortunately, being unprepared and not really knowing what you are getting into can turn into a disastrous situation.

Cosigning a loan may not always be bad. However, I believe it’s better to realize what the consequences are before going into something that can negatively impact your life. It’s always better to be prepared!

 

Is it a bad idea to cosign for someone?

Cosigning a loan doesn’t always have to be a bad thing.

However, I want you to remember that there is a chance that you will be on the hook for the loan.

So, if you cosign, whether that be for a car, mortgage, apartment, student loan, or something else, you should make sure that you can afford the payment as well. Because, there is a chance that you may have to pay it one day.

Everyone has a different situation, and ultimately, you have to do what’s right for you. 

What do you think of becoming a cosigner for a mortgage or other type of loan? Would you ever do it?

Related Posts

<!–
–>

Source: makingsenseofcents.com

Cash-out refis help drive pandemic-era mortgage boom

A fuller picture of the factors that drove the great U.S. mortgage boom of 2020 is starting to emerge.

The homebuyers who took advantage of rock-bottom mortgage rates during the pandemic included many investors and purchasers of second homes who flocked to the market at levels unseen since before the Great Recession, according to new data from the Federal Reserve Bank of New York.

Cash-out refinancings also hit a post-financial-crisis high, as many households tapped into the equity they have accumulated as home prices have climbed over the last decade. Mortgage origination volume last year totaled $3.7 trillion, by far the highest level since 2003.

The data is most notable for one major contrast that it reveals between the current boom and the previous one: borrowers’ creditworthiness. Last year, roughly 70% of mortgage borrowers had credit scores of 760 or higher, compared with around 30% in 2003.

The 40-percentage-point gap is a reflection of both lenders’ reluctance to extend credit to borrowers with subpar credit and prime borrowers’ confidence in their ability to handle more debt. During the subprime lending boom, many borrowers with little equity took on more debt than they could afford.

“Researchers have concluded that the 2003 refi boom had long-running consequences, contributing to over-leveraged balance sheets as home prices fell,” experts at New York Fed noted in a blog post published Wednesday.

During the fourth quarter, total U.S. household debt outstanding hit an all-time high of $14.56 trillion, according to the report, which was based on a sample of credit data from Equifax.

Many Americans are eschewing public transit for cars during the pandemic, contributing to a boom in auto lending. Car loan originations of $616 billion in 2020 marked a record high.

Credit cards are one consumer lending segment where balances have sharply declined in recent quarters, as banks have tightened their lending criteria and many households have used increased savings and government benefits to pay down existing debt.

Card debt as a share of disposable income fell from around 5.5% to roughly 4.5% in the early months of the pandemic, according to a recent report by the American Bankers Association.

During the fourth quarter, credit card debt outstanding totaled $820 million, down $108 million from the same period a year earlier, the New York Fed found.

The spike in mortgage originations in 2020 was driven mostly by refinancing activity, but loans for home purchases also rose significantly, likely contributing to the recent increase in U.S. home prices. A national index of home prices developed by economists Karl Case and Robert Shiller rose by 9.5% between November 2019 and the same month last year.

In addition to investors, first-time homebuyers also helped fuel demand for mortgages. This group lagged behind repeat purchasers during much of the last decade but has recently caught up, according to the New York Fed’s data.

Still, young adults make up a relatively small portion of the market. In the fourth quarter of last year, adults ages 18 to 29 accounted for 7% of all mortgage originations, down from 11% in the third quarter of 2018, but still up from the low-water mark of 4% in the first quarter of 2013.

While U.S. homeowners withdrew $182 billion in equity last year, the comparable figures from 2003 to 2006 were higher, even without adjusting for inflation, according to the New York Fed researchers. The average amount withdrawn by a homeowner was also significantly lower in 2020 than it had been in 2019.

“The median cashout withdrawal in 2020 was only $6,700,” the researchers wrote, “suggesting that at least half of the refinancers borrowed only enough additional funds to cover the closing costs on the new mortgage.”

Source: nationalmortgagenews.com

How Cosigning On a Student Loan Could Impact Your Finances

Wise Bread Picks

While college students can get their own federal student loans without a cosigner in most cases, there are some situations where a cosigner is required. Federal Direct Parent PLUS loans, for example, can actually be taken out on behalf of dependents to help pay for higher education. Students can also apply for private student loans to pay for college. These loans tend to have high credit requirements that make it difficult for young people to qualify on their own.

But should you really cosign on student loans for your child? And should you cosign on any loans they can’t qualify for on their own? You can certainly consider it, but it helps to enter the situation with eyes wide open and understand all the pros and cons. 

The main advantage of cosigning is the fact that you’re helping your child (or dependent) pay for higher education when they may not be able to otherwise. However, it can also be a huge risk. Here’s everything you need to know before you sign on the dotted line.

You’re obligated to repay the debt no matter what

Whether you take on a Parent PLUS loan or you cosign with your child for a private student loan, the first thing you have to understand is that, no matter what, you’re obligated to pay that debt back. If your child stops making payments, you’ll be required to make them. If your child flat-out refuses to get a job and completely defaults on their responsibilities, you will need to repay that loan.

Cosigning on a student loan is similar to buying a house with someone or cosigning on a car loan. You’re both jointly responsible for repayment regardless of what the other person does. That can be a huge problem if your child doesn’t take their bills very seriously, but it may not be an issue if they treat their credit with care and stay on top of their bills.

Student loans are almost never discharged in bankruptcy

Another detail to understand is the fact that student loans are rarely ever discharged in bankruptcy. For the most part, they’ll stick around forever unless the borrower dies or you can prove you have some inescapable hardship. 

As a parent, you’re probably trying to save for retirement and reach other financial goals, so it’s important to understand that the student loans you cosign for will never go away until you pay them off — once and for all.

There’s no going back

When you cosign on a student loan, you can’t just change your mind and back out of the deal. Your child may be able to refinance their student loans in their name, but only if their credit score is good enough to qualify for student loan refinancing on their own. And if that was the case, they wouldn’t have needed a cosigner in the first place.

Your finances may be perfectly fine right now, but you should think through how they may be in five or 10 years. If you’re nearing retirement, you may not want to put yourself in a situation where you’ll be stuck paying off a child’s student loans. Plus, you never know how your health will be or the status of your career several years from now. Cosigning for student loans leaves you on the hook no matter what, and it’s hard to change that after the fact. 

Cosigning on a loan could affect your credit score

When you cosign on a student loan, you have to remember that you’re jointly accepting responsibility for the debt and any consequences that arise out of late payments or delinquency. So you should only cosign if you know your child or dependent is dedicated to paying their bills on time and avoiding default at all costs.

If you’re not paying attention, you could easily take a huge hit to your credit score without even knowing. Since payment history makes up 35 percent of your FICO score, it’s easy to see how even one late payment could cause major damage. Just think of what could happen if the student loans you cosigned for were paid late month after month. If you’re not also receiving a bill in the mail, you may not find out until the damage is already done.

The bottom line

There are situations where it can make sense to cosign on a student loan, but this decision should never be taken lightly. You may be helping your child earn their degree, but you’re taking a significant risk. (See also: Should You Co-Sign a Loan?)

You may want to assess the career field they plan to enter into and figure out how much they might earn upon graduation before you cosign. Some fields have plenty of promise right now, while others offer almost none, and you should know either way before you make any type of financial commitment. Maybe your college student could even spend time improving their credit score so they can qualify for student loans on their own. 

Cosigning on student loans should be a last resort for parents, not an easy fix for students who don’t take time to consider all their options. 

Like this article? Pin it!

Cosigning on a student loan can be a huge risk. Here’s everything you need to know how cosigning on your students college loan can impact your personal finances. | #finances #personalfinance #studentdebt

Source: wisebread.com

These Two Moves Can Save You Thousands When You Buy a Car

Interest rates are still at some of the lowest they’ve ever been — making it super tempting to finally get a new ride. Plus, all these crazy car deals are being advertised… how could you not take advantage?

Whether you’re eyeing a shiny new vehicle or a pre-loved one, there are a few things you need to get in order before you sign on the dotted line: your credit score and your car insurance. If either of them aren’t taken care of properly, you could end up paying an extra $7,600 — or more.

If you can afford the car, why does your credit score matter?

Financing a new or used car isn’t any different from getting a mortgage or taking out a personal loan — at least not when it comes to the interest rate.

People with better credit scores get better interest rates, period. WalletHub found that someone with fair credit will likely spend five times more than someone with excellent credit on the same three-year, $20,000 car loan. That’s an average of $5,997— a quarter of the car itself!

Even if you can afford the car, don’t make the mistake of paying 25% more just because your credit score is meh. That number is something you can fix, and you can start by checking it on a free website called Credit Sesame. 

Within two minutes, you’ll get access to your credit score, any debt-carrying accounts and a handful of personalized tips to improve your score. You’ll even be able to spot any errors holding you back (one in five reports have one).

It’s free and only takes about 90 seconds to sign up. Use it to start fixing your credit, and you could save almost $6,000 on your car loan.

A required bill for your new car doesn’t have to be an expensive one.

The other way you could be wasting serious cash is through your car insurance. It’s easy to just keep your old insurance company when you drive your new car off the lot — but it could mean hundreds of dollars down the drain each year.

When you’re ready to buy your new car, check a website like Insure.com to compare car insurance prices. All you have to do is enter your ZIP code and your age, and it’ll show you your options.

People have saved an average of $540 a year — that’s an extra $1,620 while you pay off your three-year car loan. All it takes is a few minus to look at your options.

So before you decide to buy a car, make sure you have your credit score in check and your car insurance options lined up. If not, you could be making a very pricey mistake.

<!–

–>

Source: thepennyhoarder.com

What Is The Average Credit Score In America? Find Out Where You Stack Up.

Credit score talk is all over the place these days, from online forums to the office break room. That’s because your credit score affects just about every aspect of your life: your ability to get a mortgage, qualify for a car loan, or rent an apartment.

In some cases, potential employers will even check your credit to see how responsible you are, meaning your credit score can even affect whether or not you’re picked for your dream job.

With all this competition for credit, housing, and even jobs, it’s natural to wonder how your own credit score compares to everyone else’s. We’ve got the inside scoop on how you stack up in the wild world of credit. Ready to find out?

Putting Credit into Context

Credit scores are most frequently crafted by a company called FICO, which uses the information in your credit report to create a numerical representation of your creditworthiness.

Lenders and creditors use this information to determine how likely you are to repay borrowed funds. Then, they decide whether or not to approve your application, and what kind of interest they want to charge you.

Since someone with a lower credit score is deemed less likely to repay the loan, they’ll receive a higher interest rate as extra insurance to the lender in case the loan defaults.

FICO scores range from 300 to 850, with 850 being the highest score possible. Here’s how those FICO scores break down into rating categories:

FICO Score Rating Categories

  • Excellent: 750 and above
  • Good: 700-749
  • Fair: 650-699
  • Poor: 600-649
  • Bad: under 600

Now that you understand the basics of credit scores, are you ready for the big reveal?

According to MyFICO, the average FICO score in America for 2020 has reached 704.

If you look at the credit score range above, you’ll see that a score of 703 falls just within the “good” rating. That’s definitely on the rise as the economy continues to strengthen.

So what does it mean to have a 703 FICO score?

Since this score falls within the “good” category, you can do quite a bit in terms of loans. An FHA home loan, for example, only requires a score of 580 to qualify and take advantage of the program’s 3.5% down payment.

If you still qualify for the loan buy your score falls below that number, you’ll need to put down 10% of the loan price at the time of closing. For conventional loans, lenders usually require a minimum score of 660. So if your score is close to the average FICO score, your mortgage prospects look promising.

Getting Approved for a Loan

Getting approved for a car loan typically requires a score in the low- to mid-600s, although it’s not unheard of for someone in the mid-500s to get approved. It depends on the lender and of course, the lower your credit score, the higher your interest rates will be.

Be careful with your credit applications, though. Each new credit inquiry for a credit card or loan type can dock your score anywhere between 5 and 10 points. That drop lasts for a year and the inquiry itself is listed on your credit report for two years.

If your score is just above 700, you could quickly dip back into the “fair” category and receive a higher interest rate offer on your next financial product. Bottom line: only apply for credit if you need it. If you’re looking for a loan, do all of your rate shopping within a few weeks and you’ll only have a single inquiry impact your credit.

See also: What Is a Fair Credit Score?

Does Location Matter?

It takes a lot to maintain a high credit score, including low amounts of debt and on-time payments, to name a few things. But one influencing factor might surprise you: where you live.

It makes sense; after all, where you live affects how much you earn and how expensive your cost of living is. One striking thing is that not just particular states, but entire regions, tend to have similar credit characteristics. Could your geographic location be affecting your credit?

The Midwest

Many Midwestern states, for example, have the highest average credit scores in the country. Minnesota tops the list with an average FICO score of 722. At $71,920, the median household income is above the national average of $61,372, but Minnesotans tend not to spend beyond their means.

Balances on credit card debt, mortgages, and auto loans are all below average in this state, and in several other midwestern areas. Debt delinquencies are also low, giving many people a credit score boost across the state.

The South

Mississippi, along with several other southern states, ranks lowest in the nation for credit with an average credit score of just 648. In fact, based on the ranges above, the average credit score there is considered poor credit.

States with lower credit scores also tend to have higher credit card debt balances and delinquency rates. That makes sense because both of those factors contribute to lower credit scores.

Don’t worry if you live in a state with below-average or average credit scores or if you’re in a high credit state but still have a low credit score. You can boost your credit score by taking some basic, strategic steps.

It might take a little time and effort, but if you persevere, you’ll soon start to see a noticeable difference in your credit score.

Then, you’ll be able to pat yourself on the back for having above-average credit in both your state and the nation. Even better than that? You’ll start getting better offers on interest rates and other loan terms.

3 Tips for Boosting Your Credit Score

Now that you know how your credit score compares to those of other Americans, it’s time to break out the competitive spirit and raise your credit score.

To become eligible for the very best credit cards, loans, and mortgages, you’ll need a credit score of 740 or above. That’s right at the top of the “good” credit category, just ten points shy of “excellent.” So how can you do it? Here are a few simple tips.

1. Pay your bills on time.

It may seem like a no-brainer, but a 2018 study showed that 25% of Americans don’t consistently pay their bills on time. Why is that an issue? Your payment history accounts for 35% of your FICO score, so every time you become delinquent on a payment, you’re lowering your credit score.

Just how much your credit score is lowered depends on several personal factors, like how late you paid and how often you tend to miss payments. Obviously, if you are a regular offender, your credit score will suffer more.

2. Pay down your debt.

Most people carry some sort of debt these days, whether it be a mortgage, outstanding credit card balances, or some type of personal loan. But paying down your debt, particularly on high-interest balances outside of your mortgage, can go a long way in helping out your credit history.

That’s because you’re penalized for owing too much money compared to the amount of credit you have access to, which is measured by your credit utilization ratio. Plus, by paying off credit cards and high-interest loans early, you’ll save yourself countless dollars in interest payments.

3. Double-check your credit report.

Did you know that according to the FTC, 25% of Americans have mistakes on their credit reports that have the potential to affect their credit scores? At the end of the day, it’s your responsibility to make sure everything on your credit report is complete and accurate.

Order a free credit report from each of the three credit reporting agencies every year. After all, it’s both your right and your responsibility.

Are Your Credit Scores Below Average?

If you notice that your FICO scores are well below the American average of 704, or you’re constantly facing roadblocks to your financial goals because of your credit, it might be time to get help from a professional.

Experian states that 30% of Americans have lower than a 601, placing them in the “bad” rating category. In this situation, you might want to consider monitoring your credit score as you begin to make financial improvements.

Remember that even though your credit reports are free every 12 months, your credit scores are not included. It’s a separate calculation that is requested when your credit is pulled by third parties such as lenders and creditors.

There are several monitoring services if you’d like to check out your credit score on a regular basis, or you can pay a one-time fee to FICO to access your credit score.

When to Get Help from the Experts

For consumers who still need help getting that number up closer to the average credit score, a respected credit repair company can be a good resource in getting outdated and incorrect items removed from your credit report.

You can certainly go down that road on your own, but a professional company knows all of the laws and regulations to make sure your interests are fully represented.

Plus, dealing with creditors and credit bureaus can feel like a full-time job, and you probably already have one of those. It’s often a wise choice to work with a professional for the fastest, most comprehensive results.

No matter where your credit score lays in comparison to everyone else’s, just remember that “personal finance” is called that for a reason: each individual has personal reasons for spending and saving money as they do.

As long as you do your best to stay on top of your money and employ smart strategies to boost your credit score, you could see positive results in as little as 30 days. And that’s something worth bragging about.