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How to File for Student Loan Bankruptcy – MintLife Blog

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credit score significantly. Depending if you file for chapter 7 or chapter 13, bankruptcy will stay on your credit report for seven to 10 years. You should also be aware that when you file for bankruptcy, all of your financial information becomes available to the public. The court may also decide on how and when you can spend your money, as well as who you must repay first.

Something else that you can try instead of filing for bankruptcy is checking if you are eligible for an income-driven repayment plan. This allows you to repay your student loan debt at an affordable monthly rate based on your income. Another option is to see if you are eligible for a forbearance. A forbearance puts a temporary hold on your loan payments if you are approved. To get approved you must show that you have some kind of outstanding medical expense or financial obligation. You can also get approved for military or AmeriCorps service. One thing to consider with a forbearance is that your loans still build interest when you don’t pay them.

Next, you can check to see if you meet the requirements for Public Student Loan Forgiveness (PSLF). To qualify you must have made at least 120 qualifying monthly loan payments under a qualified plan while working full-time for a qualified employer.

Some last things to consider before you decide to file are the costs and time it takes to get your loans discharged. Getting student loans discharged is very uncommon, so you will want to be certain you will qualify before you try. If you plan on filing, you should be ready for filing fees and attorney fees — attorney fees average over $1,400 and filing fees are typically around $300. This can be a lot, especially for someone who is looking to file for bankruptcy. That is why it is important to fully understand where you stand with your finances. Many people do not realize what it costs to file for bankruptcy. For some people this is a burden that damages their finances even more. This is why you must be certain that you can do things like pay your rent and buy groceries after filing. If this is too much, then you might want to consider other options.

How to Demonstrate Undue Hardship

Proving that your student loans will cause you undue hardship is not an easy task. You will have to demonstrate that paying back your student loans will cause a significant negative effect on you and those who depend on you.

There is no set way to determine or ask someone to demonstrate undue hardship. Courts have the discretion of what methods they use to determine your hardships. A common method used by many courts to prove undue hardship is the Brunner test. To prove undue hardship, you must meet all three factors of the test:

  • Poverty – You can’t afford to pay your loans with your present earnings and spendings, and maintain a minimal standard of living afterwards.
  • Persistence – Your present financial struggles will carry on for a considerable amount of time while you repay your loans.
  • Good Faith – You have made efforts in good faith to repay your loans and arranged for an affordable payment plan

Some courts use a different method of testing for undue hardship known as the Totality of Circumstances Test. For this test the court will review all of your applicable financial assets, future earnings, and expenses. Based on what they find they might rule for undue hardship. This test is different from others because it looks at all aspects that could have an effect on the person, rather than just one or two factors.

Filing for Student Loan Bankruptcy

Discharging your loans comes at the end of bankruptcy, and you might run into some tough questions along the way. There are a few things you can do to help you understand and complete the process.

1. Talk to a Financial Advisor or Lawyer

As mentioned, getting your loans discharged can be very challenging, especially for someone who is unfamiliar with the process. This is why you will want to seek assistance from a bankruptcy lawyer who is practiced and has been in these situations before. Their professional knowledge will be very useful when it comes to filling out the correct forms and procedures.

2. File for the Correct Type of Bankruptcy

When you try to discharge your student loans, you will first have to file for bankruptcy for either chapter 7 or chapter 13. Chapter 7 might discharge your loans if they deem you unable to pay because of undue hardship. Chapter 13 bankruptcy will not get rid of your loans, rather restructure the payments so they are affordable.

Chapter 7

  • You must show the court that you cannot afford the cost of your loans.
  • If you are eligible, all loans can be cleared and you will no longer be personally liable.
  • You must meet with and be questioned by your appointed trustee and creditors.
  • This process can take 4 to 6 months, but can completely discharge your loans.

Chapter 13

  • You can prove that you can repay some of your debts, but finishing your current payments will cause undue hardship.
  • Rather than being discharged, loans are restructured. You will hold onto assets and debts will be discharged after the case.
  • You must create a payment plan for the court and all creditors to view.
  • Payment plans can take 3 to 5 years.

3. Start the Adversary Process

An adversary proceeding is a lawsuit filed in bankruptcy and basically means that you are making a complaint in court. This is required for bankruptcy because your complaint is your inability to pay your student loans. When you file this proceeding you will need to have proof that you cannot make your loan payments due to undue hardships. This means verifying your income and proving that dependents rely on you, making it impossible to pay your loans.

So can you file for bankruptcy on student loans? The answer is yes, but you should look into other options first and establish an affordable payment plan. Now that you know what it takes to discharge your student loans this way, and you understand the difficulty and costs that come with proving undue hardship, you can take your next steps. Use a debt-to-income ratio tool to help you plan your payments by determining your ability to afford and pay a loan.

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The summer’s been a trying season for our friend Aaron who’s determined to erase $11,000 worth of debt over 12 months.

He is now nearly six months into his plan and says the path has been harder than he could have ever imagined. I wrote earlier that he’s also trying to simultaneously build up his cash reserves, which makes it even more difficult to avoid using his credit cards when unforeseen expenses pop up. Between his cat’s medical emergency and a rise in car maintenance costs, Aaron estimates that he is about $700 off his original debt pay off pace. He’s hoping to play some catch up in the coming months.

Here’s an overview of how Aaron’s trying to plow ahead.

A Failsafe Plan

Aaron’s cut up all of his credit cards, except for one…which he’s deactivated and given to his girlfriend to avoid using it in a pinch. “It’s our double-failsafe way of having it if we need it, but we definitely do not want to use it,” he says.

Knowing that the holidays are an easy time to rack up credit card debt, Aaron’s also begun to save in a separate fund for those anticipated costs such as gifts and travel. The goal is to not use credit at all this year. “We have about $450 in that holiday fund so far. We have a goal of $800,” he says.

Moving to San Diego

Some more surprising (and costly) news for Aaron, who works for the Navy: He will be relocated to San Diego starting next year. This will mean a rent increase from where he currently lives. It’s all adding pressure to his current plan to save more.

He has stopped his Thrift Savings Plan contributions temporarily while devoting more to debt payments and building his emergency fund.

“I give myself a C+ for my first few months. It’s tough to stay disciplined, but staying below my Mint budget threshold has made eyeballing my finances a lot easier,” he says.

Stay tuned to the Mint Blog for more updates on his debt payoff plan.

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at [email protected] (please note “Mint Blog” in the subject line).

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.

Save more, spend smarter, and make your money go further

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He quickly curbs his exuberance in reining in what could border on braggadocious – decidedly un-Springsteen-like behavior. “Stay humble, but enjoy small victories,” he adds like a mantra of short penance. “ACC in 24 years has seen lots of good days and bad days. Much like the emotional heartbreak that Springsteen talks about. Many people … [Read more…]

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Getting a mortgage is, by general consensus, the most treacherous part of buying a home. In a recent survey, 42% of home buyers said they found the mortgage experience “stressful,” and 32% found it “complicated.” Even lenders agree that it’s often a struggle.

“A lot can go wrong,” says Staci Titsworth, regional manager at PNC Mortgage in Pittsburgh.

If you’re out to buy a home, you have to be vigilant. To clue you into the pitfalls, here are six of the most common ways people mess up getting a mortgage.

Waiting until you can make a 20% down payment

A 20% down payment is the golden number when applying for a conventional home loan, since it enables you to avoid paying private mortgage insurance (PMI), an extra monthly fee of 0.3% to 1.15% of your total loan amount. But with mortgage rates where they are today—in a word, low—waiting for that magic 20% could be a huge mistake, since the more time passes, the higher mortgage rates and home prices may go!

All of which means it may be worth discussing your home-buying prospects with lenders right now. To get a ballpark figure of what you can afford and how your down payment affects your finances, punch your salary and other numbers into a home affordability calculator.

Meeting with only one mortgage lender

According to the Consumer Financial Protection Bureau, about half of U.S. home buyers only meet with one mortgage lender before signing up for a home loan. But these borrowers could be missing out in a big way. Why? Because lenders’ offers and interest rates vary, and even nabbing a slightly lower interest rate can save you big bucks over the long haul.

In fact, a borrower taking out a 30-year fixed rate conventional loan can get rates that vary by more than half a percent, the CFPB has found. So, getting an interest rate of 4.0% instead of 4.5% on a $200,000, 30-year fixed mortgage translates into savings of approximately $60 per month, or $3,500 over the first five years.

So to make sure you’re getting the best deal possible, meet with at least three mortgage lenders. You’ll want to start your search early (ideally, at least 60 days before you start seriously looking at homes). When you meet with each lender, get what’s called a good-faith estimate, which breaks down the terms of the mortgage, including the interest rate and fees, so that you can make an apples-to-apples comparison between offers.

Getting pre-qualified rather than pre-approved

Mortgage pre-qualification and mortgage pre-approval may sound alike, but they’re completely different. Pre-qualification entails a basic overview of a borrower’s ability to get a loan. You provide a mortgage lender with information—about your income, assets, debts, and credit—but you don’t need to produce any paperwork to back it up. In return, you’ll get a rough estimate of what size loan you can afford, but it’s by no means a guarantee that you’ll actually get approved for the loan when you go to buy a home.

Mortgage pre-approval, meanwhile, is an in-depth process that involves a lender running a credit check and verifying your income and assets. Then an underwriter does a preliminary review of your financial portfolio and, if all goes well, issues a letter of pre-approval—a written commitment for financing up to a certain loan amount.

Bottom line? If you’re serious about buying a house, you need to be pre-approved, since many sellers will accept offers only from pre-approved buyers, says Ray Rodriguez, New York City regional mortgage sales manager at TD Bank. Here’s how to start the process of mortgage pre-approval.

Moving money around

To get pre-approved, you have to show you have enough cash in reserves to afford the down payment. (Presenting your mortgage lender with bank statements is the easiest way to do this.) Nonetheless, your loan still needs to go through underwriting while you’re under contract for your loan to be approved. Because the underwriter will check to see that your finances have remained the same, the last thing you want to do is move money around while you’re in the process of buying a house. Shifting large amounts of money out or even into your accounts is a huge red flag, says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.”

So if you’re in contract for a home, your money should stay put.

Applying for new lines of credit

If you apply for a new credit card or request a credit limit increase a few months before closing, watch out: Credit inquiries ding your credit score by up to five points. So, don’t let the credit inquiries add up.

“Worse than the actual hit on your credit score is any pattern of trying to borrow more money all at once,” says Glenn Phillips, CEO of Lake Homes Realty. Translation: Applying for multiple lines of credit while you’re buying a house can make your mortgage lender think that you’re desperate for money—a signal that could change your mortgage terms or even get you denied altogether, even if you’ve got a closing date on the books.

Changing jobs

Mortgage lenders like to see at least two years of consistent income history when pre-approving a loan. Consequently, changing jobs while you’re under contract on a property can create a big issue in the eyes of an underwriter.

Your best bet? Try to wait until after you’ve closed on your house to change jobs. If you’re forced to switch before closing, you should alert your loan officer immediately. Depending on the lender, you may simply need to provide a written verification of employment from your new employer that states your job status and income, says Shashank Shekhar, the founder and CEO of Arcus Lending in San Jose, CA.

Source: realtor.com

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Mortgages are complicated and confusing, and second mortgages are doubly complicated and confusing.

A second mortgage can be an extremely useful tool for your wealth, or it can become a financial trap.
Before you head into the world of second mortgages, there are a couple of different things you should think about.
Read on for an overview of second mortgages and advice to help you determine whether or not you should consider a second mortgage.

What Is a Second Mortgage?

A second mortgage can be a valuable borrowing vehicle in certain circumstances. Here’s how you can benefit from a second mortgage.

How a Second Mortgage Works

A second mortgage is basically a loan using your home equity as collateral. If you own your home, whether you have a mortgage attached to the property or not, you may be able to secure a second loan by liberating your equity that has built up over the years.
Generally speaking, real estate increases in value, so while a typical mortgage can stretch out for up to 30 years, the principal owed on the house steadily falls while the value of the house appreciates.
To find out how much you can possibly qualify to borrow on your home you need to find out how much equity is in your home. This is calculated by estimating the market value of the property and subtracting the payments made towards your first loan so far.
For example, if your home is currently worth $250,000 but you have a first mortgage of $160,000 outstanding on the property, you have managed to amass $90,000 in equity.
Lenders may be willing to allow you to borrow anywhere from 60% to 80% of your equity, which works out to roughly $54,000 to $72,000.
One unique kind of second mortgage is a cash-out refinance. This replaces your old mortgage with a new mortgage. With the new mortgage, it’s slightly larger than the original amount. The larger mortgage will give you a one-time cash payment.

What are Second Mortgages Used For?

As you can see a second mortgage can really represent a sizable chunk of cash, but what are they used for? Well, you can use a second mortgage for anything from funding a child’s education to making repairs on your home.
If you are going to take on additional debt, it should be for something worthwhile. A vacation, however deserved, might be better to save for slowly, than to take on the cost of a home equity loan.
Another option can be to avoid Private Mortgage Insurance.  

While Private Mortgage Insurance may not seem like a big deal, it can cost you thousands of dollars over the course of your loan.

It’s almost always worth avoiding PMI if you can,

Getting a Second Mortgage

Now that you understand how a second mortgage mortgage works, we can continue with the process. If you’ve decided that you want to take out a second mortgage on your house, we can help you with the route you should take.

Use a Good Lender

It is an unfortunate truth that there are unscrupulous people and businesses in the world. One of the best options for making sure you are getting a good rate with your mortgage company is to shop around different mortgage lenders.
This is why, we recommend using LendingTree for your second mortgage. LendingTree will shop several different lenders for home equity loan rates and allow you to screen who you apply with. 
They are also able to work with you whether you choose a separate home equity loan or decide to do a cash out refinance mortgage. You can learn more in our LendingTree review.

  • Our Rating
  • BBB Rating A-
  • Best ForMultiple Lenders
  • Loans Available Home Equity, Refi, HELOC

Steps you Can Take to Get the Best Loan

If it’s been some years since you’ve taken out a mortgage, you might want to brush up on some of the lingo that you’ve going to see.

  1. Go to the bank: The obvious first place to start is with your bank or mortgage company that holds the FIRST mortgage. More than likely they will be happy to give you a second mortgage (assuming you have a decent credit score and history with the organization). It will almost make the payments on the second mortgage easier because you already write one check to the bank for your mortgage, so you won’t forget to write a second one (hopefully).
  2. Shop around: After you’ve talked with your current bank or mortgage company, you can continue to look around with other banks and lenders. More than likely you didn’t go with the first lender you quoted with the original mortgage, so why would you go with the first on your second mortgage? Once you’ve met with several different loan offers at various established, you can sit down and decide which one works best for you. There are a few things you should consider, aside from interest rates (although it’s the most important factor), before picking out a second mortgage.
  3. Look at the loan types: Are they fixed rate or adjustable? This is going to have a huge impact on the amount of interest that you pay over the course of your loan.
  4. Look at the fine print: Are there any balloon payments attached to the loan? Be sure to look at every aspect of the mortgage before you sign any paperwork. Otherwise, you could pay thousands of dollars that you didn’t expect to pay.

Pros and Cons of a Second Mortgage

Pros of a Second Mortgage

  • Deductible: The good news about a second mortgage is that mortgage interest of up to $100,000 of the principal for married couples and $50,000 for singles is deductible on your tax return as well. Although this is meant to be a combined mortgage interest on both your mortgage loans it is still a great deduction, especially if your first mortgage is closer to the end of its life and so has a relatively small portion of interest payments left.
  • Liquidation: Another (possible) pro of taking out a second mortgage is the ability to liquidate the equity in your home. If you are on the verge of bankruptcy and you need to get access to cash to pay off high-interest loans and back taxes, taking a home equity loan might not be a bad trade.

  • Low interest: The interest payable on a home equity loan is usually lower than other types of debt because it offers the lender the security of your house. Depending on your situation, this could be an excellent way to lower the amount of debt you have and save you money on monthly interests.

Cons of a Second Mortgage

Taking out a second mortgage is not without its drawbacks.

  • Your home is collateral: For instance, you need to remember that even though the loan does provide you with the cash you want it comes at the cost of putting your house up for grabs in the event you cannot make good on the loan. While we hope it never happens to anyone, it’s not uncommon for some financial tragedy to strike and for a person to lose their house because of a second mortgage.
  • Expense: A second mortgage is also not without its costs. You have to pay for an appraisal on your house, loan origination and other legal fees associated with an ordinary loan, so although there is a lower rate of interest, there are other costs to consider. If you don’t remember from when you first got a mortgage, the house appraisal and legal fees can add up to be quite a hefty bill. While this probably isn’t going to completely change your decision on a second mortgage, you should at least calculate it into the costs beforehand.

If you’re one that has a rough relationship managing debt, I would strongly have you reconsider taking out a second mortgage to pay off debt.
You first have to fix the root of the problem which is most likely – you. A second mortgage is not the answer for everyone so think about all the factors before making your final decision.
I hear a lot of stories of people who took out a second mortgage to pay off some debts. Sure, the lower interest rate can be very attractive. Why wouldn’t you want to pay lower rates?
Getting a second mortgage to pay off credit card debt or some other consumer debt is only a temporary band-aid.

Alternatives to a Second Mortgage

Figure

For those looking for extra capital to use for things such as home improvements or debt consolidation, a Home Equity Line of Credit (HELOC) is another option.
A HELOC allows you to borrow money against the equity you have accrued in your home. For example, if you bought your home for $300,000 but it is now worth $330,000, you could borrow $30,000 to use for things such as kitchen or bathroom improvements.
Borrowing funds is always a big decision and should only be taken with great consideration. But, a HELOC can be a great alternative to a second mortgage.
For those who are interested in learning more about a HELOC, Figure ncould be a good place to start. This new company is innovating the HELOC game with AI-based approval that streamlines the application and appraisal process.

Other Alternatives

Think of the second mortgage as an emergency lifeboat in this situation. Hopefully, you never need it, but you’ll be grateful for it if you do.
If you are staring at bankruptcy but don’t want to go with a second mortgage, but still looking for a good way to lower your interest amounts, you can always go with a personal loan.
If you prefer to go the way of a personal loan rather than a second mortgage here are some ideas on where to get a personal loan that is best for you, according to Good Financial Cents.
While this might seem like a smart strategy, one thing you never do is borrow against your home to pay off credit cards. I cringe every time I hear of someone pondering that.
That is a major no-no in my book. You are much better off getting a credit card with 0% APR on balance transfers to pay off the old cards. You save tons of money and honestly, it’s normally a lot easier.

Our Experience With a Second Mortgage

We recently took the plunge and built our dream home. Along the way, we learned a lot in the building process, especially when it comes to the mortgage loan process.
Our first home was bought while I was in Iraq, so I cashed in on my veteran status used the VA home loan. With our dream home, we were short the 20% down payment that we needed to avoid PMI (Private Mortgage Insurance).
While we could have used the VA loan again (for refinancing not for first time home purchases), it was actually cheaper to do the traditional loan process and take out a second mortgage.

Second Mortgages, Friend or Foe?

Because of all the risk associated with a second mortgage, they have gained an awful reputation among homeowners, but if done carefully, they can be an excellent tool.
Just like with every other part of your finances, a second mortgage isn’t something that should be done lightly.
Spend some time looking at your financial situation and weigh your options.

Source: goodfinancialcents.com

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What Happens When a Bill Goes to Collections? – MintLife Blog

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credit score. You will then be contacted by phone and in writing regarding the details of the charge-off.

In this guide, we’ll explore what happens when a bill goes to collections as well as what to expect during the payoff process. You can still redeem your credit score by paying down your debt as quickly as possible and staying diligent with your other accounts.

What Is a Collection? 

The original lenders—such as the credit card company, mortgage lender, or doctor’s office—turn to collection agencies when they no longer expect to receive your payment. Collection agencies either act as a middleman to retrieve the debt or purchase the debt from the lender for a fraction of the original amount. The lender then writes the amount off as a loss to their business and passes responsibility off to the agency. 

Collection agencies purchase your debt for a smaller percentage of the original amount since they take on the risk that the money will not be repaid. This percentage varies based on a series of details, including the age and type of debt. Often, the higher the risk the debt will not be repaid, the less the agency pays.

When does a bill go to collections? A lender will typically sell the debt between 30 and60 days of delinquency, though they may not tell you that this occurred until after the transfer. Medical bills will not be transferred until they reach 180 days of delinquency due to the National Consumer Assistance Plan.

Once a lender sells the debt to a collections agency, you will receive a phone call alerting you of the change. Within five days of the initial notice, you will receive a physical letter that outlines the amount owed and how to pay or dispute the bill. Agencies do not have the right to collect fees or interest on the amount, nor are they allowed to threaten or intimidate you to pay the bill. The debt collectors can continue to pursue the amount depending on your state’s statute of limitations. The length varies between three to ten years depending on the laws of your state.

How Can a Bill in Collections Affect My Credit?

Payment history is one of the top contributing factors to your credit report, accounting for over a third of your credit score. Lenders want to be able to see that you’ve managed your finances in the past. Missed and lapsed payments that have gone to collections could be seen as a sign of financial instability. The effect on your credit score comes down to how late the payment is, the amount due and the type of debt.

When unpaid bills are sold to collection agencies, the negative mark can stay on your credit score for up to seven years. The starting date is determined by the last time the bill was brought current. For example, notes on defaulted bills can remain on your credit for seven years after the last time you made a payment on the loan in question. 

It is important to look at your credit report on occasion to ensure these negative marks do not appear by accident. If the collections agency or lender made a mistake in reporting the information, you can dispute the debt to have your report updated or the note removed.

As we mentioned earlier, the National Consumer Assistance Plan keeps medical debt from appearing on your credit report before 180 days of delinquency. This allows patients to negotiate with their doctors and insurance companies, many of which will offer payment plans when the bill is too high to pay in full.

How to Handle Accounts in Collections

Understanding what happens when your debt goes to collections can be daunting. Remember that you must receive all the details in writing within five days of first receiving notice. Once this arrives, verify the details with your own payment history and accounts. Review the Fair Debt Collections Practice Act if you’re concerned your collection agency is overstepping their bounds. Collectors are not, for example, allowed to intimidate you or call at unreasonable hours.

If all information is confirmed, you can approach the payoff in several ways. Set up a payment plan with your collection agency by determining a practical timeline with your own finances. If you can afford $50 a month for the next year, speak to your agency about this option and request any agreement in writing before proceeding. Avoid giving your bank account number or setting up automatic debits with the collection agency and clearly state how you plan to pay off the amount.

Dispute any inconsistencies within 30 days of collections notification. Collections does not have the right to list the debt on your credit report during the investigation. The Consumer Financial Protection Bureau has prepared sample letters for disputing or requesting clarification from a collection agency.

Once you’ve done your due diligence of requesting a payment plan and paying down the debt to your ability, the statute of limitations laid out by your state determines how long a collection agency can pursue you. A collection agency can sue you for unpaid debt, but you may have a case to have the lawsuit dismissed with legal assistance if the debt is outside the statute of limitations.

If a bill goes to collections, you do have options. Keep yourself informed about your rights as you work with collections agencies and be sure to request all agreements in writing. You can also track your credit as you make a plan for paying down your debt. This allows you to regain control after a temporary moment of financial instability.

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    Maybe you just graduated college, or you scored your first “grown-up” job, and now you’re looking for a car that suits your transportation needs. Whatever your situation is, there are a lot of factors to think about before purchasing your first car — the most important one being your budget. Be sure to consider these five things to help you decide whether you can fit the cost of a car into your new monthly budget.

    1. Your income

    The most important factor that affects your bottom line when it comes to purchasing your first car is your monthly income — especially if you’re buying a brand-new ride. Car payments can be pretty hefty, and if you’re not sure about what you can foot out of pocket each month, it can spell trouble down the line.

    It’s a good idea to pay as large a down payment as you can comfortably afford so that you can score lower monthly payments. Experts recommend a down payment of at least 20 percent of the vehicle’s total cost.

    Before you head to the dealership, think hard about how much you can realistically budget for your car payment each month, in addition to how much you can set aside for routine maintenance and repairs. Even if you’re buying an older, inexpensive car without a monthly payment, it’s still imperative to have some savings in case issues crop up.

    2. Your credit score

    If you’re new to this whole “being an adult” thing, you might not have much credit. But establishing a solid credit score is crucial to your car budget, since it directly affects your interest rates when financing your first vehicle. Scoring a good interest rate can save you hundreds — if not thousands — of dollars.

    If you don’t have any credit, or you have a credit score that needs some improvement, be wary of dealership salespeople who may try to talk you into a longer financing term. You’ll end up paying significantly more interest over the course of the term, which can negatively impact your future finances.

    3. Your financing options

    If you’re not purchasing your first car outright, you’ll have to finance it in some way. It might seem strange to shop for loans before you go car shopping, but it’ll give you a better idea of what kind of interest rate and loan amount you can expect once the time comes to secure a financing option.

    Compare rates from your bank or credit union to other lenders to see who offers the best option for you. If possible, it’s smart to get pre-approved for financing before you walk into the dealership — that way, you know the cards are stacked in your favor.

    If you have little or no credit, you may find that it’s best to wait on your car purchase until you’ve improved your score so that you can get a better interest rate. You’ll be able to better afford your vehicle in the long-term.

    4. Your research

    While researching cars that you’d like to take a look at and test drive, it’s wise to focus on practicality versus the latest sports car. In other words, prioritize what you absolutely need out of a vehicle rather than what you want. This keeps your car payments lower and helps reduce other ownership costs, such as routine maintenance, repairs and fuel expenses.

    Look for vehicles that have a solid track record of safety, reliability and inexpensive maintenance. Reference trustworthy sources, such as Edmunds.com, Kelley Blue Book, J.D. Power and Consumer Reports, to find honest reviews and helpful information.

    Make sure you also compare prices across multiple dealerships for each vehicle you’ve got your eye on to ensure you get the most bang for your buck.

    5. Insurance rates

    Once you’ve narrowed down a list of vehicles to shop around for, call around or go online to compare car insurance quotes for each one. It’s key to incorporate your monthly insurance cost into your budget. Not only is liability insurance required in the vast majority of states, but most lenders also require that you carry comprehensive and collision coverages (a.k.a. “full coverage”) for the life of the loan.

    To get the most accurate auto insurance quotes, there are a few pieces of information you should have handy:

    • Year, make and model of each vehicle you’re getting quotes for
    • Your social security number, which allows insurers to pull your credit-based insurance score
    • Your driving record and insurance history (if you have one)
    • Your coverage and deductible needs, plus any optional coverages you’d like to carry
    • Purpose of the purchase — whether you’ll be using the car for business, commuting or pleasure
    • Safety and security features on each vehicle, which can score you discounts
    • Vehicle identification numbers (VINs), if possible
    • Address where you’ll be garaging the car (usually your home address)

    Though this may seem like a lot to consider when deciding how to include your new car purchase in your monthly budget, it’s best to think about these things ahead of time. You’ll be sound in your purchasing decision and sound with your finances — a win-win!

    Haden Kirkpatrick is the director of marketing strategy and innovation at Esurance, where he is responsible for all initiatives related to product and service innovation. He manages the annual planning processes for the marketing and service business units. Haden is an innovator who is constantly thinking about how IoT, blockchain and machine learning will impact the insurance industry. He is also a mobile guru, aspiring yogi and mixed martial artist.

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    Apache is functioning normally

    The following is an excerpt from the book The Five Years Before You Retire by Emily Guy Birken.

    There are many different types of financial planners and advisors—and only some of the titles that various financial advisors can use are regulated. Meeting someone who calls himself a financial planner could mean you’ve shaken hands with an insurance agent, a stockbroker, an investment advisor, or a Certified Financial Planner (CFP).

    If that’s not confusing enough, different types of advisors are paid in different ways, which can seriously affect your bottom line. Even those with a good understanding of the financial can be excused for feeling a little overwhelmed.

    With all of this in mind, finding a trustworthy financial advisor can seem like an impossible task. But going it alone is not a good strategy for handling your retirement. Partnering with a financial advisor who is well versed in all of the rules, regulations, options, and opportunities facing you makes much more sense than trying to educate yourself from the ground up.

    So how do you determine exactly whom to trust with your financial decisions? While the process of interviewing potential advisors might take some time and effort on your part, it is much less overwhelming than either finding you’ve placed your trust in someone you shouldn’t have or trying to make all of your complex retirement decisions without any help.

    The following checklist of interview questions can help you find the advisor who will be your ally in creating a retirement you’ll love:

    1. What is your background and experience?

    In general, you will want to see that your prospective advisor already has several years of experience under her belt and has worked through various market ups and downs. Finding out just what your advisor was doing over the past several years can help you to know if her strategies and risk tolerances fit well with yours.

    2. Please explain what licenses and certifications you hold.

    This question will help you to understand exactly what type of advisor you are meeting with. As I mentioned above, it’s entirely possible that your advisor has multiple licenses and certifications, which means that they may be governed by several regulatory agencies.

    3. How are you compensated?

    If you only ask one question during your interview of potential advisors, make it this one. Understanding precisely how any one advisor will be paid will allow you to compare her with others that you interview. In addition, asking this question can really head off potential scammers, since someone who sees you as a mark will not want you to know how she is paid.

    4. What is your investment philosophy? What strategies do you use?

    These are good questions to ask even if you are not sure of your own investment philosophy and strategies. Your potential advisor should be able to explain what he considers to be important in investing, and based upon his answer, you might find yourself nodding your head or thinking it’s time to move on to another candidate. If any aspect of the advisor’s answer to this question is unclear, ask for clarification. Better to feel foolish asking questions than feel foolish by losing your shirt.

    5. Describe your ideal client.

    If you’ve found the right advisor, you’ll hear a description that sounds remarkably like you. If you are unlike every other client among your advisor’s customers, it’s unlikely he’ll be able to serve your needs well.

    6. What is your area of expertise?

    Some advisors focus on investments to help new workers start to build their nest egg, others help their clients with college planning, and still others earn their bread-and-butter on planning for the transition to retirement. While a soon-to-be retiree working with an advisor who is more geared toward helping young professionals start saving for retirement is not as big a mismatch as going to your dentist for a broken arm, there is no need to settle for an advisor who doesn’t specialize in your needs.

    7.  Can you show me some sample portfolios?

    Your advisor should be able to give you some very specific ideas of what to expect from his work. Sample portfolios will help you to understand exactly how your advisor will recommend that you allocate assets and handle volatility.

    If your advisor balks at giving you some samples and instead tries to reassure you that he makes X% for his clients each year, thank him for his time and lose his business card. Reassurances may sound good, but you want to see the specific dollars and cents of what he has been doing. Past performance does not guarantee future results (a phrase that I feel all investors should have embroidered on a pillow), but seeing how an advisor has specifically handled various portfolios can help you determine if you will work well together.

    8. Please tell me what you see as my financial goals and objectives.

    This one is kind of a trick question, since your advisor will already have asked you what you hope to accomplish and should theoretically be able to repeat back what you’ve already said. However, it’s an important question to ask because your advisor can take many cues about your financial goals from other aspects of your conversation, and should be able to help clarify your objectives. Many new clients are not able to state their objectives in clear terms, as their goals can often be somewhat amorphous as they think through their hopes for retirement. Having your prospective advisor tell you what he has heard regarding those goals and objectives can not only tell you how well he was listening, but it can also help you to better understand exactly what it is you want if you have not been able to articulate it yourself.

    Putting It All Together

    Getting the advice of a professional is an important part of feeling confident about your choices. Since many of us feel intimidated by finances in general, however, it can be very easy to either try to go it alone for fear of looking stupid in front of an advisor, or take the advice of the first competent-sounding person who offers it. Neither of those options will put you on the path to a secure and enjoyable retirement—and neither one is necessary, no matter how timid you may feel about your understanding of finances. Taking the time to understand who your prospective advisors are, what they can do, and how they receive compensation is just as vital as interviewing a potential nanny would be.

    Using these interview questions, you should be able to find an advisor who will help you make the most of your finances.


    Source: goodfinancialcents.com

    Apache is functioning normally

    These days, Americans are living longer than ever.

    While this is generally a good thing, it’s real problem for retirement planning.

    You’ll need to stretch your savings over a longer period of time which can be very hard to budget.

    To make matters worse, very few workers have access to pensions or other plans that offer guaranteed payments for life. To make sure they don’t run out of money, many Americans are turning to longevity insurance.

    What is Longevity Insurance?

    Longevity insurance makes sure you always have some income during retirement. It’s insurance that protects you against you living too long and running out of money.

    To buy this type of insurance, you need to deposit one lump sum payment with an insurance company. Then, once you reach a certain age, you will start receiving monthly payments from your insurance for the rest of your life.

    It doesn’t matter how long you live; you’ll keep receiving your monthly payments.

    If you die before reaching your payout age though, you won’t receive any money (unless you add a life insurance rider, which we’ll cover in a minute.)

    One of the important features of longevity insurance is that it delays your payments until the future.

    Before this product was launched, insurance companies only sold plans that started payments right away. By delaying payouts, you give more time for your money to grow so you’ll receive more later on.

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    How does Longevity Insurance Compare to Life Insurance?

    While longevity insurance is sold by life insurance companies, it is actually quite a different plan.

    In fact, it has pretty well the opposite structure. With life insurance, you make a small payment to the insurance company each month. When you die, your heirs get the payout from the plan. With longevity insurance, you give the insurance company a large, one-time payment.

    In exchange, you’ll receive many small payments sometime in the future. This is because longevity insurance isn’t life insurance; it’s a type of annuity, which is a long-term investment contract.

    How Do I Set Up a Plan?

    To set up longevity insurance, you need to transfer over a lump sum of money. Typically, investors transfer over money from a retirement plan like a 401(k) or IRA. You need to decide how much you want to put away for this long-term investment. To help you decide, the insurance company can give you an estimate of how much you’d receive per month in the future in exchange for your lump sum payment.

    When you set up your plan, you’ll also have to decide on when you want to start receiving payments. When these plans first came out, you used to only be allowed to pick age 85 or later. Now, you can pick whatever age you want for payments. However, the earlier you start taking money, the less you’ll receive each month. Once again, your insurance agent will show you the difference.

    Other Features

    You can also customize your longevity insurance with a few other features. One decision is whether you want inflation protection or not. As time goes value, the purchasing power of the dollar goes down; $100 was worth a lot more 30 years ago than today. Inflation will also eat into your monthly income from these policies. If you add inflation protection to your insurance, your payments will get bigger over time to match inflation. The tradeoff is that you’ll receive less per month at the beginning.

    If you are worried about dying early and wasting your contribution, you can also add a life insurance rider to your policy. If you died before receiving payments, your heirs would receive a lump sum of money. In exchange, your future income payments will be lower.

    What are the Advantages of Longevity Insurance?

    The big advantage of longevity insurance is that it guarantees your income for life.

    Very few investments do this. If you kept all your money in stocks or in the bank, you could try budgeting but ultimately there’s a chance you would run out of money. With longevity insurance, this wouldn’t happen.

    In addition, you don’t have to worry about investing with these products. The insurance company is completely responsible for your rate of return. If the market does badly, the insurance company still needs to come up with your payments. If you’re looking for a hands-off way to invest some money, this is an excellent way to do it. All you have to do is purchase the insurance plan, and that’s it.

    In addition, you don’t have to worry about investing with these products. The insurance company is completely responsible for your rate of return. If the market does badly, the insurance company still needs to come up with your payments.

    Longevity insurance also is good for taxes on your investment earnings. As long as your money is in the contract, you don’t pay taxes on your growth. You only need to pay income tax on your gains once you start taking out money.

    What are the Disadvantages of Longevity Insurance?

    Longevity insurance does have some problems. On average, these investments grow your savings by less per year than stocks or bonds. This is because insurance companies only will invest your money in very safe, guaranteed assets. You’ll potentially receive less money than if you invested yourself. Interest rates are also very low today so by buying into a contract, you’re locking in a low rate.

    Longevity Insurance is a perfect example of the old adage, “No risk, no reward.” These investments have almost zero risk, but as an investment, there are plenty of other options that will net you more cash. You should not rely on a longevity insurance investment account to give you the money that you need, but it can be a nice additional source of income.

    Another problem with longevity insurance is that you may not get any money. If you don’t live until your payment date, you won’t receive any income. Of course, you could add life insurance to your policy, but then you’d receive less income per month.

    Suitability

    Adding some longevity insurance to your retirement plan definitely makes sense, especially if you don’t have a pension. This way you know you’ll always have some money coming in no matter how long you live. It’s a good idea to put somewhere around 5 to 15 percent of your savings in one of these plans for long-term savings. Then, you can feel more comfortable investing the rest of your money because you know you’ll always have some guaranteed income in the future.

    Longevity insurance is just one way that you can give you and your family the financial security that they need. We know that managing your finances can be a difficult task, and one important part of that is your life insurance.


    Source: goodfinancialcents.com