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May 5, 2021

What Is a Credit Union vs. a Bank – Differences, Pros & Cons

Banks and credit unions have a fair amount in common. Both provide comparatively safe places to hold cash for spending and saving. Both make loans and extend lines of credit. Both provide basic financial services, like cutting bank checks.

Yet these two types of financial institutions are anything but interchangeable. Credit unions aren’t better than traditional banks, nor vice versa. But each has strengths and weaknesses that would-be users need to understand before opening that first deposit account or applying for a loan.

The seeds of this understanding lie in the details of the products, services, and guarantees banks and credit unions offer their members. Fortunately, those details aren’t too difficult to parse. Consider this your guide to doing just that.

Key Features of Banks and Credit Unions

It bears repeating that banks and credit unions have a lot in common, but key differences do emerge upon closer inspection. Credit unions tend to restrict membership in ways that banks don’t, for example, while generally offering higher interest rates on savings deposits and lower interest rates on loans.

Membership Requirements and Account Availability

As you decide between a credit union and a traditional bank, the institutions’ respective membership requirements — or lack thereof — will be among the first points of distinction you notice.

Membership Requirements and Account Availability at Banks

Banks tend to be more open to new customers than credit unions. To the extent that banks restrict membership or account availability at all, it’s on the basis of geography — that is, community banks or regional banks may not accept applications from would-be customers in states where they don’t have a physical presence. (Online banks like GO2Bank usually don’t restrict applications by geography.)

Otherwise, individuals and couples with Social Security numbers or taxpayer identification numbers and U.S. addresses can generally apply for deposit accounts without restriction.

Membership Requirements and Account Availability at Credit Unions

Credit union customers are known as “members,” which hints at the potential restrictions around opening accounts with this type of institution.

Historically, credit unions restricted membership in fairly drastic ways. For example, some were open only to employees of particular companies or members of particular labor unions, while others accepted members only from very narrow geographical areas.

While some smaller credit unions continue to restrict membership, many larger ones now have gaping loopholes in their membership criteria that allow basically anyone to join. For example, Andrews Federal Credit Union, which has about 120,000 members and a branch network serving the mid-Atlantic states, only asks that prospective members join the American Consumer Council and pay the organization’s nominal membership fee.

If you live in an area served by multiple credit unions, membership requirements aren’t likely to pose a serious hurdle to joining one that fits your needs. In more sparsely populated areas with limited local credit union coverage, you may need to join an out-of-state institution and potentially pay a nominal fee to secure your spot.

Branch and ATM Access

Most credit unions and many banks have physical branches where customers can make deposits, get cash, speak with loan officers, and conduct other financial business in person. Virtually all credit unions and banks also have their own branded ATMs or belong to low-fee or free ATM networks.

Banks’ Branch and ATM Networks

Banks’ branch networks come in all shapes and sizes. National and multinational giants like Bank of America and JPMorgan Chase have thousands of locations littered about the country, while single-branch community banks might serve a single small town or handful of rural communities. That said, more traditional banks have regional, superregional, or national branch networks than credit unions.

Most banks also belong to national ATM networks that include thousands or tens of thousands of in-network ATMs that charge few if any fees for cash withdrawals and other basic financial transactions. These networks may be entirely in-house — for example, Chase Bank has thousands of branded ATMs scattered about the United States — or shared by many different banks, like the Allpoint or MoneyPass networks. Most branchless banks (online banks) belong to one of the major fee-free ATM networks.

Credit Unions’ Branch and ATM Networks

Even larger credit unions that accept members nationwide tend to have smaller physical footprints, either in contiguous geographies (Andrews Federal Credit Union’s branches extend from the D.C. area in the south to New Jersey in the north) or clustered in areas where lots of members live and work.

However, hundreds of U.S. credit unions participate in the Co-Op Financial Services shared branch network, which has more than 5,000 branches across the United States. Co-Op Financial Services credit unions offer reciprocity to members of other participating credit unions, allowing them to deposit and withdraw funds and perform other basic banking tasks while traveling or otherwise far removed from their own credit union’s home territory. And the Co-Op Financial Services has about 30,000 fee-free ATMs in its network, just a bit fewer than Allpoint and MoneyPass.

Financial Products and Services Available

All banks and credit unions offer one or more types of deposit accounts, most often checking accounts (spending accounts) and savings accounts. Many banks and virtually all credit unions also offer credit products, including home loans (mortgages), auto loans (car loans), credit cards, and personal loans.

Financial Products and Services Available at Banks

Every bank, from the leanest mobile bank to the biggest multinational, offers some sort of deposit account. Some stop there, while others offer less common types of deposit accounts (such as money markets) and investment (brokerage) accounts, along with credit products ranging from credit cards and personal loans to secured loans like mortgage and auto loans. Most traditional banks do make loans, historically a key revenue stream for financial companies; some online banks don’t issue loans directly.

The biggest financial institutions typically have the widest breadth of financial products and services, often complemented by private banking or wealth management services designed to craft bespoke financial solutions for wealthier clients. If you want to do all your banking, investing, and financial planning in a single location, you might naturally be drawn to a traditional bank built to do just that.

Financial Products and Services Available at Credit Unions

All credit unions offer savings accounts. These are usually known as “share” accounts because a portion of their balance — usually $5 or $10 — represents the member’s ownership stake in the institution.

Virtually all credit unions also offer checking accounts. And, as the “credit” in “credit union” suggests, virtually all issue mortgages, auto loans, business loans, and other common types of credit products.

Credit unions generally can’t match big banks’ breadth of financial products and services, however. Although some credit unions offer in-house financial planning and wealth management services, they rarely operate their own brokerages — a disadvantage for self-directed investors — and may not offer access to alternative asset classes like forex or cryptocurrency. And credit unions’ credit options might be of the one-size-fits-all variety, with just one or two credit card options available at small and midsize unions, compared with dozens of choices from national issuers like American Express and Chase.

Interest Rates, Account Yields, and Account Fees

It’s worth drilling down a bit more on what bank and credit union customers can expect to pay or receive, respectively, on credit and deposit balances. Credit costs and account yields vary subtly but noticeably by institution type, although it’s also true that prevailing benchmark rates and applicant creditworthiness are far more important determinants of borrowing costs.

Bank Interest Rates, Account Yields, and Account Fees

Banks are for-profit institutions that answer first to their shareholders, not their customers. Unfortunately, this often manifests in higher interest rates on loans, relative both to credit unions and direct lenders, and higher account fees than credit unions. It’s not impossible to find free checking accounts at big banks, but customers often have to jump through hoops like minimum balance, monthly direct deposit, or transaction requirements or hold substantial assets across multiple accounts to avoid monthly service fees.

Likewise, traditional banks often pay lower interest rates on savings accounts than credit unions. Big-bank savings accounts have particularly low yields that make them more-or-less useless in the eternal fight against inflation.

Credit Union Interest Rates, Account Yields, and Account Fees

As nonprofit, member-owned institutions, credit unions aren’t as focused on the bottom line as for-profit banks. This enables them to charge lower rates on credit products and levy fewer (and lower) account fees relative to banks.

Credit unions may also pay higher interest rates (yields) on deposit account balances, although many online banks outcompete brick-and-mortar credit unions on this point. More sophisticated credit unions that market digital money management services on a national basis, like Signature Federal Credit Union, generally offer yields on par with or better than online banks.

Financial Technology

At this point, virtually all banks and credit unions operate secure websites that offer basic online money management services (online banking) and enable remote customer-staff interactions. But customers should be aware that the sophistication and scope of these capabilities can vary significantly by institution type — and by size, with many smaller banks having more in common with small and midsize credit unions on the technology front.

Financial Technology Available at Banks

Online banks and larger traditional banks have the resources and technical ability to design sophisticated online banking portals and mobile banking apps that can replicate most if not all of the in-branch banking experience and offer convenient services like early payday, instant person-to-person transfers, digital bill paying, and built-in savings buckets. To be sure, larger credit unions are increasingly attentive to the tech demands of younger digital natives and can compete with bigger or online-only banks at this game, but most smaller and midsize credit unions can’t.

Financial Technology Available at Credit Unions

Many credit unions still don’t have mobile banking apps and offer only rudimentary digital banking platforms that leave out capabilities most consumers take for granted, like peer-to-peer transfers. If you expect to be able to do most of your day-to-day banking digitally, you should investigate the tech capabilities of any credit union you’re thinking about joining and steer clear of institutions that don’t seem up to snuff. A general rule of thumb: If the credit union’s website feels dated and doesn’t work well on a mobile device, it probably won’t offer a quality digital banking experience.

Deposit Insurance

Rest assured: Whether you keep your money with a bank or credit union, it’s insured against institutional failure up to legally mandated limits. Some banks, especially, are even more generous with deposit insurance than legally required.

Deposit Insurance Available at Banks

All reputable U.S.-based banks carry deposit insurance through the Federal Deposit Insurance Corporation (FDIC), which insures deposits up to $250,000 per account type, per institution. Some financial institutions, especially those that offer cash management accounts, go even further. Deposit insurance limits of $1 million or more are increasingly common on this type of account.

Deposit Insurance Available at Credit Unions

The National Credit Union Administration (NCUA) provides an identical level of deposit insurance on member balances at participating (“member NCUA”) institutions: $250,000 per account type, per institution. Higher limits aren’t as common, but the $250,000 threshold is more than enough for most account holders.

The Verdict: Should You Choose a Bank or Credit Union?

It’s clear that banks and credit unions are distinct in important ways. It’s equally certain that neither is better or worse than the other — just that each is different. Your choice will depend on your personal finance needs, preferences, and priorities.

You Should Choose a Bank If…

A bank could be a better fit for your financial needs if you value any of the following.

Doing All Your Banking and Borrowing in One Place. Many credit unions offer a solid mix of basic financial products and services: checking accounts, savings accounts, CDs, mortgages, auto loans, personal loans, SBA loans. But few if any can match the breadth and depth of products and services available from major consumer banks. If you want to be able to do all of your banking, borrowing, self-directed investing, and financial planning in one place, you’re better off in the banking world.
Excellent Online and Mobile Functionality. As a group, banks offer a better online and mobile banking experience than credit unions. There’s a great deal of variation within the banking sector, of course, with traditional, branch-based community banks noticeably behind online-only and nationwide banks on the tech front. But many credit unions are even further behind, to the point that they’re simply not useful for people who prefer not to bank in-branch.
Few Eligibility Requirements to Open an Account. With notable exceptions like age-restricted senior checking accounts, banks generally don’t restrict account availability or membership except by geography — and people who do business with online banks don’t have to worry about that. By contrast, all credit unions impose some sort of restriction on membership, although it’s often possible for the general public to join by making nominal donations to affiliated organizations.

You Should Join a Credit Union If…

Consider joining a credit union if you see your financial priorities represented here.

Personalized Service and Responsive Staff. If there’s an upside to being behind the times technologically, it’s that most credit unions still invest heavily in branch-based service and local support staff. If you value the opportunity to meet with a banker or get one on the phone basically on demand, a credit union is likely to be a better fit than a bigger, more impersonal bank.
Lower Loan Rates (On Average). A nonprofit, customer-centric business model allows credit unions to undercut for-profit banks with lower interest rates on loans and other credit products, including credit cards. Not all credit unions actually do charge lower rates; you should always shop around for the best rates rather than assuming your credit union is the best you can do. But the average credit union user does see real financial benefit from membership — a 2018 analysis by the Credit Union National Association found that the average New York State credit union member reaped benefits worth $85 per person or $178 per household, per year.
Simpler Account Terms With Less Nickel-and-Diming. Although plenty of banks distinguish themselves with simple, reasonable fee structures, credit unions make a business model out of it. As a credit union member, you’re unlikely to pay a monthly maintenance fee on a checking or savings account, and you’ll probably pay lower fees for things like overdrafts and returned checks too.
A Member-Owner Model. The typical credit union member doesn’t see any obvious benefit from being a member-owner — it’s not like credit union shareholders get eye-popping dividend checks every year, as big shareholders in corporate banks do. But, on top of the lower rates and fees the model allows, it can feel good to be part of a like-minded credit union community.

Both Are Great If…

Both banks and credit unions are excellent options if:

You Want a Safe Place to Hold Money for Spending and Saving. Both banks and credit unions carry ample deposit insurance — at least up to $250,000 per account type, per institution, and more at some banks. If your bank or credit union fails, you won’t have to worry about losing insured deposits.
You Want Access to Lots of ATMs. As long as your credit union is a member of the Co-Op Financial Services network, you’ll have access to tens of thousands of ATMs across the United States — just as you would as a customer of a bank in the Allpoint or MoneyPass ATM networks.

Final Word

Since the turn of the 21st century, the widespread adoption of online and mobile banking has fueled pronounced shifts in the broader public’s financial behaviors and expectations, upending consumer finance. Parallel changes have come about thanks to regulatory reforms and consumer protection legislation implemented in the wake of the global financial crisis of the late 2000s, such as the creation of the Consumer Financial Protection Bureau.

One of the more noticeable consequences of technological and regulatory change has been a convergence — if not a total melding — of banks’ and credit unions’ respective business models. In terms of technological sophistication and product scope, larger credit unions now resemble midsize banks. Meanwhile, smaller, leaner, higher-tech banks and fintech platforms seek to replicate credit unions’ customer experience and stand apart from big, impersonal banks.

This is all to the benefit consumers, who have more choice than ever — and more reason than ever to expect financial institutions to treat them with the respect they deserve. Whether you ultimately decide to use a bank or credit union for your day-to-day and long-term financial needs, you can surely agree that’s good news.

Source: moneycrashers.com

May 2, 2021

Chase Bank Review 2021 | The Simple Dollar

Chase Bank is unmatched in accessibility and customer service, but it may not be the best option for those looking for high interest-earning potential.

Savings APY

0.01%

Min. Deposit

N/A

J.D. Power Rating

827/1,000

SimpleScore

3 / 5.0

SimpleScore Chase 3

Savings APY 2

1Y CD APY 2

Customer Satisfaction 3

Mobile App 4

Product Variety 4

Chase offers all major banking services, including checking and savings accounts, credit cards, loans, and investments. Its mobile tools are the best of the national banks, and it has the second-largest network of branches in the country, behind Wells Fargo. It also has the most ATMs, with 16,000 around the nation. Customers have reported a high degree of satisfaction with Chase, with its easy accessibility being a key determiner.

The only thing customers seem mildly dissatisfied with was Chase’s rates and fee schedule. Its monthly maintenance fees are nothing special, though there is the opportunity to waive them if you meet certain criteria. Its interest rates, too, are disappointing.

Chase Bank at a Glance

Savings Interest Rate (APY)	0.01% effective as of 6/12/20. Interest rates are variable and subject to change
Branches	4,900
ATMs	16,000
ATM Surcharge	$5 per withdrawal and $2.50 for any transfers or inquiries at ATMs outside the U.S., Puerto Rico and the U.S. Virgin Islands. Fees from the ATM owner still apply.
Credit Cards	21
Best For	Customers who value easy access to their money
Not For	Customers interested in earning a lot of interest on their accounts
Standout Features	Offers all major banking products High customer satisfaction ratings Large selection of credit cards Excellent mobile banking tools

Chase Bank Highlights

Chase Bank offers a huge network of ATMs and branches, with 4,900 brick-and-mortar banks and 16,000 ATMs nationwide.
Chase offers an impressive selection of mobile banking tools, including mobile deposit and on-the-go account management.
Chase offers some of the best rewards credit cards on the market, which are easily integrated into their mobile app.
Chase Bank has received high marks for its solid, U.S.-based customer service.

The Claim

Chase Bank puts the customer first. It offers a broad range of services, from checking and savings accounts, to credit cards and loans. It lets you decide what you need, and how you want to access your money.

Is it True?

Yes. Chase Bank provides all major banking services, including checking and savings accounts, credit cards, CDs, auto loans, mortgages, investing, and business banking. Within each service, you have several options, so you can choose the one that best fits your lifestyle. This is especially true of its credit cards. Chase offers 21 cards, each catered to different interests like small businesses or cash back rewards.

Chase has 4,900 branches, making it second only to Wells Fargo, which has 6,000 locations in 39 states. Chase was also named one of Time Magazine’s Best Banks in America in 2015 because of its huge network of 16,000 ATMs. But where the company really excels is its mobile banking. As brick-and-mortar banks continue to disappear, a clean web interface and user-friendly apps become increasingly important. Chase outshone its competitors, earning a 4.5 out of 5 rating for iOS devices and a 4.6 for Android. The next best was Citi, earning a 3.5 and 4.1 on iOS and Android, respectively. The worst — U.S. Bank — only scored a 2.5 and 3.8.

Customers have reported a high degree of satisfaction with Chase. The Consumer Financial Protection Bureau reports Chase has a below-average number of consumer complaints for a bank of its size, which is a good indication that customers are largely satisfied with the service they receive. In J.D. Power’s 2017 U.S. Retail Banking Satisfaction Study, Chase Bank scored above the regional average in all 11 regions and consistently outscored competitors like Bank of America and Citibank. The survey found customers were most impressed with the ease of accessing their Chase accounts, but they were less impressed with the company’s fee structure. Chase’s monthly maintenance fees are slightly above average, and it’s one of the only large banks to charge customers for mobile check deposits, along with U.S. Bank.

Our Deep Dive

Branches: Chase has 4,900 branch locations around the country, making it one of the largest networks of any bank. However, most of them centered in the West, New England, and only parts of the Midwest. Residents of the Southeast and North Central U.S. won’t have the option of visiting a brick-and-mortar location, but they can still access their Chase accounts online or through the mobile apps.
16,000 ATMs: Chase has the most ATMs of any national bank, so no matter where you live, you shouldn’t have to travel far to find one.
Credit cards for all lifestyles: Chase currently offers 21 credit cards tailored to a variety of customers. Frequent travelers can choose between several options that earn them travel rewards and have no foreign transaction fees. There are also cards designed for small businesses and, of course, your standard rewards cards. If you’re unsure which card is best for you, Chase’s Card Finder tool can help you narrow it down.
On-the-go account management: Chase’s mobile apps for iOS and Android devices enable you to view your account balances, find the nearest ATM, pay your credit card bills, and transfer money. There’s also Chase QuickDeposit, which enables you to deposit checks simply by taking photos of them. Chase is one of the few banks that charges a small fee for its QuickDeposit service, however, so if you can make it to a branch office to deposit your check, that’s the better way to go. (You’ll need to check the fine print on your account to know just how much those fees are.)
Offers all types of mortgages: Chase Bank offers 10-, 20- and 30-year fixed-rate mortgages, and 5/1 and 7/1 adjustable-rate mortgages. It also provides more specialized loans, including FHA, VA and Jumbo loans.
Broad range of investment products: Chase Financial Advisors can help set you up with the right investment strategy based on your goals and risk tolerance. The company offers managed accounts, college savings plans, and mutual funds. If you’re looking to save for retirement, you can also set up a traditional or Roth IRA. Chase doesn’t offer annuities directly, but it partners with several insurance providers that do offer this product, so your Chase Financial Advisor can still point you in the right direction if you’re interested in an annuity.
Business banking: No matter the size of your organization, Chase offers checking accounts, credit cards, and lines of credit to suit your needs. Chase’s Merchant Services enable you to easily collect payment from your customers, wherever you are — even on the go, if you have the Chase Mobile Checkout app. Chase also partners with ADP to offer you payroll solutions, as well as the ability to track time and attendance.

Cost Rundown

Chase offers banking solutions to individuals and businesses of all financial situations. The cost to you will depend on your lifestyle and the services you choose. For example, a basic checking account from Chase could cost you a $12 monthly service fee. But if you meet the account’s criteria, you won’t have to pay a fee at all. Certain credit cards have annual fees while others do not. And if you frequently deposit checks via mobile apps or visit out-of-network ATMs, you’ll incur additional charges.

You also have to weigh the gains of opening an account with Chase. In some cases, it may be worth it for you to pay an annual fee on a credit card if it’s going to offer you great rewards down the road. On the other hand, individuals interested in savings accounts with high interest rates may be disappointed with Chase’s. Those interested in a higher earning potential may want to consider another option, like Wells Fargo.

Cheaper (or Free!) Alternatives

Before committing to any financial institution, you should do some research and see what your options are. If you were looking to take out a mortgage, for example, you wouldn’t go with the first company to pre-approve you. You’d want to compare the rates that several companies offered you to be sure you were getting the best deal. Similarly, you should consider the terms of any credit cards or checking and savings accounts to ensure you’re choosing the one that’s most in line with your goals.

The right bank for you largely depends on your values. If it’s all about the money to you, you may prefer a company like U.S. Bank over Chase. Its monthly maintenance fees are lower than Chase’s and it gives you the option to lower them further by opting for paperless statements. It also gives you the option to earn more interest on your savings accounts, in some cases up to 0.01% APY. But on the flipside, U.S. Bank has a much smaller network of branches and ATMs than Chase does, and its mobile tools aren’t as strong. If convenient access to your money is more important to you, Chase may be the better option.

The Competition

Wells Fargo: Wells Fargo has the largest network of branch locations of any national bank. With over 6,000 branch locations in 39 states and 13,000 ATMs, accessing your money is quick and convenient. Its fees are on par with Chase’s, but its interest rates are higher, so it’s a good company to choose if you’re looking for greater earning potential. Wells Fargo doesn’t have the selection of credit cards that Chase does, but there are still several options for those looking to earn rewards on their purchases.
U.S. Bank: U.S. Bank may not have the network of Chase or Wells Fargo, but it hangs right with them in terms of customer service. It scored well in the J.D. Power survey, and it has fewer CFPB complaints than any other bank on this list. Its mobile banking isn’t as strong as its competitors, so if that is a priority for you, U.S. Bank isn’t the best choice. It does offer lower monthly maintenance fees and higher savings account interest rates than Chase, though.
Citibank: Citibank has the smallest branch network of any bank on this list, with less than 800 brick-and-mortar locations across the U.S. Citi has a good selection of checking accounts with no minimum opening deposits. The fees on its basic accounts are about on par with Chase’s. The downside is you have to pay a $30 monthly fee, and it’s unlikely that most people will meet the criteria necessary to waive that fee. Citi’s savings account is less impressive. The company only offers one account option, and interest rates are low until you accumulate a sizeable balance. Citi also failed to impress when it came to customer service, consistently scoring average or below in the J.D. Power survey.
Bank of America: Bank of America has a sizeable branch network and a decent selection of services, but it regularly fails to please its customers. It received the most CFPB complaints of any bank on this list, and it scored average or below in every region in J.D. Power’s customer satisfaction survey. Its selection of checking and savings accounts is smaller than most of the other companies as well. That being said, its fees aren’t unreasonable, and Preferred Rewards clients can earn up to 0.01% APY with the Advantage Savings Account. And it has a decent selection of credit cards, too.
Ally: One of the top online banks, Ally doesn’t have any branch locations you can visit. But it makes up for this with no monthly maintenance fees, convenient mobile tools, and interest rates higher than what you’ll find with any traditional bank. Ally also offers a rewards credit card, CDs, IRAs, and auto loans.
Barclays: Barclays is another online bank that’s worth considering if you’re after high interest rates. Barclays isn’t a good choice if you want to do all your banking in one place, though. It only offers savings accounts and CDs, so those interested in credit cards, checking accounts, or loans will have to check out other options.

What Others Are Saying

The Dallas Morning News reported that Chase, along with four other national banks, were cited for failing to develop adequate plans for how they would restructure their organization in the event of bankruptcy. The banks had been ordered to remedy the problem by October 2016. Chase’s CEO assured reporters that the company would resolve the issue as quickly as possible. But while this may seem like a significant issue, it’s unlikely to cause issues for consumers, as the article points out: “The big banks are in strong financial shape and are facing no threat of collapse. They sit on sturdy bases of capital that the regulators ordered them to shore up in recent years. The banking industry as a whole has recovered steadily since the financial crisis, racking up climbing quarterly profits.”
The Chicago Tribune picked up a story about Chase’s bank error policies. Per their terms of service, the company may not attempt to correct deposit errors of $10 or less. In some cases, this means the bank keeps your $10. In other cases, it may mean you get a bonus $10 you shouldn’t have had. This shouldn’t be an issue for most consumers, unless you make frequent deposits. If you do and you notice an error, you can contact Chase and they will fix it, according to their spokesperson: “If we haven’t done it and you call us within a year, we’ll definitely make the adjustment…This is just saying we may not automatically do it.”
U.S. News & World Report named Chase one of its 10 Best Banks of 2016, citing its broad range of services and large branch network as key factors. It does point out its low interest rates as a detractor, though: “Accessibility through its 5,300 branches and 15,500 ATMs is a major feature for Chase because, although its savings rate of 0.01 percent APY is similar to many banks on this list, its 0.02 percent APY CD rate is one of the lowest on this list.”

Compare top bank accounts

Too long, didn’t read?

Chase makes it easy to access your money wherever you are, and customers have continually voiced their approval. Whether you’re planning for retirement, opening a new savings account, or taking out your first mortgage, Chase has options for you.

Source: thesimpledollar.com

April 22, 2021

How to Manage Unpaid Debt From a Deceased Family Member

National Bureau of Economic Research found that 46.1% of American seniors die with less than $10,000 in assets. And it’s possible that outstanding debts could top this amount. Here’s everything you need to know about what happens to debt after your family member dies.

My Family Member Left Unpaid Debt, Now What?

Don’t worry about suddenly becoming legally responsible for the debt of your deceased parents, grandparents, or siblings. Even if they die with unpaid debt, these debts don’t legally pass to you.

However, if your spouse dies, you might be on the hook for their debts. Most of the time, you won’t be, but this varies by state.

You’ll be responsible for a deceased’s debts if you’ve acted as a cosigner on a loan or mortgage for a family member who died. The same goes if you’re the joint account holder on a credit card. And, in some states, if you own property with someone who’s died, their estate has to pay any outstanding bills.

Keep in mind, if you live in a community property state you might be liable for the debt of your spouse. There are nine community property states:

Arizona
California
Idaho
Louisiana
New Mexico
Nevada
Texas
Washington
Wisconsin

In these states, spouses share debts. Creditors could be able to use community property to satisfy debts, but the specifics vary by state so consult an attorney in your area to understand your rights.

Lastly, if you cosigned medical bills for a loved one when they entered the hospital, you could be on the hook for costs that aren’t covered by insurance. This also varies by state.

Contact From Debt Collectors

Even though it could feel traumatic, debt collectors are allowed to contact you if your spouse has died and left a debt. However, they’re not allowed to claim that you’re responsible for the debt unless you were a joint account holder or cosigner. Barring that, they’re only authorized to contact you for information about the executor of the estate so they can attempt to recover payment.

Since the deceased’s estate is still responsible for the debt, a debt collector could file a claim against the estate. However, unless you fit into the specific circumstances listed above, they can’t claim that you’re legally responsible for the debt. This is true even if you are the executor of the estate.

How to Deal With Inherited Debt

If you’re legally obligated to pay the debt left by a deceased family member, you’ll have to take steps to repay it. Not paying debt, such as a mortgage you cosigned or credit card for which you’re a joint account holder, could have a negative impact on your credit. This includes affecting your ability to receive financing in the future. Creditors can even go as far as to garnish your wages, in some cases.

What Happens to a Mortgage When a Spouse dies?

Family members who inherit a property are allowed to take over the mortgage from a loved one who’s died. A federal law excludes heirs from having to prove they can actually repay the funds before assuming the mortgage.

Although this gives you some flexibility to determine how to come up with the mortgage payments, it can also be stressful if you truly can’t afford the rest of the mortgage. You can always ask the lender about modifications you can make to the mortgage to help the payments fit your budget.

If you decide you don’t want to pay the remaining funds left on the mortgage, you can opt to sell the home or allow the lender to foreclose.

Preventing Unauthorized Debt

The executor of your loved one’s estate should let all lenders know of your loved one’s death so they can settle the accounts. These lenders will then report your loved one as deceased to the credit bureaus. This can prevent any scammers from attempting to rack up additional debt in your family member’s name.

Typically, the funeral home also notifies the Social Security Administration (SSA) of your loved one’s death if you provide them with their Social Security number. You can also do this yourself over the phone or in person at an SSA office.

Facing Secured Loans

There’s a chance you might face a creditor over items that were used to secure loans. For example, let’s say you owned a car jointly with your spouse, and the auto loan is in your spouse’s name. If your spouse dies and their estate can’t repay the loan, you might find yourself battling a creditor who’s trying to repossess your car.

For this reason, reach out to lenders of secured loans, immediately, to notify them of a death and arrange a payment plan.

Paying Joint Debt

If you were previously a cosigner or a joint account holder, you can find yourself legally responsible for debt that you can’t afford. In this case, one option is to look at refinancing the debt to potentially obtain a lower interest rate or longer term.

If you’re having trouble or feeling overwhelmed handling a new set of bills, consider obtaining professional financial advice. You can often get free or low-cost credit help from nonprofits or credit unions. When doing so, be sure that anyone you receive advice from is accredited by the National Foundation for Credit Counseling or the Financial Counseling Association of America.

How to Protect Your Family From Inheriting Debt

People commonly take steps to prevent passing on their debt after death through obtaining a life insurance policy that provides such coverage. There are several versions of life insurance that could help your heirs pay any of your remaining debt. Remember, always compare life insurance companies online to make sure you’re getting the best deal for your circumstances.

Credit Life Insurance

You’ll typically be offered credit life insurance when obtaining your mortgage, or another major loan such as an auto loan. If you obtain credit life insurance, when you die your loan is repaid based on your policy.

As your loan matures and the outstanding amount lessens, so does the death benefit of the policy. Because credit life insurance is guaranteed issue, it usually doesn’t require a health screening. Keep in mind, credit life insurance isn’t paid to your heirs but directly to your creditor.

Term Life Insurance

The death benefit from term life insurance can also be used to repay a debt. If you have a large source of debt, like a mortgage, you could opt to purchase term life insurance to last the entire term of your loan. You can also opt to cover debt for which you have a cosigner with a life insurance policy.

For example, let’s say you have a $1,000,000 mortgage — so you’d want a death benefit that covers this cost. Term life insurance only pays the death benefit if you die within the term of the policy. If your mortgage has a 30-year term, you’d likely want a term that covers the same time period.

Your monthly premiums are determined by the length of your term, death benefit, age and possibly other factors such as your health. The annual premium for $1,000,000 term life could range anywhere from $514 (for a 20-year-old female) to $1,894 (for a 40-year-old male) for a 30-year term.

Be sure to name a specific beneficiary so the life insurance doesn’t go directly to your estate, where creditors might have access to it.

Whole Life Insurance

Though typically more expensive, whole life insurance builds cash value throughout your lifetime which you can withdraw to repay debts while you’re still alive. Your heirs can also use the death benefit to pay debts such as a mortgage or auto loan.

Whole life insurance premiums also vary based on the age you are when you obtain your insurance, gender, age and policy amount. Health can also impact your premiums. For example, being a smoker can cause your life insurance to be more expensive.

Whole life can be significantly more expensive. For example, a 40-year-old woman might be quoted $80 per month for a 20-year, $1,000,000 term life policy, and $1,000+ per month for a $1,000,000 whole life policy.

The Bottom Line

Although there are many scenarios where you’re not liable for a deceased loved one’s debts, there are enough ways you can be liable to cause a significant financial crisis if you’re unprepared.

One of the best ways to prepare is ensuring your loved one has enough life insurance to cover their debts, and that you’re named as a beneficiary. This could be particularly important if you’re the cosigner on a loan or if you’re concerned about affording the mortgage on a home you share with your family member.

goodfinancialcents.com

April 19, 2021

The Pros & Cons of Offering Owner Financing (When You Sell Your Home)

Sometimes, home sellers find a buyer eager to purchase but unable to finance the property with traditional mortgage financing. Sellers then have a choice: lose the buyer, or lend the mortgage to the buyer themselves.

If you want to sell a property you own free and clear, with no mortgage, you can theoretically finance a buyer’s full first mortgage. Alternatively, you could offer just a second mortgage, to bridge the gap between what the buyer can borrow from a conventional lender and the cash they can put down.

Should you ever consider offering financing? What’s in it for you? And most importantly, how do you protect yourself against losses?

Before taking the plunge to offer seller financing, make sure you understand all the pros, cons, and options available to you as “the bank” when lending money to a buyer.

Advantages to Offering Seller Financing

Although most sellers never even consider offering financing, a few find themselves forced to contemplate it.

For some sellers, it could be that their home lies in a cool market with little demand. Others own unique properties that appeal only to a specific type of buyer or that conventional mortgage lenders are wary to touch. Or the house may need repairs in order to meet habitability requirements for conventional loans.

Sometimes the buyer may simply be unable to qualify for a conventional loan, but you might know they’re good for the money if you have an existing relationship with them.

There are plenty of perks in it for the seller to offer financing. Consider these pros as you weigh the decision to extend seller financing.

1. Attract & Convert More Buyers

The simplest advantage is the one already outlined: You can settle on your home even when conventional mortgage lenders decline the buyer.

Beyond salvaging a lost deal, sellers can also potentially attract more buyers. “Seller Financing Available” can make an effective marketing bullet in your property listing.

If you want to sell your home in 30 days, offering seller financing can draw in more showings and offers.

Bear in mind that seller financing doesn’t only appeal to buyers with shoddy credit. Many buyers simply prefer the flexibility of negotiating a custom loan with the seller rather than trying to fit into the square peg of a loan program.

2. Earn Ongoing Income

As a lender, you get the benefit of ongoing monthly interest payments, just like a bank.

It’s a source of passive income, rather than a one-time payout. In one fell swoop, you not only sell your home but also invest the proceeds for a return.

Best of all, it’s a return you get to determine yourself.

3. You Set the Interest Rate

It’s your loan, which means you get to call the shots on what you charge. You may decide seller financing is only worth your while at 6% interest, or 8%, or 10%.

Of course, the buyer will likely try to negotiate the interest rate. After all, nearly everything in life is negotiable, and the terms of seller financing are no exception.

4. You Can Charge Upfront Fees

Mortgage lenders earn more than just interest on their loans. They charge a slew of one-time, upfront fees as well.

Those fees start with the origination fee, better known as “points.” One point is equal to 1% of the mortgage loan, so they add up fast. Two points on a $250,000 mortgage comes to $5,000, for example.

But lenders don’t stop at points. They also slap a laundry list of fixed fees on top, often surpassing $1,000 in total. These include fees such as a “processing fee,” “underwriting fee,” “document preparation fee,” “wire transfer fee,” and whatever other fees they can plausibly charge.

When you’re acting as the bank, you can charge these fees too. Be fair and transparent about fees, but keep in mind that you can charge comparable fees to your “competition.”

5. Simple Interest Amortization Front-Loads the Interest

Most loans, from mortgage loans to auto loans and beyond, calculate interest based on something called “simple interest amortization.” There’s nothing simple about it, and it very much favors the lender.

In short, it front-loads the interest on the loan, so the borrower pays most of the interest in the beginning of the loan and most of the principal at the end of the loan.

For example, if you borrow $300,000 at 8% interest, your mortgage payment for a 30-year loan would be $2,201.29. But the breakdown of principal versus interest changes dramatically over those 30 years.

Your first monthly payment would divide as $2,000 going toward interest, with only $201.29 going toward paying down your principal balance.
At the end of the loan, the final monthly payment divides as $14.58 going toward interest and $2,186.72 going toward principal.

It’s why mortgage lenders are so keen to keep refinancing your loan. They earn most of their money at the beginning of the loan term.

The same benefit applies to you, as you earn a disproportionate amount of interest in the first few years of the loan. You can also structure these lucrative early years to be the only years of the loan.

6. You Can Set a Time Limit

Not many sellers want to hold a mortgage loan for the next 30 years. So they don’t.

Instead, they structure the loan as a balloon mortgage. While the monthly payment is calculated as if the loan is amortized over the full 15 or 30 years, the loan must be paid in full within a certain time limit.

That means the buyer must either sell the property within that time limit or refinance the mortgage to pay off your loan.

Say you sign a $300,000 mortgage, amortized over 30 years but with a three-year balloon. The monthly payment would still be $2,201.29, but the buyer must pay you back the full remaining balance within three years of buying the property from you.

You get to earn interest on your money, and you still get your full payment within three years.

7. No Appraisal

Lenders require a home appraisal to determine the property’s value and condition.

If the property fails to appraise for the contract sales price, the lender either declines the loan or bases the loan on the appraised value rather than the sales price — which usually drives the borrower to either reduce or withdraw their offer.

As the seller offering financing, you don’t need an appraisal. You know the condition of the home, and you want to sell the home for as much as possible, regardless of what an appraiser thinks.

Foregoing the appraisal saves the buyer money and saves everyone time.

8. No Habitability Requirement

When mortgage lenders order an appraisal, the appraiser must declare the house to be either habitable or not.

If the house isn’t habitable, conventional and FHA lenders require the seller to make repairs to put it in habitable condition. Otherwise, they decline the loan, and the buyer must take out a renovation loan (such as an FHA 203k loan) instead.

That makes it difficult to sell fixer-uppers, and it puts downward pressure on the price. But if you want to sell your house as-is, without making any repairs, you can do so by offering to finance it yourself.

For certain buyers, such as handy buyers who plan to gradually make repairs themselves, seller financing can be a perfect solution.

9. Tax Implications

When you sell your primary residence, the IRS offers an exemption for the first $250,000 of capital gains if you’re single, or $500,000 if you’re married.

However, if you earn more than that exemption, or if you sell an investment property, you still have to pay capital gains tax. One way to reduce your capital gains tax is to spread your gains over time through seller financing.

It’s typically considered an installment sale for tax purposes, helping you spread the gains across multiple tax years. Speak with an accountant or other financial advisor about exactly how to structure your loan for the greatest tax benefits.

Drawbacks to Seller Financing

Seller financing comes with plenty of risks. Most of the risks center around the buyer-borrower defaulting, they don’t end there.

Make sure you understand each of these downsides in detail before you agree to and negotiate seller financing. You could potentially be risking hundreds of thousands of dollars in a single transaction.

1. Labor & Headaches to Arrange

Selling a home takes plenty of work on its own. But when you agree to provide the financing as well, you accept a whole new level of labor.

After negotiating the terms of financing on top of the price and other terms of sale, you then need to collect a loan application with all of the buyer’s information and screen their application carefully.

That includes collecting documentation like several years’ tax returns, several months’ pay stubs, bank statements, and more. You need to pull a credit report and pick through the buyer’s credit history with a proverbial fine-toothed comb.

You must also collect the buyer’s new homeowner insurance information, which must include you as the mortgagee.

You need to coordinate with a title company to handle the title search and settlement. They prepare the deed and transfer documents, but they still need direction from you as the lender.

Be sure to familiarize yourself with the home closing process, and remember you need to play two roles as both the seller and the lender.

Then there’s all the legal loan paperwork. Conventional lenders sometimes require hundreds of pages of it, all of which must be prepared and signed. Although you probably won’t go to the same extremes, somebody still needs to prepare it all.

2. Potential Legal Fees

Unless you have experience in the mortgage industry, you probably need to hire an attorney to prepare the legal documents such as the note and promise to pay. This means paying the legal fees.

Granted, you can pass those fees on to the borrower. But that limits what you can charge for your upfront loan fees.

Even hiring the attorney involves some work on your part. Keep this in mind before moving forward.

3. Loan Servicing Labor

Your responsibilities don’t end when the borrower signs on the dotted line.

You need to make sure the borrower pays on time every month, from now until either the balloon deadline or they repay the loan in full. If they fail to pay on time, you need to send late notices, charge them late fees, and track their balance.

You also have to confirm that they pay the property taxes on time and keep the homeowners insurance current. If they fail to do so, you then have to send demand letters and have a system in place to pay these bills on their behalf and charge them for it.

Every year, you also need to send the borrower 1098 tax statements for their mortgage interest paid.

In short, servicing a mortgage is work. It isn’t as simple as cashing a check each month.

4. Foreclosure

If the borrower fails to pay their mortgage, you have only one way to forcibly collect your loan: foreclosure.

The process is longer and more expensive than eviction and requires hiring an attorney. That costs money, and while you can legally add that cost to the borrower’s loan balance, you need to cough up the cash yourself to cover it initially.

And there’s no guarantee you’ll ever be able to collect that money from the defaulting borrower.

Foreclosure is an ugly experience all around, and one that takes months or even years to complete.

5. The Buyer Can Declare Bankruptcy on You

Say the borrower stops paying, you file a foreclosure, and eight months later, you finally get an auction date. Then the morning of the auction, the borrower declares bankruptcy to stop the foreclosure.

The auction is canceled, and the borrower works out a payment plan with the bankruptcy court judge, which they may or may not actually pay.

Should they fail to pay on their bankruptcy payment plan, you have to go through the process all over again, and all the while the borrowers are living in your old home without paying you a cent.

6. Risk of Losses

If the property goes to foreclosure auction, there’s no guarantee anyone will bid enough to cover the borrower’s loan debt.

You may have lent $300,000 and shelled out another $20,000 in legal fees. But the bidding at the foreclosure auction might only reach $220,000, leaving you with a $100,000 shortfall.

Unfortunately, you have nothing but bad options at that point. You can take the $100,000 loss, or you can take ownership of the property yourself.

Choosing the latter means more months of legal proceedings and filing eviction to remove the nonpaying buyer from the property. And if you choose to evict them, you may not like what you find when you remove them.

7. Risk of Property Damage

After the defaulting borrower makes you jump through all the hoops of foreclosing, holding an auction, taking the property back, and filing for eviction, don’t delude yourself that they’ll scrub and clean the property and leave it in sparkling condition for you.

Expect to walk into a disaster. At the very least, they probably haven’t performed any maintenance or upkeep on the property. In my experience, most evicted tenants leave massive amounts of trash behind and leave the property filthy.

In truly terrible scenarios, they intentionally sabotage the property. I’ve seen disgruntled tenants pour concrete down drains, systematically punch holes in every cabinet, and destroy every part of the property they can.

8. Collection Headaches & Risks

In all of the scenarios above where you come out behind, you can pursue the defaulting borrower for a deficiency judgment. But that means filing suit in court, winning it, and then actually collecting the judgment.

Collecting is not easy to do. There’s a reason why collection accounts sell for pennies on the dollar — most never get collected.

You can hire a collection agency to try collecting for you by garnishing the defaulted borrower’s wages or putting a lien against their car. But expect the collection agency to charge you 40% to 50% of all collected funds.

You might get lucky and see some of the judgment or you might never see a penny of it.

Options to Protect Yourself When Offering Seller Financing

Fortunately, you have a handful of options at your disposal to minimize the risks of seller financing.

Consider these steps carefully as you navigate the unfamiliar waters of seller financing, and try to speak with other sellers who have offered it to gain the benefit of their experience.

1. Offer a Second Mortgage Only

Instead of lending the borrower the primary mortgage loan for hundreds of thousands of dollars, another option is simply lending them a portion of the down payment.

Imagine you sell your house for $330,000 to a buyer who has $30,000 to put toward a down payment. You could lend the buyer $300,000 as the primary mortgage, with them putting down 10%.

Or you could let them get a loan for $270,000 from a conventional mortgage lender, and you could lend them another $30,000 to help them bridge the gap between what they have in cash and what the primary lender offers.

This strategy still leaves you with most of the purchase price at settlement and lets you risk less of your own money on a loan. But as a second mortgage holder, you accept second lien position

That means in the event of foreclosure, the first mortgagee gets paid first, and you only receive money after the first mortgage is paid in full.

2. Take Additional Collateral

Another way to protect yourself is to require more collateral from the buyer. That collateral could come in many forms. For example, you could put a lien against their car or another piece of real estate if they own one.

The benefits of this are twofold. First, in the event of default, you can take more than just the house itself to cover your losses. Second, the borrower knows they’ve put more on the line, so it serves as a stronger deterrent for defaults.

3. Screen Borrowers Thoroughly

There’s a reason why mortgage lenders are such sticklers for detail when underwriting loans. In a literal sense, as a lender, you are handing someone hundreds of thousands of dollars and saying, “Pay me back, pretty please.”

Only lend to borrowers with a long history of outstanding credit. If they have shoddy credit — or any red flags in their credit history — let them borrow from someone else. Be just as careful of borrowers with little in the way of credit history.

The only exception you should consider is accepting a cosigner with strong, established credit to reinforce a borrower with bad or no credit. For example, you might find a recent college graduate with minimal credit who wants to buy, and you could accept their parents as cosigners.

You also could require additional collateral from the cosigner, such as a lien against their home.

Also review the borrower’s income carefully, and calculate their debt-to-income ratios. The front-end ratio is the percentage of their monthly income required to cover all housing costs: principal and interest, property taxes, homeowner’s insurance, and any condominium or homeowners association fees.

For reference, conventional mortgage lenders allow a maximum front-end ratio of 28%.

The back-end ratio includes not just housing costs, but also overall debt obligations. That includes student loans, auto loans, credit card payments, and all other mandatory monthly debt payments.

Conventional mortgage loans typically allow 36% at most. Any more than that and the buyer probably can’t afford your home.

4. Charge Fees for Your Trouble

Mortgage lenders charge points and fees. If you’re serving as the lender, you should do the same.

It’s more work for you to put together all the loan paperwork. And you will almost certainly have to pay an attorney to help you, so make sure you pass those costs along to the borrower.

Beyond your own labor and costs, you also need to make sure you’re being compensated for your risk. This loan is an investment for you, so the rewards must justify the risk.

5. Set a Balloon

You don’t want to be holding this mortgage note 30 years from now. Or, for that matter, to force your heirs to sort out this mortgage on your behalf after you shuffle off this mortal coil.

Set a balloon date for the mortgage between three and five years from now. You get to collect mostly interest in the meantime, and then get the rest of your money once the buyer refinances or sells.

Besides, the shorter the loan term, the less opportunity there is for the buyer to face some financial crisis of their own and stop paying you.

6. Be Listed as the Mortgagee on the Insurance

Insurance companies issue a declarations page (or “dec page”) listing the mortgagee. In the event of damage to the property and an insurance claim, the mortgagee gets notified and has some rights and protections against losses.

Review the insurance policy carefully before greenlighting the settlement. Make sure your loan documents include a requirement that the borrower send you updated insurance documents every year and consequences if they fail to do so.

7. Hire a Loan Servicing Company

You may multitalented and an expert in several areas. But servicing mortgage loans probably isn’t one of them.

Consider outsourcing the loan servicing to a company that specializes in it. They send monthly statements, late notices, 1098 forms, and escrow statements (if you escrow for insurance and taxes), and verify that taxes and insurance are current each year. If the borrower defaults, they can hire a foreclosure attorney to handle the legal proceedings.

Examples of loan servicing companies include LoanCare and Note Servicing Center, both of whom accept seller-financing notes.

8. Offer Lease-to-Own Instead

The foreclosure process is significantly longer and more expensive than the eviction process.

In the case of seller financing, you sell the property to the buyer and only hold the mortgage note. But if you sign a lease-to-own agreement, you maintain ownership of the property and the buyer is actually a tenant who simply has a legal right to buy in the future.

They can work on improving their credit over the next year or two, and you can collect rent. When they’re ready, they can buy from you — financed with a conventional mortgage and paying you in full.

If the worst happens and they default, you can evict them and either rent or sell the property to someone else.

9. Explore a Wrap Mortgage

If you have an existing mortgage on the property, you may be able to leave it in place and keep paying it, even after selling the property and offering seller financing.

Wrap mortgages, or wraparound mortgages, are a bit trickier and come with some legal complications. But when executed right, they can be a win-win for both you and the buyer.

Say you have a 30-year mortgage for $250,000 at 3.5% interest. You sell the property for $330,000, and you offer seller financing of $300,000 for 6% interest. The buyer pays you $30,000 as a down payment.

Ordinarily, you would pay off your existing mortgage for $250,000 upon selling it. Most mortgages include a “due-on-sale” clause, requiring the loan to be paid in full upon selling the property.

But in some circumstances and some states, you may be able to avoid triggering the due-on-sale clause and leave the loan in place.

You keep paying your mortgage payment of $1,122.61, even as the borrower pays you $1,798.65 per month. In a couple of years when they refinance, they pay off your previous mortgage in full, plus the additional balance they owe you.

Of course, you still run the risk that the borrower stops paying you. Then you’re saddled with making your monthly mortgage payment on the property, even as you slog through the foreclosure process to try and recover your losses.

Final Word

Offering seller financing comes with risks. But those risks may be worth taking, especially for hard-to-sell properties.

Only you can decide what risk-reward ratio you can live with, and negotiate loan terms to ensure you come out on the right side of the ratio. For unique or other difficult-to-finance properties, seller financing may be the only way to sell for what the property’s worth.

Before you write off the returns as low, remember that your APR will be far higher than the interest rate charged.

Beyond the upfront fees you can charge, you’ll also benefit from simple interest amortization, which front-loads the interest so that nearly all of the monthly payment goes toward interest in the first few years — the only years you need to finance if you structure the loan as a balloon mortgage.

Just be sure to screen all borrowers extremely carefully, and to take as many precautions as you can. If the borrower can’t qualify for a conventional mortgage, consider that a glaring red flag. Seller financing involves risking many thousands of dollars in a single transaction, so take your time and get it right.

Source: moneycrashers.com

April 14, 2021

5 Mortgage Misconceptions Set Straight

Looking for a home loan? Get your facts straight so you can proceed with confidence.

Getting a mortgage can be a breeze or a slog, depending on what you know about the process. To get organized and set your expectations properly, let’s debunk some common mortgage myths.

1. Lenders use your best credit scores

If you’re applying for a mortgage jointly with a co-borrower, logic suggests that your lender would use the highest credit score between both of you.

However, lenders take the middle of three credit scores (from Equifax, TransUnion and Experian) for each borrower, and then use the lowest score between both borrowers’ “middle scores.”

So, if you had a middle score of 780, and your co-borrower had a middle score of 660, most lenders would qualify and approve you using the 660 credit score.

Rates are tied to credit scores, so in this example, your rate would be based on the 660 credit score, which would push your rate up significantly — or potentially even make you ineligible for the loan.

There are exceptions to this lowest-case-credit-score rule. Most notably, if you have the higher credit score and are also the higher earner, some lenders will allow your higher credit score on the file — but this is mostly for jumbo loans above $417,000.

Ask your lender about exceptions if you have credit score disparity between co-borrowers, but know that these exceptions are rare.

2. The rate you’re quoted is the rate you’ll get

Unless you’re locking in a rate at the moment it’s quoted, that rate quote can change. Rates are tied to daily trading of mortgage bonds, so most lenders’ rates change throughout each day.

Refinancers can often lock a rate when it’s quoted — as long as you’ve given your lender enough information and documentation to determine if you qualify for the quoted rate.

You typically receive a quote when you’re beginning your pre-approval process, but a rate lock runs with a borrower and a property. So until you’ve found a home to buy, you can’t lock your rate. And while you’re home shopping, rates will be changing daily, so you’ll need updated quotes from your lender throughout your home shopping process.

Rate quotes also come with an annual percentage rate (APR), which is a federally required disclosure that shows what your rate would be if all loan fees are incorporated into the rate.

This can make you think that APR is the rate you’ll get, but your loan payment will always be based on your locked rate, and the APR is just a disclosure to help you understand fees.

3. Fixed-rate mortgages are always better than adjustable-rate mortgages

After the 2008 financial crisis, many borrowers started preferring 30-year fixed loans. For good reason too: The rate and payment on a 30-year fixed loan can never change. But the longer the rate is fixed for, the higher the rate.

So before settling on a 30-year fixed, ask yourself this question: How long am I going to own this home (or keep the loan) for?

Suppose the answer is five years. If you got a five-year adjustable rate mortgage (ARM) instead of a 30-year fixed, your rate would be about .875 percent lower. On a $200,000 loan, you’d save $146 per month in interest by taking the five-year ARM. On a $600,000 loan, the monthly interest cost savings is $438.

To optimize your home financing, peg the loan term as closely as you can to your expected time horizon in the home.

4. Real estate agents don’t care which lender you use

A federal law enacted in 1974 called the Real Estate Settlement Procedures Act (RESPA) prohibits lenders and real estate agents from paying each other fees to refer customers to each other. So as a mortgage shopper, you’re always free to use any lender you choose.

But real estate agents who would represent you as a buyer do care which lender you use. They’ll often suggest that you use a local lender who’s experienced with your area’s nuances, such as local taxation rules, settlement procedures and appraisal methodologies.

These areas are all part of the loan process and can delay or kill deals if a nonlocal lender isn’t experienced enough to handle them.

Likewise, real estate agents representing sellers on homes you’re interested in will often prioritize purchase offers based on the quality of loan approvals. Local lenders who are known and respected by listing agents give your purchase offers more credibility.

5. Mortgage insurance is always required if you put less than 20 percent down

Mortgage insurance is a lender-risk premium placed on many home loans when you’re putting less than 20 percent down. In short, it means your total monthly housing cost is higher. But you can buy a home with less than 20 percent down and avoid mortgage insurance.

The most common way to do this is with a combination first and second mortgage — often called a piggyback — where the first mortgage is capped at 80 percent of the home’s value, and the second mortgage is for the balance of what you want to finance.

Related:

Originally published January 12, 2016.

Source: zillow.com

April 13, 2021

Hey, Big Spender! Can You Afford It?

Big goals can carry price big tags. Whether you plan to buy a home, a new car or treat yourself to a much-needed vacation, you’ll need the money. And before you can really start planning for these big expenses, you’ll want to ask yourself, “Can I (or should I) afford it?”

If the answer is yes, then begs the question, “What’s an appropriate amount to spend?”

Here’s some advice on how to tackle a few big-ticket buys. And, if saving money isn’t exactly your strong suit, keep reading. I’ve included some of my favorite resources to get a jump-start at the end.

Buying a House? Cap Monthly Payments at 30%

When it comes to budgeting for housing costs, my rule of thumb is to spend no more than 30% of your take-home pay. That includes the mortgage, property tax and maintenance payments. The truth is that becoming a homeowner comes with hefty responsibilities and often, unforeseen costs.

Should your new home require a repair, you’ll want to be able to comfortably afford it without stretching yourself too thin. A rookie homeowner mistake is assuming you can spend the same monthly cost on a mortgage as rent. But renters aren’t necessarily required you to pay for plumbing damage or repair broken major appliances on their own dime.

Once you’ve calculated how much you can spend per month, figure out what size mortgage that equates to and that should help you narrow down homes by price. Home search website Zillow.com has a calculator that produces your target home price based on your annual income, monthly debt payments and the size of your down payment.

Speaking of, you’ll want to prepare to put down 20%, especially in competitive markets. For more on the specifics of home buying, check out my previous blog post.

Save more: To minimize monthly mortgage payments, be sure your credit is in great standing. Borrowers with high credit scores (often a 760 or greater) are best suited to qualify for the lowest interest rates on a home loan in today’s market.

Eyeing a Car? Ideally, Budget 15%

When it comes to purchasing a new car, aim to spend no more than 15 to 20% of your take-home pay. This includes maintenance and gas. if you pay with cash, take your annual salary and multiply it by .15 to calculate a max spend.

If you plan to finance or lease the vehicle, take your monthly take-home pay, multiply that number by .15 and that is a healthy budget for car payments (assuming you don’t have other major outstanding debt).

Save More: Go pre-owned. If you’re okay with a few scratches and some wear and tear but with the assurance that the car comes with a manufacturer’s warranty, then opting for a pre-owned vehicle could be a great way to save anywhere from probably 10 to 25%. This option can be more costly than going with a regular used car. But CPO’s come with benefits like a longer warranty and proper inspections.

If you’re set on purchasing a new car, wait until the end of the year when dealers are desperate to unload the current year’s models to make room for new inventory.

And for what it’s worth, waving cash at the dealer won’t necessarily earn you any discounts (unlike in years past). I recently purchased a new car and thought we would get a lower price by offering to pay entirely in cash. Wrong. Turns out, by signing up for auto-financing I was able to score a discount. With the loan interest rate at only 2% I decided to finance the car and commit to paying it off within the year (as opposed to four years) to keep interest payments to a minimum.

Fancy a Piece of Jewelry? Or any Luxe Item? Mind Your Savings.

Who doesn’t want to treat themselves to a little something every once in a while? Personally, I’ve been eyeing the new iWatch. But for such discretionary expenses (aka “splurges”) it’s best to pay them with cash on hand. If you can’t pay it off in a month, then I question whether it’s really something you can afford. If it’s a financial stretch, perhaps it’s wiser to hold off on the purchase?

For discretionary or miscellaneous expenses, I think it’s responsible to cap spending at no more than five percent of income and that includes things like luxury items and recreational spending. If you need to tap savings, just be sure you replenish the account within the next month and aim to leave yourself with at least a six-month rainy day cushion at all times.

Save more: Similar to pre-owned cars, what about buying secondhand? Tradesy and Poshmark are two websites that have a large inventory of gently used (or in some cases brand new, but discounted) designer goods. These online vendors verify that items are authentic and match the seller’s description.

Sallie Krawcheck, Wall Street veteran and co-founder and CEO of the online investment platform Ellevest, revealed to me on my podcast So Money that discount site The RealReal is her go-to place to splurge. She calls it “financially savvy.” Hey, if it’s cool for her, then it’s cool for me!

Longing to Getaway? Time it Right.

I always say it’s most rewarding to spend on experiences, especially travel. It’s important to recharge your mind, body and soul or to simply learn about other cultures.

For vacations, again, coming from your discretionary budget, aim to spend within 5% of your take-home pay.

Save more: Depending on when you book your flight you can earn more bang for your travel buck. Data from FareCompare show airfare tends to fall to its lowest level all week on Tuesdays starting at 3pm. That’s typically when airlines release the greatest number of deals and subsequent pricing wars lead to low prices.

Need Help Saving?

All of the above assumes that you have money left at the end of the month after covering your bills to save up and spend on big-ticket items. That may be a big assumption. Many of us live paycheck to paycheck and quite frankly, as humans, we’re not exactly hard-wired to save. As famed behavioral expert Dan Ariely once told me, “We see something, we want it and we go for it without thinking very much. The world is designed to tempt us and we follow and get tempted.”

Here are some free tools that can help us to curb some of that ill-fated temptation.

Digit – Save money without really having to think about it. Sign up for Digit by creating a free account. After a few days, Digit checks your spending patterns and moves a few dollars from your checking account to your Digit account, if you can afford it. Users can easily withdraw money any time, quickly and with no fees.. Over time, you’ll build a nice slush fund for yourself

Qapital –Qapital lets you set a savings goal and then create rules that trigger automatic transfers toward your goal. For example, users can charge themselves a determined amount for a guilty pleasure. Say they choose to charge $5.00 every time they order takeout, that $5.00 will go toward a goal of their choosing. Or, users can round purchases to the nearest dollar and the change will be allocated toward their specified goal. On this platform, the average user saves $44 each month.

SmartyPig – This is a free, high-yield savings account that lets you allocate money toward different financial goals. It can be hard to save for a big purchase if you’re lumping it in with your regular savings or checking account. But by compartmentalizing your savings for a particular goal (e.g. a new car, vacation, etc.) you can better track your progress. Like Digit, you can transfer funds at any given time.

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at Farnoosh@farnoosh.tv (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.

Learn more about security

Source: mint.intuit.com

April 4, 2021

Cheapest Cars for Car Insurance

Car Insurance

It’s your first car; your first foray into the automotive world. You’re excited, eager, and you spend your time looking for cars that you can show off to your friends, cars made for speed, power, performance.

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But none of those things really matter when you’re buying your first car. Your main goal should be function and cost; a car that can do what you need it to do without costing the earth. And when price is your priority, car insurance is just as important as fuel economy and maintenance, potentially saving you up to 50% on your premiums.

The Cheapest Cars for Car Insurance

Before we look at the types of cars that insurers prefer, the types that offer the cheapest rates, let’s focus on the cars that are consistently generating the lowest insurance quotes.

Most of these vehicles are SUVs, as they score the highest average ratings in safety tests, but once you venture outside the top 10, you’ll find some sedans and luxury cars as well.

Honda Odyssey: A highly rated minivan with a retail price that begins at around $31,000.
Jeep Wrangler Sport: A sporty, convertible SUV with an average cost of around $35,000.
Subaru Outback: A powerful SUV with a suggested retail price of less than $30,000.
Mazda CX-3 Sport: A low-cost, powerful and sleek subcompact SUV.
Honda HR-V: A 1.8l SUV that begins at less than $21,000.
Honda CR-V LX: Another safe and affordable Honda SUV.
Jeep Renegade Sport: A cute and powerful Jeep for less than $23,000.
Ford Escape: Compact, with an engine size ranging from 1.5l to 2.5l.
Subaru Forester: 182 horsepower and an MSRP of less than $25,000.
Jeep Compass Sport: Yet another stylish Jeep. This one packs 180hp into a compact design.

Other Cars

The aforementioned vehicles aren’t the only ones that come with low car insurance quotes. The Subaru Crosstrek, Jeep Cherokee, Nissan Frontier, GMC Canyon, and Chevrolet Traverse are all up there, and you’ll also get good deals on a host of other reliable vehicles, such as those manufactured by Hyundai, Fiat, Kia, and Toyota.

But as soon as you venture into sports car territory, such as more expensive vehicles made by the likes of Mercedes, Porsche, BMW, and even the higher-end car models offered by Nissan (Nissan GT-R) and Ford, those car insurance premiums increase.

How Are Car Insurance Rates Calculated?

The goal of all insurance companies is to ensure that premiums are higher than projected costs. Underwriters use a series of statistics to calculate these premiums, knowing that probability is always on their side.

This is true for all types of insurance and allows these companies to operate at a profit even in the face of extreme outliers and exceptions. With term life insurance, for instance, they’ll look at your age, sex, medical conditions, and smoking status to predict if you are likely to die during the term; with homeowner’s insurance, it’s all about the risk factors in your area, as well as the size and cost of the house.

Where auto insurance is concerned, there are many factors that insurers can consider and these either revolve around you or your vehicle. They know, for instance, that a driver under the age of 18 is more than twice as likely to have an accident than a driver over the age of 18. They also know that renters and individuals with low credit scores are more likely to be involved in an accident.

Many of these factors can’t be influenced by the policyholder. They can promise to drive safely and insist they are not as reckless as their peers, but until they have established a long and clean driving record, the insurer won’t care.

However, the policyholder can influence the risks associated with the vehicle. By choosing a safer, more sensible ride, they can win favor with the car insurance company and potentially save hundreds of dollars on annual insurance premiums.

When judging the safety of a particular vehicle, car insurance companies will consider the following:

Anti-Theft Features

New cars are fitted with a host of features designed to make criminals’ lives harder. In the old days, cars could be stolen with a wire hanger/screwdriver and a little persistence. These days, thankfully, they’re much harder to crack and these features provide insurers and owners with a little peace of mind.

Safety Features

The National Highway Traffic Safety Administration (NHTSA) applies rigorous safety tests to all new vehicles, giving them a safety rating of between 1 and 5 stars, with 5 being the highest.

The NHTSA runs collision checks to see how the vehicle fares when hit from the front or the side, while also looking at stability, air bags, tires, and additional safety features. The higher the rating, the lower the insurance premiums, at least in theory.

Repair Costs

How much does your car cost to repair, are the parts widely available, does the car have any specific features or requirements that make a mechanic’s job harder? All these things will be considered during the underwriting process.

It’s one of the reasons sports cars have higher insurance premiums. Not only are they faster and involved in more high-speed accidents, but they’re also very expensive cars to fix.

Statistics

Underwriters don’t simply focus on safety ratings, repairs, and built-in features. They want to know how the car fares in the real world; how those features translate into practical costs. Generally speaking, a new car with advanced anti-theft features will be stolen less often than an older car.

However, if the statistics suggest otherwise, for whatever reason, you may not be offered the low premiums you’re expecting. Maybe there is a serious security flaw in the car’s anti-theft mechanism, and this has resulted in a spate of thefts; maybe it’s just really popular with criminals.

Whatever the reason, a car’s safety mechanisms are only as good as their real-world applications.

Other Things to Consider

Your driving record and type of car aren’t the only things that can impact insurance costs, nor are they the only things you can influence:

Driving Courses: Defensive driving courses can reduce the cost of your insurance policy as it proves you’re a capable driver and suggests you’re less likely to be involved in an accident.
Parking Your Car: Where you park your car on an evening can have a serious impact on your insurance premiums.

How Much you Drive: It stands to reason that a policyholder who drives for one or two hours a week is less likely to be involved in an accident than someone who spends all day on the road.

Source: pocketyourdollars.com

April 3, 2021

Cheap Car Insurance for High-Risk Drivers

Car Insurance

Insurance companies profit by carefully calculating probability and then accounting for it. Your insurance premiums are closely tied to your risk factors; the more at-risk you are, the higher those premiums will be. But that doesn’t mean that you can’t get affordable insurance just because you’ve had a few violations.

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What Makes you High-Risk?

You may be deemed high-risk if you have received a violation of any kind. There are minor and major violations, ranging from parking fines, moving violations and traffic violations to drunk driving and more. The most serious and destructive violations include:

Driving Under the Influence (DUI)

A DUI, also known as a DWI, can have a big impact on your car insurance premiums. It’s a citation that results in more bodily harm and property damage than any other, and it’s also connected with more death benefit payouts than any other type of driving citation, making DUIs a huge red flag for all insurance companies.

If you have a recent DUI conviction on your record, you’ll struggle to get comprehensive insurance coverage for a reasonable price, but there are a few things you can do, as discussed in our guide to Getting Car Insurance with a DUI.

Racing and Speeding

Speeding increases your risk and many insurance carriers will charge you over $100 more for every speeding ticket that you receive. If you’re charged with “Racing”, the penalties are more severe and you may be charged an additional $1,000 a year.

It only makes sense, as street racing turns you into a high-speed liability. Your car insurance premiums increase because you’re more likely to do harm to yourself, your car, your passengers, and all innocent bystanders. It doesn’t matter how good of a driver you think you are, in the eyes of an auto insurance company, you’re an expensive disaster waiting to happen.

At-Fault Accident

A car accident that was caused by you and led to significant payouts by the insurance company can have a massive impact on your auto insurance rates.

Collision coverage and liability coverage are essential components of any insurance policy and if there is extensive property damage and motorist injuries, resulting in major repair work and liability claims, the provider will be hit with a sizable bill.

It should come as no surprise, therefore, that an at-fault accident can increase your insurance premiums by over $600 a year.

Reckless Driving

If you’re cited for reckless driving, your premiums may increase by anywhere from $300 to $1,000 a year. The risk of bodily injury and property damage increases, as reckless driving is defined as driving without care and putting yourself and others in danger.

Other High-Risk Factors

You are also considered to be a high-risk driver if you’re young and male, as young drivers are significantly more likely to claim than drivers aged 25 or older and male teen drivers are twice as likely to claim as females. That’s why young drivers pay higher car insurance rates on average.

But your demographic and driving record aren’t the only things that can prevent you from getting a cheap auto insurance policy. You’ll also be charged higher rates if you:

Have a Poor Credit History

Your credit score impacts pretty much everything that you do financially. It can reduce your chances of getting a credit card or mortgage; it can stop you from getting security clearance and securing the job of your dreams.

Believe it or not, your credit score is also considered by your insurance provider, as studies suggest that bad credit policyholders are more likely to claim.

Live in a High Claim Area

The best safety features and the safest cars won’t matter much if the driver lives in a high claim area and drives a car that is frequently stolen. In this case, you’re paying for the mistakes of others as the insurance company tries to balance its books.

Have no Driving Experience

Your experience is key, so your driving history will always be factored into the equation when applying for car insurance quotes. If you have some experience behind you and haven’t made any claims, you can secure lower premiums. If not, you have no proof that you’re a good driver or a safe driver and will be considered a risk.

Live in Rented Accommodation

Your credit score isn’t the only surprising criteria considered by insurance carriers. They will also consider whether you are a tenant or a homeowner, with the latter offered lower premiums on average. Again, it all comes down to probability, as studies suggest that renters are more likely to claim than homeowners.

How to Get the Cheapest Car Insurance

As noted above, all insurance companies calculate risk and probability to determine how much of a liability you are. This is true for life insurance, homeowner’s insurance, and pretty much all other forms of insurance. Your goal, therefore, is to reduce that risk, keep that liability to a minimum, and make sure you look like a prime candidate in the eyes of car insurance companies.

To get cheap car insurance, therefore, just keep the following in mind and you can secure some car insurance discounts:

Choose the Right Car

A new car can reduce your premiums, especially if it comes with a high safety rating and has anti-theft features installed. SUVs have the highest safety ratings and can save you a lot of money when dealing with major insurers like Geico, State Farm, and Allstate, but there are some highly insurable sedans and smaller cars as well.

Look for the safety rating, check for an anti-theft device, and scour the rates before you buy your car.

Get Training

By completing a defensive driving course, you can prove to your insurers that you are a safe driver who knows what they are doing on the road, thus securing a lower rate than you would get if you didn’t have that all-important certificate.

Improve your Credit Score

A few points can make a big difference, netting you a policy discount and giving you more options if you ever need to apply for a new line of credit or loan.

Multi-Policy Discount

By taking out different types of coverage with the same provider, you can benefit from bulk rates, known as “bundling”. Like a multi-car discount, you’re essentially getting wholesale rates on your insurance policies.

Providers like Progressive, Nationwide, State Farm, and Geico offer discounts when you bundle car insurance with home insurance, life insurance, and more.

Bide Your Time

Time is your friend when looking for the best car insurance rates. If you have multiple violations and you’re still a teenager, then making do without a car for a while could save you a small fortune. Not only will those violations expire, but you’ll be a little older and will therefore not be considered as much of a risk.

You’ll still be considered high risk as a new driver, but there will be significant savings to make, nonetheless.

Bottom Line: Getting the Cheapest Insurance Policy

Being high risk doesn’t mean you can’t get insured. It just means your car insurance policy will cost more than someone who has a clean driving record and ticks several other boxes with regards to the ideal policyholder. By searching, comparing, and doing what you can to decrease your liability, you can keep those insurance costs to a minimum and save hundreds of dollars a year.

Source: pocketyourdollars.com

April 3, 2021

Life Events that Impact Car Insurance Rates

Car Insurance

Insurance is a numbers game. Underwriters base their rates on the likelihood of an insured making a claim; the more likely you are to claim, the higher your insurance premiums will be. It’s as simple as that. To get the best rates, therefore, you need to present yourself as a low-risk customer.

Find your best rate on Car Insurance!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

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But what can you do to reduce this risk; what major life events are impacting your chances of getting affordable car insurance cover?

Birthdays

Your 18th and 25th birthday have a massive impact on your auto insurance policy. After these dates, your risk plummets, and your rates soon follow. Car insurance companies base their rates on probabilities, as discussed above, and a 16- to 17-year-old is twice as likely to have a car crash than an 18- to 19-year-old.

At this young age, you pay a higher deductible because your insurance needs are greater, but as soon as you turn 18, you can secure lower rates and bring those car insurance costs down.

A teen driver is between 2 and 5 times more likely to have an accident and suffer bodily injury than a driver aged between 25 and 35, so car insurance costs will reduce even further once you reach 25.

The cheapest rates tend to be reserved for policyholders aged between 50 and 60. At this age, insurance premiums cost around $1,200 on average, compared to the $5,000+ paid by the average 16- to 18-year-old teen driver. However, costs begin to increase again after this age. Even if you have a relatively clean driving record, auto insurers will consider you to be a greater risk and will increase your premiums as you age.

Motorists over the age of 80 can expect to pay roughly the same as those aged between 20 and 29, for example.

Getting Married

Your marital status is considered by underwriters for most insurance policies, including homeowners insurance. Again, it’s all about probability, and statistically speaking, married policyholders carry less risk than their single counterparts. Where car insurance is concerned, this is even more poignant, as you’re more likely to use your spouse’s car.

Your insurance company may also provide you with a multi-car discount, allowing you to save even more on your car insurance policy. Speak with your provider to discuss potential savings and benefits.

As an example, a married couple will pay around $1,600 on average for a joint policy with Geico, and if they have more than two cars between them, they can shave up to 25% off the cost.

By the same token, however, these rates may increase if you get divorced, with the average increase being around $120 to $140.

Buying A Home

In the eyes of an insurance company, you’re more responsible when you buy a home and your rates may decrease as a result. However, the best thing about this life event is that it allows you to take advantage of multi-policy discounts.

If you take out many different policies with the same provider, you can shave hundreds of dollars off your annual premiums and will be covered for everything from property damage to medical costs, physical injuries, vandalism, and breakdowns, all with the same company.

Buying a home also improves your chances of securing credit and it gives you more options when times are tough. Homeowners can tap into their home equity whenever they need a little cash and because they can use their home as collateral, they can also benefit from low-interest secured loans.

Buying a home is one of the biggest life changes you can make and it’s also a costly one as it leaves you with substantial and long-term debt, but it’s a decision that generally carries more positives than negatives.

Getting a Job

As an employee you can benefit from company discounts and policy offers, potentially saving on a host of insurance policies and shaving dollars off your car insurance policy. This isn’t true for all jobs and all employers, but it’s worth looking into.

Ask your employer if there is any way you can save money on your insurance and if there are any other benefits you can take advantage of.

Paying Off Debt

Repaying debt is a huge accomplishment, especially when you consider that three-quarters of all Americans will die with substantial debts and many of those will have lived with debt throughout their adult life.

Repaying debt provides you with a little more financial freedom and is a significant weight off your shoulders, but it can also reduce the price of your auto policy by improving your credit score.

Bad credit increases your risk significantly and is factored into a lot of calculations, including job applications and security clearances.

How Much Does Car Insurance Cost?

The exact price of your car insurance policy will depend on a number of factors, from coverage limits to your age, personal circumstances, driving history, and type of car. Whether you have a new car or a used car will impact the price, but whether it has features such as emergency braking, anti-lock brakes, and airbags, will also make a difference.

Discuss your options with insurance agents, compare rates from multiple companies, and don’t forget to consider extras such as rental car expenses and collision coverage. Your goal is not to simply get the cheapest auto insurance premiums and move on. You need to think about what will happen if you ever have an accident and file a claim. If you’re cheap today you could be hit with some costly expenses in the future.

Summary: Comparison Shop and Benefit

Every time a major life event occurs, you should consider changing your insurance policy. Car insurance isn’t like life insurance or health insurance; it doesn’t increase as you age and the cheapest policy isn’t the one you’re offered at the first time of asking. If anything, the opposite is true, because as discussed above, teen drivers and young drivers pay huge premiums every month.

Comparison shop, negotiate, and don’t be afraid to look for a new provider. Car insurance companies do everything they can to compete with one another and switching is a great way for policyholders to take advantage of different circumstances and secure reduced premiums.

Source: pocketyourdollars.com

April 3, 2021

How to Get Free Car Insurance Quotes

Car Insurance

Choosing the right car and getting an auto loan is only half the battle. You still need car insurance coverage and finding the right insurance policy is a taxing, boring, and often expensive process. But if you keep some simple tips and techniques in mind, you can find affordable car insurance quotes and save yourself a fortune on insurance premiums.

Find your best rate on Car Insurance!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

How Can You Get a Free Car Insurance Quote?

Car insurance quotes should be provided free of charge. That’s not the case for all of them, but there are plenty of companies and services that will provide you with a free quote. You can then compare these quotes to help you find the best policy.

Online car insurance quotes are generally free, so if you’re being charged a fee, take your business elsewhere.

How to Find Cheap Auto Insurance Quotes

There are a few simple steps to getting a free quote and using this to secure the cheapest car insurance rates:

1. Be Prepared

To save yourself some time when dealing with car insurance companies, make sure you have some essential information, including:

Personal Information: You’ll need to have your basic information at hand when dealing with insurance companies. This includes your driver’s license and the details of everyone else included in the auto insurance policy.
Vehicle Information: Make a note of the mileage and the date that you purchased the vehicle, as well as the make and model.
Vehicle Identification Number (VIN): You can get the VIN from the dealer or seller.
Driving Record: Note down all accidents and claims, as well as any driving courses you have completed.
Insurance Record: Finally, many car insurance policies will insist on at least 6 months of insurance before they supply you with a new policy.

2. Understand What They’re Looking for

Knowing what car insurance companies are looking for can help you prepare and allow you to secure some cheap and comprehensive coverage. Generally speaking, the things that have the biggest impact on your quote include:

Age: Young drivers are significantly more likely to be involved in an accident and to make a claim, so they can expect to pay more for motorist coverage. Policies should get cheaper as you age, but this changes once you reach your 50s and you will start receiving more expensive quotes thereafter.
Coverage: The extent of your coverage is key to the price of your policy. Do you need roadside assistance, how much liability coverage do you need, and what other coverage options should you consider?
Car Insurance Discounts: A safe driver in a new car with no claims can secure some big discounts on an auto insurance policy. There are even student discounts for teen drivers and policyholders who have completed defensive driving courses.
Location: Your location has a major impact on the cost of your auto policy, and whether you’re in California or Hawaii, Florida or New York, could impact your policy by tens of dollars.
Marital Status: You’re more likely to get cheap car insurance quotes if you’re married, as you’re statistically less likely to make a claim.
Renter vs Homeowner: A homeowner pays less, on average, than a renter. The difference is slight but could save you tens of dollars a year.

3. Improve Your Chances of Getting Cheap Insurance

You can’t magically make yourself a few years younger (if only!) and if you’ve already made a claim on your insurance there’s not much you can do to reverse time and undo that claim. However, there are a few ways you can reduce your premiums and bring those insurance costs down, including:

Check Your Credit Score

Your credit score plays an important role in pretty much every financial decision that you make, whether you’re applying for a credit card, looking into life insurance or getting an auto insurance quote.

A good credit score shows that you’re a trustworthy individual who knows how to handle your finances. It also suggests that you’re less impulsive.

Of course, that’s not always the case and having a bad credit score doesn’t mean you’re impulsive and reckless. Far from it. However, insurance is based on statistics and probability, and statistically speaking, an individual with bad credit is more likely to be reckless than an individual with good credit.

Check Your Auto Insurance Coverage

There’s no point paying for full coverage if you’re driving a cheap car that costs less than $500. Be careful how you structure your auto insurance with regards to liability, collision coverage, and auto repair. Make sure you weigh the pros and cons against your car and the likelihood of encountering an issue and use these to set realistic and affordable premiums.

Look for Insurance Discounts

You can secure auto insurance discounts for a variety of reasons. One of the best of these is a multi-policy discount, which is offered to policyholders who have several different policies with the same insurance provider. For instance, you can purchase life insurance, property liability insurance, and more, with the insurer essentially offering you a wholesale discount.

There are also discounts for multi-car and driver policies, whereby you add several cars or drivers onto the same policy. But the reductions don’t stop there, and you should also look into the following:

Good driver discounts
Discounts for student drivers
Discounts for paying in full
Paperless discount (provided when you agree to paperless billing)
Company and employee-based discounts
Military discounts

Shop and Compare

Don’t accept the first policy you’re offered; don’t assume they’re giving you the best price and complete coverage. Work with different insurance agents, check multiple providers, and run some searches on comparison websites.

Bottom Line: Free Auto Insurance Quote

Most auto insurance companies provide you with auto insurance quotes for free, and there’s no reason why you should be paying money for these quotes. Be wary of any companies or sites that charge you for this service, remember to compare several quotes from several different companies, and once your policy begins, keep searching for discounts and doing what you can to reduce quotes in the future.

Source: pocketyourdollars.com

Key Features of Banks and Credit Unions

Membership Requirements and Account Availability

Membership Requirements and Account Availability at Banks

Membership Requirements and Account Availability at Credit Unions

Branch and ATM Access

Banks’ Branch and ATM Networks

Credit Unions’ Branch and ATM Networks

Financial Products and Services Available

Financial Products and Services Available at Banks

Financial Products and Services Available at Credit Unions

Interest Rates, Account Yields, and Account Fees

Bank Interest Rates, Account Yields, and Account Fees

Credit Union Interest Rates, Account Yields, and Account Fees

Financial Technology

Financial Technology Available at Banks

Financial Technology Available at Credit Unions

Deposit Insurance

Deposit Insurance Available at Banks

Deposit Insurance Available at Credit Unions

The Verdict: Should You Choose a Bank or Credit Union?

You Should Choose a Bank If…

You Should Join a Credit Union If…

Both Are Great If…

Final Word

Find High-Yield Savings Accounts

In this article

Chase Bank at a Glance

Chase Bank Highlights

The Claim

Is it True?

Our Deep Dive

Cost Rundown

Cheaper (or Free!) Alternatives

The Competition

What Others Are Saying

Compare top bank accounts

Too long, didn’t read?

My Family Member Left Unpaid Debt, Now What?

Contact From Debt Collectors

How to Deal With Inherited Debt

What Happens to a Mortgage When a Spouse dies?

Preventing Unauthorized Debt

Facing Secured Loans

Paying Joint Debt

How to Protect Your Family From Inheriting Debt

Credit Life Insurance

Term Life Insurance

Whole Life Insurance

The Bottom Line

Reader Interactions

Advantages to Offering Seller Financing

1. Attract & Convert More Buyers

2. Earn Ongoing Income

3. You Set the Interest Rate

4. You Can Charge Upfront Fees

5. Simple Interest Amortization Front-Loads the Interest

6. You Can Set a Time Limit

7. No Appraisal

8. No Habitability Requirement

9. Tax Implications

Drawbacks to Seller Financing

1. Labor & Headaches to Arrange

2. Potential Legal Fees

3. Loan Servicing Labor

4. Foreclosure

5. The Buyer Can Declare Bankruptcy on You

6. Risk of Losses

7. Risk of Property Damage

8. Collection Headaches & Risks

Options to Protect Yourself When Offering Seller Financing

1. Offer a Second Mortgage Only

2. Take Additional Collateral

3. Screen Borrowers Thoroughly

4. Charge Fees for Your Trouble

5. Set a Balloon

6. Be Listed as the Mortgagee on the Insurance

7. Hire a Loan Servicing Company

8. Offer Lease-to-Own Instead

9. Explore a Wrap Mortgage

Final Word