Over the years, consumer perception of electric vehicles has been all over the map, with some early adopters embracing them and others feeling apprehensive about issues like battery range, price, and the environmental impact of EV production.
Within the next decade, however, the choice to buy an EV or other “zero-emission” model might produce no hesitation at all: It might be the only new car you can buy where you live.
At least a dozen states have made moves to restrict the sale of vehicles driven purely by internal combustion engines, with nine working toward an all-out ban by 2035. The states are following California’s Advanced Clean Cars II (ACCII) rule, which requires automakers and car dealers to sell increasingly more zero-emissions vehicles each year between 2026 and 2035. For example, in 2026, 35% of new vehicles on car lots within an ACCII state must be emission-free. That percentage will gradually increase year after year to 100% by 2035 — an effective ban on purely gas-powered vehicles.
In addition to EVs, California’s definition of zero-emission vehicles includes battery-electric, hydrogen fuel cell electric and plug-in hybrid electric vehicles.
So far, eight states and Washington, D.C., have adopted ACCII for light passenger vehicles. The states are Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Washington, and, most recently, Virginia. Connecticut and Maine are also considering the measures but haven’t adopted them formally, while Colorado, New Mexico, Delaware and Minnesota have partially adopted a large portion of the standards.
What the ban means for owners of gas cars
To be clear, the ACCII regulations will only prohibit the sale of newinternal-combustion passenger vehicles (cars, SUVs and light-duty trucks) starting in 2035. They wouldn’t, however, require drivers of gas cars to forfeit ownership of previous models.
Residents of these states could still buy used gas-powered vehicles within the state’s borders. Likewise, nothing in the regulation would prohibit drivers from buying a new gas car from a state without the ban, then registering it within a state that has one. Although amendments can be made at any time, currently only the sale of gas-powered cars by 2035 would be prohibited in a state whose standards are identical to ACCII.
Of course, regardless of the ban, drivers who want a new internal-combustion vehicle in 2035 may have fewer choices. Already Stellantis — the company behind Chrysler, Dodge, Fiat, and Jeep — has warned dealers it will ship fewer gas cars to states that follow California’s emissions standards, while also pledging to have electric vehicles make up half of its North American sales by 2030.
Meanwhile, other automakers have announced plans to cease production of fully gas-powered cars at around the same time that the ACCII would phase them out. For example, General Motors plans to stop making gas cars by 2035, with an earlier date of 2030 for a fully electric lineup of Cadillac and Buick. Ford has said it plans for EVs to make up half of car sales by 2030. Other car companies that have pledged to sell electric only include Volvo (2030), Mercedes-Benz (2030), Honda (2040) and Volkswagen (2040).
While some of these goals are objectively ambitious (and often contingent on market conditions), they’re in lockstep with gas car bans planned by nations with large economies, including those in the European Union (2035), Japan (mid-2030s) and South Korea (2035), among others.
Will other states ban gas cars in the future?
As it stands, most states don’t have plans to discontinue the sale of gas-powered vehicles in the near future. But it’s possible that other states will join those that do, especially if they tend to follow California’s stricter vehicle emission standards.
Because of the Clean Air Act, no state except California can create its own fuel economy standards, but states can choose to adopt California’s guidelines under a provision called Section 177. Presently, 17 states have emission standards tied to California’s: Colorado, Connecticut, Delaware, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington.
So far, only eight of these states have formally adopted a standard that’s identical to California’s Advanced Clean Cars II regulations. Colorado, New Mexico and Delaware have partially adopted the standard, but instead of a 2035 ban on gas-powered vehicles, these three states will require 82% of new car sales to be emission-free by 2032. Minnesota enacted its “Clean Cars Minnesota” rule this year, which requires automakers to cut down on emissions and produce more zero-emission cars. However, it doesn’t have plans to ban gas cars.
Likewise, neither Pennsylvania nor Nevada have announced plans to follow California’s standards. Maine and Connecticut were expected to adopt ACCII regulations, though both states have so far voted against them.
If states don’t follow California’s standards, they’ll have to comply with federal regulations, which currently don’t have a plan to ban gas vehicles. But federal policy is shifting. In March 2024, the Environmental Protection Agency finalized measures that require automakers to gradually reduce the emissions associated with the vehicles they sell. The rule applies to model years 2027 through 2032.
While the new rules don’t require a specific percentage of sales to be zero-emission vehicles, the Biden administration estimates the new emission standards could be met if EVs make up 56% of new car sales by 2032 (with another 13% of sales composed of plug-in hybrids or other partially electric cars).
It’s not a ban per se on entirely gas-powered vehicles. But, when coupled with state bans, plus automakers’ pledges to produce less of them, it could mean fewer engines that go “potato potato potato”and more that hum quietly off dealership lots.
Investors evaluating precious metals often ask: gold vs silver, which is better for investors? In this comparison, discover the investment merits of gold’s stability and silver’s industrial relevance, geared towards helping you decide which metal suits your financial strategy. Without leaning towards one or the other, this article presents a balanced view to inform your choice.
Key Takeaways
Gold and silver serve as a store of value and a hedge against inflation, with gold mainly being an investment asset while silver has significant industrial applications, impacting their price volatility and investment suitability.
Gold is revered as a safe haven asset, attracting investment during economic turmoil and serving as an inflation hedge, while silver’s dual role in industry and investment sectors offers growth potential and affordability.
Investors should consider precious metals within a diversified portfolio and can choose between physical metals, ETFs, or mining stocks, each with its own benefits and risks, and should evaluate after-inflation returns and personal financial goals to decide between gold and silver.
Gold and silver, the titans of precious metals, have long served as a reliable store of value and an effective inflation hedge. While gold primarily functions as an investment asset, offering potential for significant returns to those with larger capital, silver boasts an additional industrial role, broadening its appeal. However, investing in these precious metals isn’t as simple as stashing bars or coins in a safe. It involves dealing with price volatility and aligning your investment with long-term goals.
Adopting a buy-and-hold approach may serve investors best over the long term when investing in gold and silver. But why? It’s because the prices of these metals are shaped by a vast array of factors. Geopolitical issues, economic turmoil, and demands in the industrial sector all play a part in the daily dance of gold and silver prices. Understanding these factors can help you make informed decisions about when and how much to invest.
So why consider precious metals as part of your investment portfolio? They offer a unique combination of benefits:
Gold, with its reputation as a safe haven, attracts those looking for stability amidst market chaos
Silver, with its dual role in the industrial and investment sectors, offers an affordable entry point for investors with smaller capital
Both metals provide a robust way to diversify your portfolio and protect against inflation.
Understanding Gold’s Position as a Safe Haven Asset
Gold has long been a symbol of stability and security in the financial world. Its glittering history spans centuries, maintaining its value even in times of economic turmoil. It’s no wonder that in periods of global uncertainty or financial crises, investors often flock to gold, buoying its value and cementing its reputation as a safe haven.
One of gold’s most notable features is its role as an inflation hedge. As the cost of living increases, inflation hedge gold has shown a remarkable ability to preserve the real value of assets. This unique characteristic comes from how gold’s supply growth aligns with long-term global economic growth, helping to maintain its value during inflationary periods. This resilience, coupled with the tendency of investors to shift towards gold as a safe haven during inflation, can drive up its demand and price.
Given these factors, it’s clear why gold holds a revered place in the financial market. Whether you’re looking for a buffer against economic instability or an asset that can protect your buying power in the face of rising prices, gold stands firm as a reliable safe haven asset.
Silver’s Dual Role: Industrial Demand and Investment Segment
While gold may steal the spotlight for its luster and stability, silver plays a shining role of its own. Apart from being an investment asset, silver’s widespread industrial applications can drive up its price and enhance its investment appeal. In 2023, industrial applications reached a new record high, with photovoltaics usage increasing by a staggering 64%. China’s industrial demand for silver surged by 44% in the same year, predominantly driven by growth in green applications such as:
photovoltaics
solar panels
batteries
electronics
medical devices
These industrial applications highlight the versatility and value of both silver and silver bullion coins as an investment.
Due to its significant industrial use and affordable price point, silver is an accessible option for investors with smaller amounts of capital. However, the silver lining has a cloud. During economic downturns, silver’s industrial use can result in a drop in demand and a corresponding price drop. This volatility underscores the need for investors to consider their risk tolerance when investing in silver.
Despite its volatility, the forecast for silver demand in 2024 predicts a growth of 2%, with industrial production expected to achieve new records. This projected growth, along with silver’s role in portfolio diversification and potential for future price appreciation, suggests that silver’s investment appeal may shine brighter in the future.
Including gold and silver in a diversified portfolio can enhance performance during market volatility and inflation. Financial advisors often suggest allocating 5-10% of an investment portfolio to commodities like gold and silver for diversification purposes. The logic is simple: gold offers diversification due to its historically low correlation with other financial assets such as stocks and bonds.
The inclusion of gold and silver, primarily an investment asset class, which unlike an asset produces cash flow, can act as an uncorrelated asset relative to equities, serving to diminish the total volatility of the portfolio.
Some benefits of including silver in your portfolio are:
Silver has significant industrial applications
It is positively correlated with periods of economic growth
Anticipated growth in areas such as renewable energy and artificial intelligence suggests an expanding demand for silver.
However, it’s crucial for investors to consider the following factors when determining the fit of precious metals within their investment strategies:
Potential costs for secure storage of precious metals
The speculative nature of precious metals
Due diligence and careful consideration of your financial circumstances
As with any investment decision, due diligence and careful consideration of your financial circumstances are key, including addressing portfolio risk management requirements.
While investing in physical precious metals has its appeal, precious metal mining stocks offer an intriguing alternative. Gold stocks provide a leveraged play that can outperform physical gold when prices rise, offering substantial potential for capital gains. The reason? Mining stocks do not just reflect the value of the precious metal. They also include the prospects of mining companies themselves.
Compared to physical gold, gold stocks offer several advantages:
They are more liquid and can be easily bought and sold.
They can provide additional income through dividends paid by established, profitable mining companies.
Investors can benefit from the expansion of mining operations and reap profits from significant new gold discoveries.
These advantages make gold stocks an enticing option for those looking to diversify their portfolio.
Moreover, by choosing gold mining stocks, investors can avoid the extra costs associated with the storage and security of physical gold. This can make gold stocks a more convenient and cost-effective alternative for investors who want exposure to gold without the logistical challenges of owning physical metal.
Physical Bullion vs. ETFs: Choosing Your Investment Vehicle
When considering precious metals as part of your investment strategy, it’s essential to explore all available options. Physical bullion and exchange-traded funds (ETFs) present two distinct investment vehicles, each with its own set of advantages and challenges. Gold ETFs, for instance, offer enhanced liquidity compared to physical gold, allowing investors to quickly buy and sell shares without facing the logistical challenges tied to physical transactions of gold.
Investing in gold ETFs can also be more cost-effective over time. Investors do not have to deal with the costs of purchasing and maintaining physical gold, and the responsibilities of securing and insuring the physical gold are professionally managed by the fund. However, it’s crucial to remember that the value of shares in gold ETFs may not track the price of gold precisely, as the fund’s expenses could slightly erode the value of these shares over time.
On the other hand, investing in physical gold comes with its own set of considerations. Apart from the allure of owning a tangible asset, investors must account for costs such as storage fees, insurance, and potentially higher dealer premiums over the market price. Additionally, purchasing physical gold requires vigilance due to the risks of scams, necessitating transactions with reputable dealers and possible appraisal costs, which add to the overall investment expense.
Evaluating After-Inflation Returns: Gold vs. Silver
When it comes to returns, it’s crucial to look beyond the nominal figures and consider the real value – the after-inflation returns. And in this regard, the performance of gold and silver may not be as glittering as one might expect. However, these precious metals have historically provided a hedge against inflation, offering returns that outpace inflation over certain periods. Here are some key points to consider:
Gold and silver can serve as a portfolio diversifier, helping to reduce risk.
Silver, due to its abundance, may have less upside potential compared to gold.
Both gold and silver have historically provided a hedge against inflation.
While the after-inflation returns of gold and silver may not always be stellar, considering past investment product performance, they can still play a valuable role in a well-diversified investment portfolio, remaining steady amid inflation uncertainties.
Gold tends to perform well during economic downturns and protections against inflation; studies confirm a positive correlation between the rising cost of living and the value of both precious metals. This ability to preserve wealth becomes particularly valuable during periods of high inflation, increasing their attractiveness as part of an investment strategy.
While the after-inflation returns for gold and silver may not be highly impressive when compared to other investments, rising inflation typically enhances their attractiveness as part of an investment strategy. This context underscores the importance of considering multiple factors – including inflation, market conditions, and personal financial goals – when evaluating the potential returns on your investment in gold and silver.
Making the Decision: Should You Buy Gold or Silver?
So, armed with all this knowledge, how do you decide between gold and silver? The answer isn’t one-size-fits-all. Investors should assess their individual financial circumstances and objectives when considering gold or silver investments, as the suitability can greatly vary depending on personal financial situations and goals.
The choice between gold or silver as a better investment option hinges largely on the individual’s risk tolerance and comfort with each investment strategy. It’s crucial to remember that while both precious metals can serve as hedges against inflation and economic downturns, they also present unique risks and opportunities. For instance, gold’s role as a safe haven asset may appeal to those seeking stability, while silver’s industrial applications and lower price point could attract investors looking for growth and affordability.
Before making the final call, it’s advisable to seek the guidance of a financial advisor to evaluate the appropriateness of gold or silver investments for your portfolio. Additionally, conducting independent research into gold and silver investment strategies can help you make a well-informed decision. Armed with knowledge and guided by your financial goals, you are well-equipped to make the golden (or silver) choice that’s right for you.
Summary
When it comes to precious metals, gold and silver stand as powerful contenders. Their unique characteristics offer distinct advantages for investors, making them an appealing inclusion in a diversified portfolio. Gold, with its safe-haven status, serves as a buffer against economic instability, while silver, with its industrial applications and affordable price, presents growth opportunities and accessibility to investors.
Ultimately, the decision to invest in gold, silver, precious metal mining stocks, or any other asset class should be guided by a thorough understanding of your financial goals, risk tolerance, and market conditions. It’s not about choosing the shiniest option, but the one that aligns best with your investment strategy and financial aspirations. So, whether you’re drawn to the allure of gold or the versatility of silver, remember – knowledge is the most precious asset of all.
Frequently Asked Questions
What factors influence the price of gold and silver?
The prices of gold and silver are influenced by various factors, including global economic stability, inflation rates, currency values, interest rates, and mining supply. Geopolitical events and investor sentiment can also cause significant price fluctuations.
Can I invest in gold and silver without owning physical metals?
Yes, investors can gain exposure to gold and silver without owning physical metals by investing in exchange-traded funds (ETFs), mining stocks, or mutual funds that focus on precious metals.
How does the industrial demand for silver affect its investment value?
The industrial demand for silver, particularly in technology and renewable energy sectors, can significantly affect its investment value. As demand for industrial applications rises, the price of silver may increase, potentially offering capital gains to investors.
What risks are associated with investing in precious metals?
Investing in precious metals carries risks such as market volatility, liquidity issues, and potential losses if prices decline. Additionally, physical metal investments may incur costs for storage and insurance.
Are there any tax considerations when investing in gold and silver?
Yes, there are tax considerations when investing in gold and silver. Capital gains on precious metals may be subject to taxation, and the tax treatment may differ depending on the investment vehicle (e.g., physical metals, ETFs, stocks). A tax professional can help you with this.
How do geopolitical events impact gold and silver prices?
Geopolitical events can have a significant impact on gold and silver prices. Uncertainty and instability often lead investors to seek safe-haven assets like gold, which can drive up prices. Conversely, positive geopolitical developments can reduce demand for safe havens, potentially lowering prices.
What is the best way to track the prices of gold and silver?
Investors can track the prices of gold and silver through financial news websites, commodity exchanges, and market data services. Many investment platforms also provide real-time pricing information for precious metals.
How do central bank policies affect gold and silver investments?
Central bank policies, such as interest rate adjustments and quantitative easing, can affect the value of currencies and influence investor sentiment towards precious metals. Policies that lead to currency devaluation can increase the attractiveness of gold and silver as a store of value.
Living with family members can be both a comforting and challenging experience, especially when those family members happen to be siblings. As adults, the dynamics change, and considerations extend beyond just familial bonds. When siblings decide to live together and potentially invest jointly, a unique set of opportunities and obstacles arise. Let’s delve into the pros and cons of such an arrangement.
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Pros
Shared Financial Responsibilities: Pooling resources with siblings can ease the burden of financial responsibilities. Whether it’s splitting rent, utilities, or groceries, dividing costs can lead to significant savings for all parties involved.
Greater Purchasing Power: When siblings join forces to invest, they can leverage their combined financial resources to access opportunities that might be out of reach individually. This could include purchasing a larger property, investing in stocks, or starting a business together.
Built-In Support System: Living with siblings means having a built-in support system readily available. Whether it’s help with chores, emotional support during tough times, or simply having someone to share a meal with, the presence of siblings can provide a sense of comfort and security.
Shared Goals and Values: Siblings often share similar upbringings, values, and life goals, which can facilitate smoother decision-making processes when it comes to investments and lifestyle choices. Aligning on common objectives can lead to a more cohesive living and investing experience.
Potential for Long-Term Wealth Building: By combining resources and investing strategically, siblings can work towards building long-term wealth for themselves and future generations. Real estate investments, for example, can appreciate over time, providing a valuable asset for the family.
Cons
Conflict and Tension: Living with siblings can sometimes lead to conflicts over finances, household responsibilities, or personal space. Differing lifestyles and personalities may clash, potentially causing tension within the household and complicating investment decisions.
Dependency Issues: Dependence on siblings for financial support or decision-making can hinder individual autonomy and personal growth. It’s essential to strike a balance between mutual support and independence to avoid feelings of resentment or overreliance.
Risk of Financial Disputes: Entering into joint investments with siblings carries the risk of financial disputes and disagreements. Differences in risk tolerance, investment preferences, or future plans may lead to conflicts regarding asset management and distribution of profits.
Limited Privacy: Sharing a living space with siblings means sacrificing some level of privacy. While it can foster closeness and bonding, it may also restrict personal freedom and make it challenging to carve out individual spaces within the home.
Uncertain Future Dynamics: Life is unpredictable, and circumstances can change over time. Siblings may experience shifts in career paths, relationships, or financial situations that impact their living arrangements and investment plans. Anticipating and adapting to these changes requires open communication and flexibility.
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When both parents and kids in one family have student loans, you may benefit from a game plan about how to handle the debt and the stress that can go along with it. Perhaps the student is still in college and the parent is reaching the end of their payments. Or maybe the parent is currently getting a degree, and the child with student loans has just graduated and is living at home.
Whatever your particular situation may be, there is a silver lining when parents and kids both have student loans. You can all work together as a unit toward the same goal: to pay them off in the most manageable way possible.
Here, you’ll learn about the financial impacts of student loans, repayment strategies, how to prioritize financial security, and how to support each other. While being in debt can be hard, arming yourself with knowledge is a solid step forward.
Understand the Financial Impact
Student loans can have several impacts on individuals of any age. It can alter your budget and your debt-to-income ratio (also known as your DTI), meaning the amount of debt you carry versus your earnings. This, in turn, can make lenders less likely to offer you loans or credit, or do so at the most favorable rates.
To look at the big picture, student debt could affect your ability to do the following:
• Purchase housing, including renting an apartment or qualifying for a mortgage
• Get married due to financial setbacks and can also add stress to a marriage
• Commit to attending graduate school
• Build long-term savings
But keep in mind, plenty of people have student loans and achieve these things, whether the debt means a delay in plans or they find a way to forge ahead. And know that people without student loans also face financial challenges: Perhaps they have a lot of credit card debt or a mortgage that is difficult to pay. Know that you are not alone in having financial challenges.
If student debt proves to be really unmanageable, it can affect other areas of your life as well, and the consequences of default can range from ineligibility for more federal financial aid, having a default reported to credit bureaus, credit score impact, and paycheck garnishment.
Of course, you want to avoid these scenarios. So if your family unit has multiple members with student loans, it’s wise to start by having open communication between parents and kids. Take the following steps:
1. Talk with each other. Don’t sweep the topic under the rug. Talking about it together can help you both share knowledge, support one another emotionally during what can be a difficult time, and come up with ideas for tackling your debt.
2. Total it up. Identify the total student loan debt for parents and kids. Break it up individually and figure out how much you both owe and the types of loans you have. Federal or private? High interest rate or low interest rate? When does the loan interest accrue? Only after you map it all out can you see exactly what’s going on.
3. Explore the implications of student loan debt on future financial goals. How will student loan debt affect your future financial goals? Writing down your future financial goals can help you create goals for moving forward.
4. Budget together. Finding a budget that helps you manage and track your finances is crucial. Share learning about the different budgeting techniques available, experiment with them (including apps that may be provided by your bank), and land on a system that helps you.
💡 Quick Tip: Often, the main goal of refinancing is to lower the interest rate on your student loans — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.
Create a Repayment Strategy
Next, you can create a repayment strategy. Both parents and students can follow these steps:
• Understand the loans. Particularly in the child’s case, do they understand all the terms, including interest rate, repayment schedule, and cosigned loans? Cosigning means that the parents signed to obtain loans on their behalf. A Direct PLUS loan is a loan made to a parent to pay for a student’s education and cannot transfer to the child. The parent is legally responsible for repaying the loan.
• Look into repayment plans. Will you stick with the Standard Repayment plan or would a Graduated or Extended plan work better? Reach out to your loan servicer to find out if you qualify for an income-driven repayment plan. An income-driven repayment plan bases your payments on income and family size. It can help ensure that you make manageable payments every month.
You might also benefit from learning about the SAVE Plan, which replaces the REPAYE Plan, and can make debt repayment more manageable for some borrowers.
• See if you qualify for student loan forgiveness. If a government or nonprofit organization employs you, you might qualify for the Public Service Loan Forgiveness Program, or PSLF. If you qualify, you could have the remaining balance on your federal student loans forgiven. In other words, you won’t have to pay them back.
• Consider consolidating federal student loans. Consolidating means combining one or more federal education loans into a new Direct Consolidation loan to lower your monthly payment amount or gain access to federal forgiveness programs.
• Pay extra toward the principal. You can pay extra toward the principal, meaning you make more payments toward your loans every month — the principal is the amount you owe on your loans. This can help speed up repayment and potentially lower the amount of interest you pay over the life of the loan.
• Consider refinancing student loans. You can also explore refinancing your student loans, which means replacing your current student loans with private student loans. This might enable you to get a simpler single monthly payment that is more affordable. However, it’s important to know these two facts:
◦ When you refinance federal student loans with private ones, you forfeit federal benefits and protections, such as deferment and forgiveness. For this reason, think carefully about which option best suits your needs.
◦ When you refinance with an extended term, you may get a lower monthly payment, but you could pay more interest over the life of the loan. This knowledge can help you make an informed decision.
Yes, that’s a lot of information to digest and contemplate. What’s the right student loan debt solution? Ultimately, it’s determining the repayment strategy that will help you meet your financial goals while paying off your loans. Talking to your loan servicer about options can help, as can speaking with a nonprofit credit counselor who specializes in managing student loans.
Take control of your student loans. Ditch student loan debt for good.
Prioritize Financial Security
What does it mean to prioritize financial security? Financial security means having the money to cover the necessities in your life, like food, water, and shelter, and having a safety net, like an emergency fund and having money stashed away for your future retirement. It also means balancing loan repayments with these other financial obligations.
Building financial stability could also include:
• Creating a budget: Creating a budget involves totaling up your income and subtracting your expenses, choosing a budgeting system, like an app, and tracking your expenses. Many experts recommend the 50/30/20 budget rule, which advocates spending 50% of your budget on necessities, 30% on wants, and 20% on savings and additional debt repayment.
• Putting together an emergency fund: Try to put some money aside for an emergency fund. Many experts recommend at least $1,000 to start and then go on to save three to six months’ worth of emergency expenses. That said, $1,000 can be a significant chunk of money. Setting up automated deductions from checking into a high-yield savings account ($20 or so per paycheck is fine) can get you started.
Building an emergency fund can help you combat unexpected expenses that may come up, like a job loss.
• Setting long-term financial goals: What long-term financial goals do you have? Set some long-term financial goals, such as saving for retirement or achieving homeownership with student loans. Both parents and college-aged or newly graduated kids can do this with a financial advisor who can help everyone balance loan repayments alongside other financial aspirations.
Support Each Other
This is a biggie, emotionally and financially. As you discuss your money goals, consider creating a joint plan. Kids should remember that parents still need support throughout this journey, and the reverse is true. Paying off debt and staying motivated during your repayment journey can be incredibly stressful.
Reach out to the people who will support you in your journey, and that includes resources and support networks for guidance, such as your student loan servicer, a financial advisor, and, if stress is an issue, a mental health provider.
Planning for the Future
Planning for the future may seem overwhelming while managing student loan debt. However, you don’t have to go it alone. Consider meeting with a financial advisor to discuss how to balance today (as in, your student loan repayment strategies) and tomorrow, such as putting away some funds for retirement.
It can be a good idea to have an objective, outside expert come in and evaluate your situation so they can help you devise a plan of action — in both kids’ and parents’ situations. You may feel as if you can’t possibly save for the future while focused on paying off your student debt, but a trained professional can often offer wise guidance.
Both parents and students may also wonder how to save for college for future generations. Ultimately, it’s important to secure your financial path first to reach your long-term financial goals and achieve financial freedom before worrying about future generations. After all, grandchildren can also borrow for college, but you can’t borrow for retirement. That said, this is another good topic to broach with a financial expert who is familiar with student loans and saving.
The Takeaway
Student debt can be challenging on its own, but when two generations of the same family are paying off their loans, it can feel overwhelming. It’s important to remember that student debt is a phase you are moving through, like paying off a car loan or mortgage. It doesn’t define you, nor is it with you forever. By supporting one another emotionally, budgeting well, and exploring repayment options, families can take control of their debt and pay it off in the most manageable way possible.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
FAQ
How does student debt affect families?
Student debt can affect families in many ways, from stretching the family budget thin to making it difficult to save for long-term financial goals. However, families that devise a plan and explore their loan repayment options can pay off their debt and work towards future goals successfully.
What is the average student loan debt?
The average student loan debt is $37,718 on average per borrower of federal loans — about 92% are federal student loans and the remaining are private student loans. Including both federal and private loans, borrowers in the U.S. owe about $1.75 trillion in student loan debt.
Are children responsible for parents’ student loan debt?
No, children are not responsible for parents’ student loan debt. However, parents may be legally obligated to repay student loans on behalf of a child if they took out Parent PLUS loans.
Photo credit: iStock/Daniel Balakov
SoFi Student Loan Refinance If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
It’s a common misconception that all debt is bad. Some forms of debt—such as student loans, mortgages, and auto loans—can help you improve your professional and personal life. But while debt can be useful, overspending while already in debt can lead to an unmanageable situation.
To find tips to ensure you aren’t adding unnecessarily to your debt or falling behind on payments, we asked Bob G. Wood—a professor of finance at the University of South Alabama’s Mitchell College of Business—to share his top debt-crushing strategies. These tips and ideas can help you gain lasting financial freedom.
Keep reading to learn how to get out of debt and stay there.
1. Avoid increasing what you owe on your credit cards
One of the first steps to getting out of debt is to stop adding to it. While credit cards are a helpful payment option (especially for unplanned expenses), continually building up a card balance that you can’t pay off every month can negatively impact your debt load and your credit score.
“A debt-averse individual pays the total balance on each credit card before the payment due date to avoid interest charges and late fees,” Wood explains. “This approach helps people avoid using the cards to buy things they cannot afford.”
2. Put some investments on hold
If you’re struggling to figure out how to pay off debt, you may want to put discretionary investments on hold until you’re debt-free. (Think: that $100 in crypto your buddy suggests you buy, or the IPO you’ve been reading about.) In some cases, paying off your debt faster will save you more money than your investments can earn. According to Wood, the exception to this rule is investing as a part of your retirement savings strategy, such as in a 401(k).
“I recommend continuing to fund retirement account investments, especially for those individuals with employer-provided accounts,” Wood says. “Many of these accounts provide a match for individual investments into the account, and that provides a 100% return on the individual’s contribution. Also, delaying retirement investment contributions can drastically reduce the future value of the account.”
3. Commit to a plan
While putting extra cash toward debt payments can help you make progress, having a steady plan is necessary to tackle debt efficiently. Wood shared the following steps consumers need to take when they’re budgeting to pay off debt:
Step 1. Differentiate between your needs and wants, and review your current expenses. “Be honest—upgrading to the latest cell phone model or adding items to an already full closet are more than likely wants rather than needs,” Wood says.
Step 2. Develop a realistic budget. Not sure how to budget to pay off debt? Be thoughtful when you create a budget to help keep your spending in check. This new budget should include a fixed monthly amount for debt repayment, beyond any monthly payments for student, auto, or home loans.
4. Choose the ‘snowball’ or the ‘avalanche’ style of debt reduction
When creating a plan to tackle your debt, you may consider the popular “debt snowball method,” which targets the smallest debt first. As soon as this first debt is satisfied, you focus on the next-lowest balance.
While seeing a debt of any size reduced to zero can be incredibly motivating, this approach may come with a cost. “Unfortunately, the strategy often results in more interest paid by the borrower,” Wood explains.
“As an alternative, the ‘debt avalanche method’ targets the highest interest debt first,” Wood explains. “By paying off the debt with the highest interest first, the borrower reduces the total amount of interest paid. Although this approach is more financially sound, it requires the borrower to focus on the long-term result and remain diligent in their payment plan.”
Note that with either of these approaches, staying current on all debt payments is important, meaning that you should pay at least the minimum amount due, while dedicating any extra contributions to the targeted debt.
5. Try to renegotiate your debt
One of the ways to pay off debt is to renegotiate it. While there are no guarantees that a lender will agree to negotiate the terms of your debt, you may have more luck if you’re a long-term customer with a history of on-time payments. In this case, a lender may be willing to waive fees, shift due dates, or even lower the interest rate. And these actions should not affect the individual’s credit rating, Wood notes.
Before committing to an arrangement, you should seek guidance from a professional about your specific situation, needs, and goals.
6. (Carefully) consider a balance transfer vs. debt consolidation loan
Transferring credit card debt to a new account has advantages, as many transfer offers may have an introductory period with an interest rate of 0%. A balance transfer can also reduce multiple payments to one, with a single payment date.
But keep an eye on your calendar so you’re aware of when the introductory period ends and the new interest rate begins.
He explains that debt consolidation is similar in concept, but these balances are typically rolled over into a personal loan for debt consolidation, a home equity loan, or a credit card with a lower interest rate (and concurrent lower payment).
7. Consider a rewards checking account
Looking to make the most of the cash you aren’t spending but still need access to? This is where a rewards checking account such as the Discover® Cashback Debit account can be handy when considering how to budget to pay off debt.
Earn cash back with your debit card
Discover Bank, Member FDIC
A rewards checking account can assist consumers in managing their debt by offering perks such as cash back or interest rewards on certain transactions. Consumers can then take those earnings and put them toward debt payments as needed.
8. Make it a family affair
Borrowing money from a trusted family member can help you save a lot on interest, making it easier to get out of debt faster. Let’s say that loved ones lend you the money you need to pay off your high-interest debts in full. You can then focus on paying them back at a lower interest rate or with no interest at all—whatever you agree on.
Just ensure you and your loved ones are on the same page about what this repayment agreement will look like so you don’t strain any relationships.
9. Know when to seek professional help
There may come a point when you need to hire a professional to help with get out of debt planning. “An individual should seek debt counseling when the anxiety associated with the debt interferes with the person’s personal and professional life or when the minimum debt payments are not possible without sacrificing necessities,” Wood says.
“There are both for-profit firms and nonprofit counseling agencies available to help an individual through the process.” The Consumer Financial Protection Bureau offers advice and resources on how to select a reputable counselor.
Consider what strategies might work best for you
There are many different approaches you can implement to help you get debt-free faster. Take some time to devise a realistic plan to tackle your debt so you can pay it off for good and start making your money work for you.
When you’re paying off debt, every boost of extra cash can help. A Discover Cashback Debit Account can help you earn cash rewards on debit card purchases1 with no account fees.
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
1 On up to $3,000 in debit card purchases each month. See Deposit Account Agreement for details on transaction eligibility, limitations and terms.
The following is a sponsored partnership with Kudos. Have you heard about Kudos – the free AI-powered wallet that helps you get more out of your credit cards? In this Kudos Review 2024, I’ll explain how this desktop browser extension and iPhone app helps you earn the maximum rewards and benefits when shopping online. With…
The following is a sponsored partnership with Kudos.
Have you heard about Kudos – the free AI-powered wallet that helps you get more out of your credit cards? In this Kudos Review 2024, I’ll explain how this desktop browser extension and iPhone app helps you earn the maximum rewards and benefits when shopping online. With the average Kudos member earning $750 per year, you won’t want to miss out on this game-changing tool!
With Kudos, you can always choose the best card for maximum rewards at checkout, easily autofill your card information (including CCV) with just one click, find new cards that match your shopping preferences, and more.
Plus, Kudos has helped its members earn $150 million in rewards and counting!
The best part? Kudos is completely free. That’s right—no hidden fees. Just shop like you normally do, and Kudos automatically helps you during checkout to maximize your rewards.
If you don’t want to leave money on the table, there’s no reason not to use Kudos to take the guesswork out of deciding which credit card to use for each online purchase.
Personally, I find Kudos incredibly helpful. As someone with multiple rewards credit cards, each with their own unique benefits, Kudos saves me a ton of time by instantly identifying the best card to use for each transaction. This not only simplifies my life but also helps me earn more money!
This is great so that you are using the full potential of your credit cards.
And, even if you only have one credit card, Kudos is still helpful! This is because, at many online stores, you can still double your rewards for using the Kudos browser extension and earn points to put towards free gift cards.
You can download Kudos for free by clicking here.Plus, use code “CENTS” to earn $20 back after your first eligible Boost purchase.
Key Takeaways from this Kudos Review 2024
Kudos is a free AI-powered wallet that maximizes your credit card rewards when you shop online, whether you’re buying groceries, clothing, travel packages, furniture, or anything else—all with a single click.
With Kudos, you no longer have to guess which credit card to use for each purchase. Just shop like normal and Kudos will automatically recommend the best card to make sure you always earn the highest cashback, points, or miles on every transaction.
Kudos supports over 2 million stores, so you’re virtually guaranteed to find your favorite retailers and maximize your rewards with them.
Even if your credit card doesn’t typically offer rewards, you can still earn rewards by shopping through the Kudos browser extension at participating merchants.
Kudos is compatible with all major desktop browsers (Chrome, Safari, Edge) and is also available as an iPhone app, making it easy to boost your credit card rewards across every device.
Kudos Review 2024
Below is my Kudos review.
What is Kudos?
Kudos (also known as Kudos Technologies, Inc.) is a helpful AI-powered browser extension and app designed to help you make the most of your credit cards, particularly when shopping online. It was founded by Tikue Anazodo and Ahmad Ismail, and Kudos has been featured on Forbes, Yahoo Finance, Bloomberg, The Motley Fool, Nasdaq, and more.
Think of it as a smart wallet for your browser. Driven by the complex world of credit card rewards, the Kudos team created this tool to simplify the process.
Here’s how it shines: Select the cards you commonly use (without the need for any sensitive bank details) and Kudos tells you which one to use at checkout. You see, your cards might be packed with potential rewards for different spending categories—travel, groceries, or dining.
Different credit cards have so many different benefits (such as the rewards percentage, extended warranties, purchase protection, insurance, and more), which can be difficult to keep track of.
Kudos makes sure you’re using the best card possible to earn the most rewards, which is especially useful if you have more than one rewards credit card.
Members have collectively earned over $150 million in rewards with Kudos. On a personal level, you could boost your annual shopping rewards by an average of $750 just by using Kudos.
Plus, Kudos is super user-friendly. You can add it to your preferred desktop browser (Chrome, Safari, Edge) or use it on your iPhone, and it’s completely free. The service makes money by earning a small commission when you shop at participating stores or sign up for a card through their recommendations.
When you shop without Kudos, you could be missing out on opportunities to earn rewards with your purchases. Why miss out on potential earnings when Kudos provides a free and simple solution?
Kudos also has a really helpful Instagram account full of helpful credit card tips. I highly recommend checking that out here.
How Kudos works
Imagine you’re online shopping, ready to checkout, and you pause, thinking, which credit card do I use? That’s where Kudos steps in, always there to give you the best advice.
Kudos knows your cards and suggests which one to use at checkout. But how? First, you add your credit cards to the Kudos wallet. It’s safe and simple. When it’s time to buy something, Kudos pops up and says, “Hey, use this card!” Why? Because it’s the card that will give you the most rewards or savings for that purchase.
Here are the steps to get started:
Download the Kudos browser extension (takes less than a minute to do) on your desktop browser (Chrome, Safari, Edge) or iPhone. You’ll also answer basic questions like your name and the type of credit card you have (such as the Chase Freedom card).
Shop like you normally do.
Once you’re ready to checkout, Kudos will automatically appear to let you know which credit card you should use to get the most rewards and benefits.
Click the card you want to use and Kudos will then autofill the card info, making checkout a breeze.
What stores does Kudos work on?
Kudos works at over 2 million online stores and with over 3,000 credit cards – so there’s a very good chance that it’ll work for you.
Don’t see a store supported or can’t find your card? Their support team is super responsive and will help you out!
Kudos vs. other rewards tools: What sets Kudos apart?
When it comes to maximizing credit card rewards, Kudos stands out from other popular tools like Rakuten, Honey, and Capital One Shopping.
While these platforms primarily focus on providing cashback offers or coupon codes, Kudos takes a more comprehensive approach to optimize your entire credit card strategy.
What sets Kudos apart is its AI-powered technology that analyzes your specific credit cards and spending habits to recommend the best card for each purchase.
This makes sure that you’re not only earning cashback but also maximizing your points, miles, and other card-specific perks. By considering factors like bonus categories, statement credits, and exclusive benefits, Kudos helps you get the most value out of your credit cards.
Key Features of Kudos
When shopping online, you want to stretch your dollar as far as it can go. Kudos has features that make this easy by helping you get the most out of your credit cards such as:
Maximize your credit card rewards
When you’re shopping online, Kudos helps you pick the best card to use to maximize your rewards and benefits.
With Kudos, you no longer have to guess which credit card to use. This AI-powered wallet automatically recommends the best card for each purchase, making sure you always receive the highest cashback, points, or miles possible.
I personally didn’t even know that one of my credit cards had some of the benefits that Kudos listed, and I can’t believe I had been wasting so much money by skipping out on such a valuable benefit! Kudos makes it very easy for me to see my card’s benefits all in one easy place.
Plus, if you’d like, you can add your credit card information to Kudos, and Kudos will autofill your card info (including CCV) to make checking out fast.
Another way that Kudos helps you earn more rewards is because Kudos helps you build your Dream Wallet so you can get the most out of your everyday purchases. You’ll go through a quick quiz to help Kudos gather information about your needs.
Double your rewards with Kudos Boost
With Kudos, you can increase the amount you can get in credit card rewards with just one click.
If you usually earn 4% cash back when shopping at sites like Walmart or Sephora, you’ll now earn a total of 8% back with Kudos Boost. The best part? You can earn Boost at participating stores even if your card doesn’t offer its own rewards.
Kudos Boost are reward points you earn by shopping at Boost merchants.
It works like this:
Shop at one of Kudos’ 15,000 participating Boost merchants
Click “Activate Boost” on the bottom right corner of the screen
Use Kudos at checkout – At checkout, Kudos will find your best credit card to use, autofill the payment forms, and match your credit card rewards.
Redeem rewards for a gift card
You’ll receive an email from Kudos around 1-2 days after completing an eligible transaction. After the store confirms your purchase it usually takes between 60 to 120 days for your rewards to be available, and you can then find your rewards on your Activity page on Kudos.
When you’ve earned 1,000 Kudos Boost points (equal to $10.00 USD), you can exchange them for an Amazon gift card.
Receive personalized credit card recommendations
Stop wasting time opening up credit card application pages on incognito. You can receive access to elevated card offers on Kudos’ Explore Tool through their partnership with The Points Guy.
So, if you are looking for a new credit card, use Kudos to help filter the best one for you and your situation and compare different cards in one easy place.
For example, Kudos member Christina L. was able to get 150,000 Membership Rewards points after spending $6,000 on the Amex Platinum card within the first three months of account opening. That’s almost double the 80,000 points after spending $8,000 found on the American Express website!
Answer all your credit card questions with MariaGPT
Maria GPT is an AI-powered, personalized assistant designed to answer all your credit card questions, available on the Kudos mobile app.
She can help you understand the benefits of your current cards and offer personalized suggestions for new cards based on your spending habits, goals, and objectives.
Frequently Asked Questions about Kudos Review 2024
Below are common questions about Kudos, the free AI-powered wallet.
Is Kudos free to use?
Kudos is free to use.
How does Kudos make money?
Kudos earns a small affiliate commission when you make an online purchase at one of their participating merchants. Additionally, if you use the Kudos Explore Tool to apply for a new credit card, Kudos may receive a payment from the credit card issuer.
Is there a Kudos referral code?
Yes! Sign-up for Kudos for free and use the Kudos referral code “CENTS” to earn $20.00 back after your first eligible Boost purchase.
How much can you earn with Kudos?
On average, Kudos members earn $750 per year in rewards by using the app to maximize their earnings.
Do I need to provide my credit card numbers to use Kudos?
No, you don’t need to enter your credit card numbers to use Kudos. Simply select the cards you have in your wallet, and Kudos will help you maximize your benefits at checkout. Providing your credit card information is optional if you want to speed up the checkout process.
Can I use Kudos with other browser extensions?
If you use Kudos Boost and then activate another rewards program like Rakuten, Honey, Capital One Shopping, or others during the same shopping session, Kudos may not be able to earn an affiliate commission. To make sure you get maximum rewards, it’s best to use Kudos exclusively during your online shopping.
Is Kudos wallet legit?
Yes, Kudos is a legitimate browser extension and app used by over 200,000 shoppers who have earned over $150 million in rewards. You can find genuine user reviews on trusted platforms like Trustpilot, Chrome Web Store (4.8/5 stars from 667+ reviews), and the Apple App Store (4.7/5 stars from 3,500+ reviews).
Is Kudos safe and secure?
Yes, Kudos prioritizes user security and employs industry-leading protocols, including bank-grade 256-bit encryption, to safeguard your data. Kudos handles your personal and financial information with the utmost care and never sells or shares it with third parties. You can feel confident and secure when using the Kudos browser extension and app.
My Kudos Review 2024: Final Thoughts
I hope you found this Kudos review informative and helpful in understanding how this AI-powered wallet can help you maximize your credit card rewards.
Navigating the world of credit card rewards can be overwhelming, but Kudos simplifies the process with its intelligent recommendations. By analyzing a database of over 3,000 cards, Kudos ensures you always use the best card for each purchase, boosting your rewards effortlessly.
In addition to its AI-driven recommendations, Kudos streamlines your online shopping experience with a one-click autofill feature. This not only saves you time but also guarantees that you’re always using the card with the most advantageous benefits for each transaction.
Personally, I find Kudos to be a must-have shopping tool. As someone with multiple rewards credit cards, each with their own unique perks, trying to determine which card to use for every purchase can be time-consuming and confusing. Kudos eliminates this hassle by automatically identifying the best card for each transaction, allowing me to maximize my rewards efficiently.
Even if you only have a single credit card, Kudos can still help you earn more rewards. By shopping through the Kudos browser extension at thousands of participating online stores, you can accumulate points that can be redeemed for free gift cards. This means that regardless of how many credit cards you have, Kudos enables you to optimize your rewards earning potential.
Kudos also helps users find new credit cards through its partnership with The Points Guy, a well-known credit card rewards and travel website. By using the CardMatch service, Kudos helps users find the best credit card offers tailored to their specific needs and spending habits. This feature is particularly useful for those looking to expand their credit card portfolio and maximize their rewards earning potential across multiple cards.
You can sign up for Kudos for free by clicking here.
Do you use Kudos? What other questions do you have for this Kudos review?
Average mortgage rates inched lower yesterday. But all that did was wipe out last Friday’s similarly tiny rise.
Earlier this morning, markets were signaling that mortgage rates today might barely budge. However, these early mini-trends often alter direction or speed as the hours pass.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.302%
7.353%
+0.01
Conventional 15-year fixed
6.757%
6.836%
+0.01
30-year fixed FHA
7.064%
7.111%
-0.07
5/1 ARM Conventional
6.888%
8.036%
+0.12
Conventional 20-year fixed
7.199%
7.257%
+0.05
Conventional 10-year fixed
6.663%
6.737%
+0.06
30-year fixed VA
7.292%
7.332%
+0.01
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
This morning’s Financial Times reports, “While the base case remains a reduction in borrowing costs, the options market shows a 20% probability of an increase.” That means most investors think the Federal Reserve will cut general interest rates this year, but they reckon there’s a 20% chance of the central bank actually hiking them. That’s new and scary.
Although the Fed doesn’t directly determine mortgage rates it has a huge influence on the bond market that does. And I very much doubt mortgage rates will fall consistently before the Fed signals that a cut in general interest rates is imminent. And a Fed rate hike is likely to send mortgage rates much higher: maybe back up to 8% or beyond.
So my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes edged down to 4.6% from 4.64%. (Good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were rising this morning. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices decreased to $81.59 from $82.06 a barrel. (Good for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices fell to $2,333 from $2,350 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Because gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — climbed to 40 from 33 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So, lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to be unchanged or close to unchanged. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
What’s driving mortgage rates today?
Today
This morning’s two April purchasing managers’ indexes (PMIs) will likely be good for mortgage rates. These “flashes” (initial readings and subject to revision) are both from S&P.
Here are this morning’s actual numbers in bold, alongside the prepublication consensus forecasts, according to MarketWatch, together with the March actual figures:
Services PMI — 50.9 actual; 52 expected; 51.7 in March
Manufacturing PMI — 51.1 actual; 52 expected; 51.9 in March
You can see that the PMIs were worse than expected, which is typically good news for mortgage rates.
Tomorrow
Tomorrow’s durable goods orders for March rarely affect mortgage rates. And they’d need to contain some pretty shocking data to do so tomorrow.
Markets are expecting those orders to have risen by 2.6% in March compared to a 1.3% increase in February. They’ll probably need to be significantly higher than 2.% to exert upward pressure on mortgage rates and appreciably lower to push them downward.
The rest of this week
Nothing has changed since yesterday concerning economic reports due on Thursday and Friday. So, I’ll repeat what I wrote yesterday:
We’re due the first reading of gross domestic product (GDP) for the January-March quarter on Thursday. And that could have a larger effect than PMIs and durable goods orders, depending on the gap between expectations and actuals.
But Friday’s personal consumption expenditures (PCE) price index for March is this week’s star report. That’s the Federal Reserve’s favorite gauge of inflation. And it could certainly affect mortgage rates, possibly appreciably.
The next meeting of the Fed’s rate-setting committee is scheduled to start on Apr. 30 and last two days. So, the PCE price index will be the last inflation report it sees before making decisions.
And index that shows inflation cooling could change the mood at that meeting. True, it’s vanishingly unlikely that a cut to general interest rates will be unveiled on May 1 no matter what.
But a PCE price index that shows inflation cooling could help the Fed to move forward with cuts earlier than expected, which should cause mortgage rates to fall. Unfortunately, one that suggests inflation remains hot or is getting hotter could send those rates higher.
I’ll brief you more fully on each potentially significant report on the day before it’s published.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Apr. 18 report put that same weekly average at 7.1%, up from the previous week’s 6.88%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Mar. 19 and the MBA’s on Apr. 18.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.7%
6.7%
6.6%
6.4%
MBA
6.8%
6.7%
6.6%
6.4%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
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Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
“We decided going forward that we’re going to focus 100% on retail,” she said. “We look for like-minded companies that have the same culture, because culture and leadership are key. And I think you have to start building scale in this business.”
Scale is an important tool for maintaining investment in people and technology, Schmidt said, and the additional companies that Guild has brought aboard recently reflect its goals for culture and leadership and may have had issues of scale that were solved by joining Guild, she said.
When asked about the particulars of culture and how Guild aims to define that trait, Schmidt said that three values lead the charge: listening, collaboration and learning.
“For us, [potential acquisitions] have to be able to have a good understanding of their people and listen to what they have to say,” she said. “Everybody has a voice. Those are the kinds of leadership qualities that create that culture. Sometimes it’s not easy to identify that. We have to spend a lot of time doing a lot of discovery to identify that.”
When asked about recent acquisitions like Academy Mortgage and Cherry Creek Mortgage, Schmidt said that Guild had identified the kinds of values they want in their organization as well as the geographic advantage that would come from bringing them into the fold. There were also product advantages.
“Those two are more West Coast companies even though they had a national footprint, and so we’ve known them for years,” she said. “We had a good sense of their culture in advance. They both have great cultures and we were competing for the same people, so we knew the fit would be really good. So now, for all the western states, we pretty much have the market share that we wanted to get to.”
The Cherry Creek acquisition allowed Guild to expand and build out its reverse mortgage capabilities since the company served as a leading lender in the space for quite a while. With Academy, the homebuilder business was most attractive to Guild, Schmidt said.
Schmidt also talked about the need to invest in the company’s technology platform to better enable its people. Recruitment efforts are also following the company’s broad retail-focused strategy, and Schmidt asserted that any retail loan originator will want to “talk to Guild” if they want to advance in the retail origination space.
Schmidt also alluded to further development of its technology by leveraging artificial intelligence, and she shared that the company hired a specialist in its technology division to help grow the company’s efforts.
But to avoid moving too quickly and potentially running afoul of a developing and controversial technology, she said the company’s approach is to “start small and be careful.”
Taking that much needed vacation while on a debt payoff journey may seem impossible, but it doesn’t have to be. By planning a vacation that suits your budget and keeps goals on track, you can transport yourself somewhere new and recharge.
It’s an approach Jasmine Gillians, a leave of absence specialist and YouTuber at the channel Jazzie RayShaune, is taking with her husband. On their second debt payoff journey, the Kansas City, Missouri-based couple is working on eliminating around $64,000 in remaining debt. Previously, they took the stricter path of staying home all the time and avoiding spending on extras. She sums it up as “miserable.”
“We both work full time and we want to be able to get a breath of fresh air, but we also wanted to be mindful that we still have debt to pay off,” she says. “We like to get out, we like to enjoy ourselves, but we just realized that we can still do that on a good budget.”
Time isn’t promised, especially when it comes to vacationing with elderly family members or if starting a new job that won’t accrue paid time off for a while. When deciding whether to travel, consider the emotional and monetary cost. Choose the option of no regrets that allows you to stay true to your debt payoff plan.
Review the budget
Revisit debit and credit card statements to know where money is going. Know your numbers, including income, expenses and debt, suggests Tiffany Grant, a North Carolina-based accredited financial counselor. Understand how much to contribute monthly to pay off debts by your deadline, and prevent setbacks by building an emergency fund.
Use this information to see if it’s also possible to start a vacation fund. If money is tight, consider whether focusing only on debt makes more sense.
“If you are not able to make your payments — and like not even the minimum payments — and you’re running in the negative every month, then you probably shouldn’t be traveling,” says Grant. “Or if you do, something that’s super low cost.”
Also consider if it’s possible to cut back in certain areas to accelerate savings. Instead of taking the strict approach from the previous debt payoff journey, Gillians found ways to trim expenses to allow for more flexibility with spending.
“Things like a date night may not be dinner and a movie, it may be movie night at home,” she says. “We were already the majority of the time working out at home, so we canceled our gym memberships.”
For added savings, Gillians says she also switched to cheaper providers for things like streaming services. With these adjustments, Gillians was able to plan a vacation to Destin, Florida, to celebrate her husband’s 50th birthday.
Make a plan
Brainstorm destinations and research potential costs for transportation, accommodations, activities, food and possibly foreign transaction fees. Also leave a cushion in that vacation budget for unforeseen expenses.
Consider these options to find savings:
Redeeming rewards. On a debt payoff journey, it’s not ideal to chase credit card rewards, but using those already earned may help defray the costs of a vacation. Rewards earned through a loyalty program may also chip away at costs. Gillians says she was able to save $40 on her trip with rewards earned through Vrbo.
Exploring free or low-cost activities at your destination. Think about ways to experience a destination on a budget. For instance, consider going on a free walking tour (many cities offer these), exploring a national park on a free day or taking in some culture with free museum admission. If your budget permits, you may also get the resort experience without the high price tag. Companies like ResortPass allow you to pay for use of a hotel’s spa, pool or gym for the day. If you’re with a large group, though, these costs can add up.
Cooking your meals. By buying groceries outside of populated tourist areas and making your own meals, whether at a hotel or vacation rental, you’ll save money versus eating at restaurants. If that’s not for you, build dining expenses into the vacation fund.
Being flexible with accommodations. Where you stay depends on your preferences and needs. Weigh a variety of options, including camp sites, hostels, vacation rentals that you can split with a group, and last-minute hotel deals. A “mystery” hotel deal through a service like Priceline or Hotwire can save on costs, but the key details of the hotel are secret until you book it. You’ll see only the price, number of stars, guest rating, limited photos, a general overview of the location and a list of amenities.
Compromising on transportation. Make travel more affordable by staying local or traveling during the off season. Websites like Going, Fare Deal Alert and The Flight Deal can alert you to cheap flights. In addition to the cost of flying or driving to your destination, factor in the price of transportation once you arrive. If it’s safe to take, public transit may provide lower costs than rideshares, taxis, rental cars or other options.
Also, consider other ways to save. “I save gift cards that I get for Christmas and birthdays,” says Gillians. For her upcoming trip, she says she used three airline gift cards to save $300 on flights.
Checking for discounts. You might qualify for discounts based on employment, a credit card or another option. If you have a AAA or warehouse club membership, for example, you may be eligible for discounts on rental cars, hotels, or tickets to sporting events and theme parks. Some credit cards also provide discounts when you use them to shop with specific merchants. If you can pay off the purchase in full and avoid derailing your debt payoff journey, this option could allow you to save on dining, hotels and more.
If you’ve owned your car for several years, it may be a source of cash even if you don’t want to sell it. Enter auto equity loans, which lets you turn the equity you have in your car into a loan you can use for any purpose.
While the risks and interest rates may not be suitable for every borrower, a strategic approach to this loan can quickly get you the cash you need. Here’s how to tell if a car equity loan makes sense for you.
How Auto Equity Loans Work
Vehicle equity loans depend on how much a borrower’s car is worth versus how much they owe on the car. For example, say your car is worth $15,000. You’re almost finished paying off your car loan and only owe $1,000 on it. So, you have $14,000 of equity you can leverage with an auto equity loan.
Your equity in your vehicle is the basis for a loan, and terms vary by lender. For example, some lenders may loan a maximum of 100% of your auto equity, while others loan 125%.
Like any loan, a car equity loan comes with terms and conditions. This includes the interest rate, repayment schedule, and loan fees.
However, the unique aspect of auto equity loans is the vehicle serves as collateral. The advantage is that you can obtain better terms and rates than an unsecured loan. The downside is that the failure to repay the loan gives the lender the right to repossess the vehicle to recoup their losses.
Auto Equity Loan vs. Auto Title Loan
Auto title loans and car equity loans sound similar, but they have stark differences with severe implications for borrowers. Auto equity loans allow you to turn the equity you have in your car into a loan you’ll repay over the coming months or years. Defaulting on the loan can result in repossession, but the loan terms are typically affordable enough for borrowers to avoid this outcome.
Auto title loans also use equity in your car but have harsher terms and rates. Typically, auto title loans give the borrower one month to repay the loan with higher interest rates than auto equity loans.
The sole upside is that these loans have minimal credit requirements, making them accessible to more borrowers. The downside is that the loan terms are so stringent that borrowers often fail to repay the loan within 30 days, default, and lose their vehicle. 💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.
How to Get an Auto Equity Loan
Getting an auto equity loan means assessing your equity, finding a lender, and applying. Here’s the step-by-step guide:
Check Your Equity Level
Get an accurate estimate of your car’s current market value. An online tool, such as Kelley Blue or Edmunds, can help. Once you know the value, subtract any outstanding loan balance on your car from it. The result is your equity. Remember, lenders use the equity amount to determine the maximum loan amount you can receive.
Shop for a Lender
Look for reputable lenders that offer auto equity loans. Specifically, auto lenders, credit unions, and online lenders offer these loans. Peruse customer reviews and gather offer information, including interest rates and loan fees. In addition, lenders have different eligibility requirements, such as equity amount and credit score standards.
Apply for the Loan
Once you choose your lender, prepare the required documentation for the application, including proof of income, identification, vehicle title, and proof of insurance. Then, you can apply using your lender’s website, visiting a physical location, or contacting the lender by phone.
If approved, carefully review the loan terms before accepting. Pay attention to interest rates, repayment schedules, and any fees associated with the loan.
Pros and Cons of an Auto Equity Loan
Like any financial decision, getting a car equity loan has advantages and disadvantages. Here are some potential pros of auto equity loans:
• Competitive interest rates: Because you secure the loan with your vehicle, you’ll likely get a lower interest rate than an unsecured loan or credit card.
• Less-stringent approval: Because a car secures the loan, borrowers with lower credit scores or a less-than-perfect credit history are more likely to qualify.
• Quick funding: Auto equity loans often provide a faster funding process than traditional loans. In some cases, borrowers can receive funds within a day of approval.
• Customizable terms: Some auto equity lenders may offer flexibility in repayment schedules, allowing borrowers to customize the loan terms to better suit their financial situation. For example, you can shorten the term to reduce how long the loan lasts, reducing total interest costs.
However, consider the following cons as well:
• Risk of losing your car auto equity: Auto equity loans are secured loans, meaning the vehicle serves as collateral. If you fail to repay the loan according to the agreed-upon terms, the lender can repossess and sell your car.
• Full-coverage insurance requirements: Many auto equity lenders require borrowers to maintain full-coverage insurance on the vehicle throughout the loan period. This coverage costs more than minimum liability insurance.
• Uncommon among lenders: While auto equity loans are available, they might not be as common or widely offered as other types of loans. This drawback can limit the options available to borrowers. In addition, your current auto lender might not offer this loan, meaning you’ll end up having auto loans with multiple lenders.
Auto Equity Loan Alternatives
A vehicle equity loan is just one way to get the financial assistance you need. Other loan tools are available. Here are some to consider.
Personal Loans
Personal loans can be used for various purposes, including financing a car or covering regular expenses. Unlike car equity loans, personal loans are unsecured, meaning they do not require collateral like your vehicle.
Interest rates on personal loans can vary based on your creditworthiness and may be higher because they don’t have collateral. However, borrowers with higher credit scores generally qualify for lower interest rates. Personal loans usually have fixed monthly payments over a predetermined term.
New Credit Card
Credit card companies frequently offer credit cards with low or no APR to draw new customers. So, you can apply for a new card and take advantage of the promotional interest rate. For example, if you get a new card with 0% APR for one year, you only have to make the minimum payment on the balance each month for the first 12 months.
This feature allows you to accrue debt without paying it back immediately. Just remember that when the promo period ends, any balance will start accruing the card’s regular APR.
In addition, credit cards are unsecured, so no collateral is needed.
Home Equity Loan
A home equity loan is like a car equity loan, but it uses the equity in your home instead of your vehicle. It is a secured loan because your home serves as collateral, and the debt becomes a second mortgage.
Home equity loans typically have fixed interest rates and fixed monthly payments over a specific term. The loan amounts can be larger because homeowners can build up hundreds of thousands of dollars of equity to tap.
Plus, interest rates on home equity loans are often lower than those on unsecured loans. However, you could lose your home if you default on the loan.
Auto Loan Refinance
Car loan refinancing involves replacing your existing auto loan with a new one, usually with better terms such as a lower interest rate or an extended repayment period. Doing so usually lowers your monthly payment, making your loan more affordable. 💡 Quick Tip: In a climate where interest rates are rising, you’re likely better off with a fixed interest rate than a variable rate, even though the variable rate is initially lower. On the flip side, if rates are falling, you may be better off with a variable interest rate.
The Takeaway
Car equity loans leverage a vehicle’s equity for access to cash with low waiting times. While offering advantages such as potentially lower interest rates and quick funding, they can also pose significant risks, including possibly losing the car. Full-coverage insurance requirements and the relative uncommonness of these loans among lenders add to their drawbacks.
Individuals considering auto equity loans should carefully assess their financial situation and alternatives, exploring options like personal loans, credit cards, home equity loans, or auto loan refinancing. Thorough research into reputable lenders is crucial to making an informed decision that aligns with their financial needs and goals.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.
FAQ
Is it good to have equity in your car?
It’s good to have equity in your car because you can use it as collateral to get an auto equity loan or sell your car for a profit.
Can you cash out auto equity?
You can turn the equity you have in your car into cash with a cash-out refinance from a lender. Doing so will provide you with a lump sum equal to your equity amount and replace your current auto loan with a new loan with an accordingly larger balance.
Is it a good idea to get an auto equity loan?
If you have thousands of dollars in equity and can’t access other forms of debt, a vehicle equity loan can provide a quick solution. However, it’s crucial to carefully evaluate if you can afford the monthly payments before deciding. Otherwise, you may lose your car if you fail to repay the loan.
Photo credit; iStock/sturti
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