What’s the difference between a personal loan and personal line of credit?

When you have an unexpected expense or just want to improve your credit profile, a personal loan or a personal credit line can let you borrow the money you need to meet your goals. However, both of these financing options work in very different ways and strategic borrowers must carefully weigh which one would work […]

The post What’s the difference between a personal loan and personal line of credit? appeared first on Credit Absolute.

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How to Use the Debt Lasso Method to Pay Off Debt Faster

Remember how we talked about the importance of committing because of later temptations? Here’s where that comes into play.
By automating your payments, you’ll be less tempted to reduce the amount when your minimum payment goes down — sort of an out-of-sight-out-of-mind mentality.
And don’t limit yourself to credit card offers. Using a personal loan to pay off multiple cards has the same effect.
Before you reach the end of a zero-interest period, start looking for other offers that allow you to transfer your balance so you can avoid getting socked with the new higher interest rate on your old card.

What Is the Debt Lasso Method?

Auten and Schneider should know: They started their own debt lasso journey with ,000 in credit card debt. After years of poor financial choices, the couple was sitting on the floor of their basement apartment when they realized that their debt would never allow them to buy a house or enjoy life the way their friends were.
Yeehaw!
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Who Should Use the Debt Lasso?

Decide on an amount greater than your total minimum monthly payments that you can reliably put toward your debt every month.
So if you have ,000 in credit card debt and your gross income (before taxes and other deductions are taken out) is ,000, you’re a good candidate for the debt lasso. But if you have ,000 in credit card debt with the same salary, you may want to seek other assistance to help you pay off your credit card debt.

Pro Tip
We’ll look at all the pieces, but let’s first decide if the debt lasso method can help you.

And if you’re wondering when you’ll reach the end of your debt lasso, they include a calculator on debtlasso.com to help you figure out how long it will take to pay off credit cards based on your interest rates and debt amounts.
Stop using your credit cards. No exceptions.

How the Debt Lasso Method Works

This portrait shows a gay couple sitting on a couch together in the mountains after being married.
Developed by David Auten, left, and John Schneider, the married couple known as the Debt Free Guys, the debt lasso method involves corralling your high-interest debt into a low-interest one so you can pay down the principal balance more quickly. Photo courtesy of Studio Lemus

To determine if the debt lasso method is right for you, start by adding up how much you owe in credit card debt. Then compare that total debt to your annual income. If your debt is less than half of your income, the debt lasso method could work for you.

1. Commit

After you’ve paid down a portion of your balance, your credit card company tells you that your new minimum payment is only . Yay! But that doesn’t mean you now have to spend — you should continue paying 0 each month, sending even more money toward your principal balance.
Saving your cash for now will let you build an emergency fund in case you do lose income. And if it turns out that you end up with an extra nest egg, consider it a bonus payment as you return to the debt lasso method.
Start with the easy wins by paying off any credit cards that have low enough balances to knock out in less than six months.
You can still benefit from the lasso method by negotiating a lower interest rate with your current credit card company or transferring the balance to a card with a substantially lower interest rate than what you’re currently paying.

  1. But if you have a less-than-stellar credit score, those offers may be tough to come by. Don’t give up.
  2. Remember that you’ve committed to not using your credit cards (see Step #1). So hold onto the ones you’ve paid off. Why?

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2. Trim

Developed by David Auten and John Schneider, also known as the Debt Free Guys, the debt lasso method involves corralling your high-interest debt into a low-interest one so you can pay down the principal balance more quickly — and for less money.
You may have multiple credit cards, but we’ll keep the example simple with one card: When you began your debt lasso journey, your minimum monthly payment was , so you committed to paying 0 on your credit card — 0 extra each month.
Time to saddle up.

3. Lasso

Source: thepennyhoarder.com
So they made a two-part commitment — which you’ll also need to do if you want to use the debt lasso method:
You cannot successfully use the debt lasso method unless you’re willing to commit.
Automating your minimum monthly payments for all but your lassoed credit card will allow you to focus on paying off one debt at a time. But automating your payments can do even more to help.
But if you fall somewhere in between, the lasso could help you pay off debt in a shorter amount of time and with less interest.
Compared to the average rate on credit cards, which was 17.13% in the third quarter of 2021, personal loans offered a better deal at 9.39%, according to the Federal Reserve.
If the debt avalanche and snowball methods leave you feeling a bit cold when you think of all the interest you’ll end up paying, consider the debt lasso method.
This is no time to put your debt payment strategy out to pasture. Monitoring your accounts is an important last step, as those credit card rates can run wild if left unattended.
Each time you pay off one credit card, put your money toward paying off the next highest balance.
“That was our particular rock-bottom moment, realizing that here we were in this financial and literal hole,” Schneider said.
Although opening new accounts could temporarily hurt your credit score, Auten and Schneider emphasized that the long-term benefits of paying off debt faster can help counteract that effect.
Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder who is fully committed to corny puns. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

4. Automate

“If you do get an offer and then you end up not being able to make your payments, then you could get stuck with an interest rate that’s 25 to 30%,” Auten said.
Ready to stop worrying about money?
Although it may be tempting to pay every dime toward your debt, don’t drain your emergency fund when practicing the debt lasso method.
The early victory not only offers a psychological benefit but also helps your credit score.
If you’ve read about other debt payoff methods, you might be wondering if the lasso method is just a balance transfer. Auten and Schneider get that question a lot.
Ready to wrangle in that credit card debt?

5. Monitor

This woman monitors her accounts online.
Getty Images

Maintaining those credit lines will decrease your credit utilization, which accounts for approximately 30% of your credit score. And the higher your credit score, the better position you’ll be in when you’re ready to lasso.
Want to learn more? Auten and Schneider told us all about the debt lasso, including who it can help the most — and who shouldn’t use it.

Credit card agreements often include a clause in the fine print that allows them to raise your interest rates if you miss a payment during the zero-interest offer period. Some will even sneak in the right to recoup any money you saved previously during the promotional period at the new interest rate.
The takeaway lesson: Read the fine print.

Who Should NOT Use the Debt Lasso Method — For Now

A word of warning: If you’re in an industry where you could be furloughed or laid off suddenly, you should probably hold your horses — and your cash.
If you have a good or excellent credit score, finding a zero-interest offer where you can transfer your highest interest credit card debt should be your goal.
Committing to the process is essential, Auten and Schneider said, as it will help you later when you may be tempted to stray off course.
If you still have additional higher interest balances, prioritize paying off the credit card with the highest interest rate first.
You also might not benefit from taking up the lasso if you can realistically pay off your credit card debt in six months, since the associated fees (typically 3% to 5% of the amount being transferred) could cost you more than you’d save by taking advantage of a lower interest rate.
“The reality is that a central piece of the process is doing some sort of consolidation — whether that’s a balance transfer to a zero-interest credit card or a low-interest loan,” Auten said. “But a lot of people forget those first two pieces and the last two pieces.”
A card that doesn’t have a balance means you have more available credit, thus helping improve your credit score. And a higher credit score will help you get approved for another zero-interest credit card.

Putting all of the extra money toward your card with the highest interest rate will help you pay the least amount of interest over time. And that’s where the last step becomes crucial.

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“To get you from 20% to 25% down to a 9% to 15% — that’s a great first step,” Schneider said.

Best Personal Loans for 2020

Maybe it was an unexpected dental procedure, or a tax bill you didn’t plan for, or a car repair that came out of nowhere.

Whatever the reason, if you need money quickly, a personal loan can deliver it.

As you shop for a personal loan to solve your short-term problem, look for loan terms that won’t hurt your long-term financial life.

7 Best Personal Loans & Lenders for 2020

Online lending has opened a new world of personal loan options. 

Not that long ago we had just a couple of legitimate choices:

  • Your Local Bank or Credit Union: You can usually borrow money at a decent fixed interest rate at your neighborhood bank or credit union. The downside: You’d need to make an appointment or at least spend an hour or two on the phone.
  • A Credit Card: It’s hard to beat the convenience of a credit card, but the interest rates, late fees, and over-the-limit charges can make this option too volatile.

We still have these two options, and sometimes they can get the job done. But we also have scores of online lenders that compete to give you installment loans with more competitive interest rates. You can also finalize loans and receive money more quickly online.

Here are some of the best personal loan choices:

  • Credible
  • LendingClub
  • Payoff
  • PersonalLoans.com
  • Prosper
  • SoFi
  • LendingTree

Credible Personal Loans

I’m starting here because Credible isn’t a lender. It’s a way to connect with and compare a variety of lenders, including several from lower on this list. To start the process, you’ll submit Credible’s initial application which generates up to six loan offers.

This initial process will run a soft check of your credit score which shouldn’t hurt your score the way a hard check can. If you like one of the offers, you can complete the next steps to apply for the loan which will, of course, result in a hard credit check.

Pros & Cons of Credible Personal Loans

Pros:

  • An efficient way to compare loan offers
  • Fast and easy application process
  • Many quality participating lenders

Cons:

  • Not for people with credit scores below 640
  • Could result in unwanted phone calls from lenders

LendingClub Personal Loans

I was an early fan of LendingClub back in 2007, and I still recommend this trailblazer in the peer-to-peer (P2P) lending market.

Rather than using bank funds, P2P lenders finance your loan with money from investors. You’ll still have to go through an application process, but LendingClub has opened new doors to people who don’t want to borrow from a bank.

  • Loan Amount: LendingClub’s maximum loan amount is $40,000. You can repay the money in terms ranging from three to five years. 
  • Costs: Interest rates typically range from 7 to 36 percent depending on your qualifications. The higher your qualifications, the lower your rate.

LendingClub continues to evolve. It now has debt consolidation loans and allows for co-signers which lets more people borrow.

Pros & Cons of LendingClub Personal Loans

Pros:

  • Credit scores of 600 can get approval
  • New co-sign option lets more people borrow
  • Debt consolidation loans available
  • No prepayment fee

Cons:

  • Loan origination fees (1% of loan)
  • Check processing fee ($7)

Payoff Personal Loans

As the name indicates, Payoff Personal Loans specializes in debt consolidation, helping you pay off other debts. You can potentially save money by having fewer loans and paying a lower interest rate.

The payoff isn’t a good option for people with shaky credit, though. 

You’d need a score of 650 to 660 — and a few years of credit history on your report — to get approval at a decent interest rate. So don’t wait until you’ve already fallen behind on your other debts to consolidate with Payoff.

  • Loan Amounts: Eligible borrowers can get up to $35,000 to pay off other lenders such as credit cards, auto loans, or other personal loans.
  • Interest Rates: Loans range from about 6 to 25 percent depending on your borrowing credentials.

Pros & Cons of Payoff Personal Loans

Pros:

  • No late or check processing fees
  • No prepayment penalty
  • See interest rate without a hard credit check

Cons:

  • Not for people with shaky credit
  • A loan origination fee of 2% to 5%

PersonalLoans.com

Applicants with rocky credit histories appreciate PersonalLoans.com because the site lends to people with credit scores as low as 580.

  • Loan Amount: You could borrow up to $35,000 on a six-year (72-month) payback plan through PersonalLoans.com. Spreading money across six years can lead to lower monthly payments.
  • Interest Rates: This sounds like a friendly situation, but remember you’ll pay higher interest — up to 36 percent — if you have a lower credit score, and the interest can increase your monthly loan payment significantly.

Pros & Cons of PersonalLoans.com

Pros:

  • Available to credit scores 580+
  • Easy-to-use online application
  • Up to 72-month term loans
  • Access money within a day

Cons:

  • Wide range of interest rates (5.9%-35.99%)
  • Uses a third-party lender

Prosper Personal Loans

Many borrowers like the way Prosper Personal Loans gives them a platform to share why they need to borrow money. This opportunity comes during the application process to this P2P lender. You can use this platform to appeal directly to the investors who would be funding your loan.

Of course, the numbers will tell their story, too: You’d need at least a 640 credit score to get funding, and Prosper’s rates range from 6.9 to 35.99 percent APR.

  • Loan Amount: If you qualify, you could borrow up to $40,000 with payments spread over three to five years.
  • Interest Rates: Prosper also offers a wide range of rates, from 6.9 to 35.99 percent.

Pros & Cons of Prosper Personal Loans

Pros:

  • Soft credit check to see terms
  • No prepayment penalties
  • Fast and efficient service

Cons:

  • Higher interest for lower credit scores
  • Origination fee can reach 5%
  • Late fee is steep ($15 or 5% of payment, whichever is higher)

SoFi Personal Loans

SoFi has become a standard in student loan consolidation, but the lender also has personal, unsecured loans for non-academic borrowing.

SoFi stands out because the lender does not focus exclusively on an applicant’s credit score. This can be misleading because you’d still need a 680 or higher to get a loan.

But SoFi will not deny a loan if you have a short credit history as many lenders do. Instead, this P2P lender will consider your career and earning potential. In this way, SoFi can be a good fit for young professionals starting new careers.

SoFi calls its borrowers “members” and hosts social gatherings in major cities for members which can lead to networking opportunities.

  • Loan Amounts: SoFi will lend up to $100,000 which is significantly higher than most online lenders.
  • Interest Rates: SoFi’s rates range from 5.75 to about 17 percent.

Pros & Cons of SoFi Personal Loans

Pros:

  • Larger loan amounts (up to $100,000)
  • Good for someone with a short or thin credit history
  • Flexibility to change due dates
  • No loan origination fee

Cons:

  • Funding can take up to 7 business days
  • 680 or higher credit score required

LendingTree Personal Loans

I started this list with Credible, an aggregator, and I’ll conclude it with a nod to another aggregator.  LendingTree helped establish one-stop shopping for loans back in 1998, and the service has continued to lead the industry.

Like Credible, LendingTree turns one application into loan offers from a variety of lenders. You’ll still need to assess each offer on its own merits, but LendingTree can save you a lot of legwork.

Pros & Cons of LendingTree Personal Loans

Pros:

  • Efficient way to shop
  • Trusted leader in the field

Cons:

  • Can send too many loan solicitations 

Other Personal Loan Options to Consider

My list of best personal loan providers above includes most well-known lenders. You’ve probably heard of most of them already.

Below I’m including a list of lesser-known options that have gotten my attention for various reasons. Most of these are loan matching services with P2P funding sources.

AmOne

AmOne has been around 20 years and has about a million customers. I like the company’s versatility. It can handle all sorts of borrowing needs, including personal loans.

  • Amounts: Loans range from $1,000 to $100,000.
  • Interest rates: You’ll find a wide range, but highly qualified borrowers should get competitive rates. 

Fiona

Fiona provides another loan-matching service similar to Credible or LendingTree. The service hasn’t been around long, but it’s growing quickly by partnering with a lot of the lenders on this list.

Fiona works quickly — many applicants have funds within a business day.

Monevo

Yet another loan shopping service, Monevo stands out because of its speed and its high loan amounts. You could borrow $100,000 through the site.

I like the site’s simplicity and its large volume of partnering lenders which means a wider variety of borrowers can benefit.

Federal Trust

Federal Trust partners with Fiona, which I listed above, to match loan shoppers with potential lenders. 

You could borrow up to $100,000, and with such a wide variety of lenders in their network, Federal Trust can find competitive rates for eligible borrowers.

I also like Federal Trust’s option of a seven-year installment loan for someone who needs to keep loan payments as low as possible.

Will A Personal Loan Work For You?

Yes, personal loans can help get you out of a tough financial spot. But they’ll also cost you money for months or years, depending on how long you need to pay back the loan. 

It goes without saying: You should always look for the lowest, fixed interest rates when borrowing. 

Here are some other ways to save money when you borrow:

  • Look for Shorter-Term Loans: Monthly payments will be higher with shorter-term loans, but you’ll pay less money over the life of the loan. If you can afford the higher payments, go with a shorter-term loan.
  • Avoid Fees: Even if you’re getting a lower interest rate, be sure the lender isn’t compensating by charging high origination fees or punitive late fees that could eclipse your savings on interest. 
  • Pay it Off Early: Look for a loan with no prepayment penalty, but even if you would incur a prepayment fee, consider whether this fee would exceed the interest you’d be paying over the life of your loan. 
  • Avoid Borrowing: Maybe this isn’t the time or place, but as a financial advisor I have to say it: If you can save up an emergency fund, you may be able to avoid borrowing in the first place. I recommend having at least three months of income in reserve. Then you can borrow from yourself in an emergency. Maybe it’s too late to save for the current emergency, but this is something to think about when life gets back under control.

Wherever you borrow — online or at a neighborhood bank — try to look out for your future as well as your present financial situation.

The post Best Personal Loans for 2020 appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

How to Compare Mortgage Refinance Offers

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If you own a home, you probably see a lot of advertisements or get mail about refinancing your mortgage. Refinancing your home loan can help you save money, lower your interest rate, or convert an adjustable-rate mortgage to a fixed-rate mortgage.

To get the best deal on your refinance, you need to compare offers from multiple lenders. Read on to learn how to evaluate these offers and select the option that best fits your needs.

How to Compare Mortgage Refinance Offers

When you apply for any type of loan, whether it’s a mortgage, car loan, or personal loan, you should take the time to comparison-shop. If you look at multiple loan offers, you’ll usually find a better deal.

1. Check Your Credit Score

The first thing to do when you’re thinking about refinancing your loan is check your credit score. Credit scores are one of the first things that a lender will look at when a borrower submits a loan application.

The better your credit score, the better your odds of getting approved for a loan. A good credit score also gives you more loan options to choose from and may help you secure a lower interest rate on the loan you eventually chose. And that’s likely to save you some money in the long run.

If you have a poor credit score, the loans you qualify for might involve higher upfront fees and a higher interest rate than your existing loan. That could defeat the purpose of refinancing. 

It’s easy to check your credit report for free. If you find errors on your report, work with the reporting credit bureau to remove them. And if you find your credit isn’t as strong as you thought, table the idea of refinancing for the time being and work on boosting your FICO score.

2. Consider Your Goals for Refinancing

Before you apply for a new mortgage loan, think about your goals for refinancing. Your reason for refinancing will make a huge difference in the loan you choose. 

For example, if you want to lower your monthly payment, you wouldn’t want to refinance to a loan with a shorter term. If you want a lower mortgage interest rate, you wouldn’t choose a loan with a higher rate.

Let’s take a look at some of the most common reasons you might want to refinance your mortgage.

Lower Monthly Payments

Refinancing your mortgage can help you reduce your monthly payment, giving you more flexibility in your budget. Extending the term of the loan or reducing its interest rate are two ways to do this.

Lower Interest Rate

If rates have decreased or your credit has improved since you got your current loan, refinancing your mortgage can help you reduce your interest rate, which will save you money in the long run.

Remove PMI

If your down payment for your current mortgage was less than 20%, you likely have to pay for private mortgage insurance (PMI). If your current loan-to-value ratio has risen above 20% due to your loan payments or increasing home values, refinancing can help you get out of paying PMI.

Cash Out Home Equity

If you’ve built a lot of equity in your home and want to use it for something else, like home improvement or investing, use a cash-out refinance to turn your home equity into money you can spend.

Adjust the Loan Term

Refinancing your mortgage lets you reset its term. You can extend the loan’s term or shorten it based on your financial goals.

Add or Remove a Co-Borrower

If you want to add a co-borrower or remove someone from a loan, the easiest way to do so is likely to refinance your loan. For example, you might refinance to remove an ex-spouse from your loan.

Convert an Adjustable Rate to a Fixed Rate or Vice Versa

Refinancing is an opportunity to switch from an adjustable rate to a fixed rate or vice versa, reversing the choice you made when you got your original mortgage. 

Switching from an adjustable-rate mortgage to a fixed-rate mortgage prevents a potential interest rate spike after the adjustable-rate loan’s rate lock period ends. Meanwhile, converting to an adjustable-rate mortgage could temporarily lower your rate — as long as you plan to sell during the rate lock period.

3. Compare Mortgage Lenders

Once you’ve made sure your credit is in good shape, take a look at a few different lenders. You can consider lenders in your local area like banks and credit unions as well as online lenders.

To find the best mortgage for your needs, look for a lender that is advertising the type of loan you want. 

Do you need an FHA loan? Make sure the lender offers that type of mortgage. If you have an expensive home, you’ll want to make sure the lender offers jumbo loans.

You can also do some preliminary comparison of the loan terms, such as the annual percentage rate the lenders are advertising for their loans.

4. Request Quotes From Multiple Lenders

Once you’ve settled on a few lenders that you’re interested in working with, ask each of those lenders for a quote.

As part of providing the quote, the lender will probably ask you for some basic information, such as the loan amount that you’ll need, your annual income, the amount of home equity you’ve built, and so on.

Based on the information you provide, each lender will give you a sample mortgage loan offer. This will include things like the interest rate, fees, and monthly payment for the new mortgage they are offering.

One of the best ways to do this is to use an online loan broker or quote website like LendingTree. These sites take your information and search for lenders that work with people like you. You can get a quick look at offers from multiple lenders this way.

If you only get a couple of quotes from these sites, you can then move on to approaching lenders on your own.

Keep in mind that these sites make money by referring you to lenders, so they’ll give your contact info to lenders. You’re likely to start getting calls and emails after requesting quotes, so be prepared for that.

5. Compare Loan Estimate Terms

After you get loan estimates from each lender, sit down and compare them to find the best deal and to make sure that the terms of the new loans beat the terms of your current mortgage.

The important things to look at include:

Interest Rate.

The interest rate of the loan determines how quickly interest accrues. The lower the rate, the lower your monthly payment and the overall cost of the loan because less total interest will accrue over the life of the loan.

Mortgage Points

Mortgage points are paid upfront when you close on the loan. Points are a type of prepaid interest and each point you pay usually reduces the rate of your mortgage by 0.25%. Paying points can save you money in the long run if you plan to stay in your home for a long time.

Fees

You’ll have to pay various fees as part of getting a new mortgage, including underwriting fees, home appraisal fees, application fees, and origination fees. The higher the fees charged, the more expensive it will be to refinance your loan.

Loan Term

The term of a mortgage is the amount of time it will take to repay the loan if you follow the minimum payment schedule. The most common terms are 15 years and 30 years. A 30-year mortgage will have a lower monthly mortgage payment while a 15-year loan will cost less overall. Which you choose depends on your refinancing goals.

Interest Rate Type

When you get a mortgage, you can choose from an adjustable-rate loan or a fixed-rate loan. Fixed-rate mortgages have steady interest rates which offer predictability over the life of the loan. Adjustable-rate mortgages usually have lower initial interest rates, but rates could rise in the future, increasing the cost of the loan and its monthly payment.

Closing Costs 

Closing costs are all of the costs you have to pay to get your new mortgage, including things like mortgage points and fees. You want to make sure that you can afford any closing costs your refinance lenders will charge.


Mortgage Refinancing FAQs

Mortgages and refinancing can be complicated. Make sure you understand the process and why you might want to refinance before starting the process.

Should I Refinance My Mortgage?

Whether you should refinance your mortgage depends on your personal financial situation and your goals for refinancing.

You shouldn’t refinance just for the sake of refinancing. In most cases, refinancing only makes sense if it saves you money over the life of the loan, lowers your monthly payment, or helps you get out of debt faster. You’ll have to run the numbers to see if any of these situations apply to you.

How Much Money Can I Save by Refinancing?

Depending on the interest rate of your old loan and whether you’re paying PMI, refinancing could save you a lot of money.

Imagine you have a mortgage with a $250,000 balance and fifteen years remaining in its term. The interest rate of that loan is 4%. Your monthly payment before taxes will be $1,849 and you can expect to pay $332,820 over the remaining life of the loan.

Refinancing to a 15-year loan at 3% interest will drop your monthly payment by more than $100 to $1,726. Over the life of your new loan, you’ll spend $310,680, saving you $22,140 overall. If the closing costs and other fees are less than that amount, refinancing means saving money and adding flexibility to your monthly budget.

Does Refinancing Remove Private Mortgage Insurance (PMI)?

If you’re able to eliminate PMI from your loan payment, you can save even more. According to a study from the Urban Institute, the average loan that includes PMI had a principal balance of $289,700 in 2020. The Urban Institute reports that PMI averages between 0.22% and 2.25% of your loan’s value. Even if you’re on the lower end of that range and paying 1%, refinancing to eliminate PMI can save you almost $2,900 per year on an average loan.

For conventional loans, you can remove PMI by refinancing to a loan with a loan-to-value ratio of 80% or less, meaning you have at least 20% equity in your home. That equity can come from paying down your original loan’s balance or due to appreciation in your home’s value.

Unfortunately, mortgage insurance is difficult to avoid on some types of mortgages, includinge Federal Housing Administration loans. Depending on when the loan originated, mortgage insurance can be permanent or fixed for 11 years regardless of the equity you build. 

The only way to get out of these payments when you refinance is to refinance to a conventional loan. If you refinance to another FHA loan, you still have to pay for mortgage insurance.

Can I Refinance if I’m Underwater on My Mortgage?

If you wind up underwater on your mortgage, meaning you owe more than your home is worth, it can make refinancing more difficult. Many lenders require that you have some equity in your home before refinancing.

However, there are some lenders that will let you refinance, especially if you can put some extra cash toward the loan balance to get out of being underwater. 

In the past, the federal government has offered special refinance programs for borrowers with government-secured loans, such as the Enhanced Relief Refinance Mortgage program and HARP. Programs like these could appear once more in the future, though that’s not guaranteed.

Can I Refinance if I Have a Second Mortgage?

Some people wind up having multiple mortgages at one time. This can happen if you get a home equity loan or home equity line of credit on top of your current mortgage.

Refinancing with a second mortgage is possible, but can be more difficult than refinancing when you only have one loan.

One common solution is to refinance both loans into a single loan when you refinance. This has the added benefit of leaving you with just one monthly payment to make. It’s also relatively simple to refinance just your second mortgage.

Refinancing your primary loan is more complex. You need to work with both the new lender and the lender who provided your second mortgage and have the second mortgage lender agree to remain subordinate to the new loan. That means that the lender for your refinance loan has first priority to recover its losses in the event that you stop making payments.

If your second mortgage lender won’t agree to this, you won’t be able to refinance just your primary loan alone.

Can I Refinance More Than Once?

Yes, it’s possible to refinance your mortgage more than once. You can refinance as often makes sense for you financially so long as you can find willing lenders.

In reality, you don’t want to refinance your mortgage often. Refinancing incurs major costs, and the process can reduce your credit score in the short term, potentially impacting your ability to qualify for other loans or credit lines.

What Information Do I Need to Provide to a Mortgage Broker?

One option if you’re looking to refinance is to work with a mortgage broker. Mortgage brokers are middlemen who look at your financial situation and try to match you with lenders that will best help you meet your financial goals. This saves you the effort of having to research dozens of lenders to find the best deals.

Your mortgage broker will need much of the same information you’d need to provide to a lender, including:

  • Proof of Income. Bring your two most recent pay stubs and information about any other income you have so the broker can confirm your annual income, which can affect your ability to qualify for loans. 
  • A List of Bank and Loan Accounts. This shows your broker and would-be lenders how much cash you have on hand and your current liabilities. Lenders want to know that you have enough in the bank to deal with upfront refinancing costs. They also need to know your debt-to-income ratio, a key measure of your ability to afford your loan.
  • Details About Your Home and Current Mortgage. Bring your most recent mortgage statement so the broker can see your remaining balance, interest rate, monthly payment, and other details. 
  • Your Goals for Refinancing. Make sure to explain why you’re refinancing, such as to lower your monthly payment or to convert an adjustable-rate loan to a fixed-rate loan. This helps guide the broker as they look for the best loan for you.

Final Word

There are many reasons to refinance your mortgage, but most involve saving money — either by lowering your monthly payment or reducing the total cost of the loan. Understanding why you’re refinancing and knowing how to effectively compare loan offers from mortgage refinance lenders increases the odds that you’ll choose the loan that’s the best choice for your personal financial situation.

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TJ is a Boston-based writer who focuses on credit cards, credit, and bank accounts. When he’s not writing about all things personal finance, he enjoys cooking, esports, soccer, hockey, and games of the video and board varieties.

Source: moneycrashers.com

11 Super-Simple Ways to Build Wealth in 2022

A wealthy couple
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To paraphrase William Shakespeare, some people are born wealthy and others achieve wealth. If you weren’t lucky enough to be in the first group, then it’s time to get going on your self-made fortune.

Think that can’t happen? You’re wrong. Pathways to wealth are everywhere. Why shouldn’t you take them?

Some of these smart choices will save you money upfront. Next, use that money to make more money through strategies like fractional investing and online wealth management.

Want to put yourself on the road to riches? These tactics can help.

1. Used Chevy or new Mercedes?

Save $100 a month, earn 1% on it and after 20 years you’ll have $26,545. Enough for a used Chevy.

Boost that percentage to 15%, and you’ll end up with $124,569 after 20 years. That’s nearly $100,000 more: enough for a new Mercedes.

Of course, earning 15% isn’t easy (the stock market’s average return is about 10%) and never guaranteed, but here’s something that is guaranteed: You won’t be earning big returns at the bank.

If you want to super-charge your savings, you’ve got to invest.

Plenty of people grow up thinking that “investing” is something only rich people do. Not so! You can start your investing journey with as little as $1, without paying a dime in fees, thanks to an investing app called Public.

With the Public app, you take part in “fractional investing,” which means buying little slivers of companies, funds or crypto assets. Take your choice from among thousands of exchange-traded funds (ETFs) and stocks.

Start by signing up and telling the app what investing experience (if any) you have and what your investing goals are. According to Public, 90% of users are in it for the long haul.

There’s no charge to join, although you’re allowed to leave tips on transactions. And again: You can start with as little as $1. What else can you get for a buck these days? Even dollar stores are raising their prices!

Download the app now, and take the first step toward getting rich instead of just getting by.

2. Chop your car insurance bill by $700 a year

Auto insurance is a must. You know what isn’t a must? Paying too much for coverage.

People who switch to Progressive for their auto insurance can save up to $700 – not just initially, but every year. Imagine what you could do with an extra $700 in your budget.

Emergency fund? Extra payment against your mortgage? Retirement planning? It’s your call. Point is, those are dollars that are now working for you instead of for someone else.

Incidentally, a cheaper premium doesn’t mean you’re cheaping out on protection. Progressive is known for its strong coverage. Request your free quote now and see how much you can save this year, and every year.

3. Let mortgage savings put your kids through college

If you’re currently paying about 4% on your mortgage, refinancing could lower your rate to as low as 2.376%.

Not much of a difference, right?

Well, if your mortgage is $300,000, that lower rate would mean paying about $94,000 less in interest over the life of the loan. That’s enough to put your kids through college, start your own business or retire earlier.

Maybe you know the savings would be significant, but haven’t refinanced yet because it seems so complicated. It isn’t. A direct lender called Better will make it child’s play.

The simplifying starts with a near-instant rate quote, and continues through the refinancing process. Better doesn’t charge origination fees or lender fees, and you can get a mortgage interest rate lock if you like.

Millions of homeowners around the country are saving every month because they refinanced. But the experts are saying these low rates won’t last. It’s do-it-or-lose-it time.

Get your new, personalized rate today, and make strides toward a better tomorrow.

4. Stop worrying about expensive household breakdowns

For most of us, our home is our most valuable asset. We put a lot of money down to buy it and pay a lot of money each month to keep it. Sometimes we’re stretched pretty thin financially, so when things break down it can be tough to cover the fixes.

The heating/cooling system grinds to a halt. A major appliance gives up the ghost. And why are the lights flickering — could it be the electrical panel?

What you need is a full-time maintenance person.

The next best thing? A home warranty from America’s 1st Choice Home Club. You can choose from among several coverage plans that cover issues with appliances, plumbing, heating, electrical systems and more. You can use your own technician or let America’s 1st Choice send someone over.

A breakdown happens in the middle of the night? Doesn’t matter. The in-house service team is available 24/7.

All this starting for as little as $390 a year.

Homeownership is great. But when things go wrong — and they will! — we can no longer call the landlord. We are the landlord, and we might go into debt just to keep things running smoothly.

Stop worrying about household breakdowns, and the high costs that come with them. Get a free quote in 30 seconds.

5. Get paid to watch videos and take surveys

Think of all the time you spend waiting somewhere. Waiting for the spin cycle in the laundromat. Waiting at the auto shop until the mechanic can give you an estimate. Waiting for your kid’s sports practice to be over. Waiting in an exam room for the doctor, who’s running 20 minutes late.

You could spend that time watching funny cat videos — or you could use that time to make some money. Our friends at InboxDollars can help you with the latter.

InboxDollars is a rewards site that pays you actual cash to watch videos and take surveys. Seriously: Why not use your downtime to make money?

Those aren’t the only ways to earn money with InboxDollars, however. You can also do some online shopping, click on daily emails, scan your grocery receipts into the “Magic Receipts” function, complete special offers (especially those for things you’d planned to buy anyway), play games and even help others by making donations to various causes.

From now on, get paid for waiting. It takes seconds to sign up, and you’ll get a $5 welcome bonus just for joining.

6. Find cheaper homeowners insurance in 60 seconds

Again, our homes are usually our most valuable asset. It’s essential to make sure they’re protected in the event of an emergency. But how do you know whether you’re overpaying for homeowners insurance?

Simple: You ask Lemonade for an estimate. It takes only a few seconds to find out whether you could be keeping more of your hard-earned money each month. Lemonade’s coverage starts from just $25 a month.

Homeowners insurance isn’t just about fixing things up after a fire, though. The dog bit the mailman? Lemonade can help with legal and medical payments.

A thief steals your stuff? Lemonade has your back, even if the theft happened away from home.

Your home rendered unlivable due to that fire? A homeowners insurance policy through Lemonade will cover expenses until you can get back into your home sweet home.

Why overpay with your current carrier? Find cheaper home insurance in seconds.

7. Add $1.7 million extra to your retirement

A recent Vanguard study indicated that a self-managed $500,000 investment would grow into $1.69 million in 25 years, on average. Sounds pretty good, huh?

However, with professional help, that same $500,000 would have turned into $3.4 million. In other words, a quality financial adviser could double your retirement nest egg!

At least talk to a pro, especially when finding one is free and easy. SmartAsset is a free service that will match you with a qualified money manager who can help you put your money where it will do you the most good.

Bank interest rates don’t beat inflation, so the value of your savings erodes over time. Stocks and other investments have historically beaten inflation, but a lack of knowledge and experience leaves you vulnerable to dodgy advice or financial scams.

SmartAsset will put you in touch with up to three local, experienced professionals, all of whom are fiduciaries, meaning they’re required to put your best interests over their own. They can give you a clear picture of where you are now, and help you develop the right plan for the long term.

Since the first appointment is often free, what have you got to lose? If you’re ready to at least consider a local adviser, check it out.

8. Protect your wealth with a gold IRA

Not everyone is comfortable with traditional retirement investments. Some people are opting for a “gold IRA,” which is just what it sounds like: gold, gold and more gold. This can be bullion (coins or bars) only, or also include gold stocks, ETFs and mutual funds. Gold is one of the few commodities that the Internal Revenue Service approves as an IRA investment. It’s a finite resource, rather than one that can be controlled by governments or banks.

Sound intriguing? Time to educate yourself, with help from American Hartford Gold.

This family-owned company can help you set up a gold IRA that meets all IRS standards. Chief among them: The gold must be kept at an approved depository. (No, you can’t bury it in your backyard.)

There may be less than 20 years’ worth of mineable gold remaining in the ground. As the saying goes about real estate, they ain’t making any more of it. Demand for gold is rising all over the world, especially in the electronics industry, so your IRA has a great chance to increase its value until you’re ready to retire.

American Hartford Gold has an A+ rating with the Better Business Bureau, and a 5-star rating with TrustPilot. Get your free investors kit now.

9. Diversify your portfolio with art collected by billionaires

Billionaires didn’t become billionaires by making bad investment choices. And billionaires have been collecting art for generations; for example, the Rockefellers amassed a collection that sold for an eye-popping $835 million in 2017.

But it isn’t just the ultra-rich who can invest in art by Banksy, Warhol and Picasso. With a new investing app called Masterworks, you can invest in iconic artworks as well – right alongside deep-pocketed folks like Bill Gates, Oprah Winfrey and Jeff Bezos.

Blue-chip art outpaced the S&P 500 from 1995-2021, which is impressive considering that historic bull run we’re now witnessing. The Wall Street Journal recently reported that art is “among the hottest markets on Earth.”

Art also has one of the lowest correlations to stocks that you can find. In other words, art’s value doesn’t have anything to do with the stock market’s wild swings, which makes it a good hedge.

Masterworks is an invitation-only art investment platform. So if you want to invest like a billionaire, request your invitation to join here.

10. Borrow $50,000 to erase your debt

Ever feel like you’ll never get out from under your credit card debt? Consumer debt is way too easy to get into, yet sometimes feels impossible to escape. You pay as much as you can each month, but the high interest rate just keeps piling on the dollars.

AmOne is a free service that matches people like you with loan providers. When you fill out one simple form online, AmOne finds lenders who want to fund your loan of up to $50,000.

Once you’ve been approved and agree on the terms, it can take as little as 24 hours to get the cash. Use the money to erase all your debt at once, then pay back the personal loan at a lower interest rate than those credit cards were charging you.

The service does only a “soft” credit pull, rather than have you going directly to lenders and getting “hard” credit pulls that affect your credit score. And speaking of your credit score: You don’t need an “excellent” rating to be considered, since AmOne’s lending partners are willing to work with people of varying credit ratings.

AmOne has a 4.7-star rating (out of 5) on TrustPilot. It’s free to check your rate online, and it literally takes just one minute.

11. Pay no interest until 2023 with a better card

Another way to deal with high credit card balances? Get another credit card. Specifically, get a 0% APR card, transfer those balances and get charged no interest while you’re paying down the debt.

There’s another good reason to get a 0% APR card: to get free financing on a big-ticket item.

Suppose your HVAC system goes out or your car needs a few thousand bucks’ worth of repairs. Rather than deplete your emergency fund, pay with that new 0% APR card to give yourself some breathing room while you pay it off.

How much breathing room? Anywhere from 15 to 21 months, depending on the card you choose.

You’ll need a plan to go along with that new card: no more using the other cards with unnecessary splurges while you pay off the 0% APR card. It doesn’t make sense to run up more debt while you’re paying off old debt.

But with a 0% card, you’ll pay no interest. Think of all the interest you’d been paying, and what those dollars could have done for your long-term financial security. With a 0% APR card, you won’t have to waste any more of your hard-earned dollars on interest.

Compare these top cards and discover the best one for you.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

Best Online Installment Loans for Bad Credit

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Dig Deeper

Additional Resources

Everyone aspires to good credit. But not everyone is so fortunate, at least not right at the moment.

Bad credit can strike for any number of reasons: overwhelming debt loads, missed payments, foreclosure, bankruptcy. Often, it has more than one cause, making the process of rebuilding credit all the more challenging.

Meanwhile, life rarely waits for your credit to improve. Fortunately, if you need to borrow money now — perhaps to consolidate high-interest debt or deal with unexpected expenses — you have options. Many online lenders offer installment loans to borrowers with limited or poor credit.

Best Online Installment Loans for Bad Credit

These are the best online installment loan providers for borrowers with impaired credit. Some appear on our list of the best personal loan companies overall, while others cater mostly or exclusively to subprime borrowers. 

Each of these providers does at least one thing really well, whether it’s serving borrowers seeking larger loans or providing fast funding. Our top pick excels in several areas and offers the best overall value for the typical borrower.

Best Overall: Earnest

Earnest is our best personal loan provider primarily because it’s a loan broker. That means it works directly with other personal loan companies to match you with online installment loan options.

In other words, Earnest makes it more likely that you’ll find favorable rates and terms on an online installment loan — even if your credit is impaired. 

Earnest’s benefits include:

  • Borrow up to $100,000, although most borrowers with bad credit won’t qualify for such high loan amounts
  • Wide range of lenders offering competitive interest rates
  • Opportunity for loans with no origination fees, although some borrowers won’t qualify
  • Option for noncredit underwriting factors, such as savings rate and educational attainment

Best for Borrowers With Limited or No Credit: Stilt

Stilt is designed for a specific group of borrowers within the larger “subprime” category: people with limited or no U.S. credit history. This includes unbanked U.S. citizens and permanent residents as well as recent immigrants with U.S. bank accounts, including people here on work visas. 

Stilt’s underwriting process puts noncredit factors front and center. If you don’t have a credit score, you can still qualify for a loan based on your financial behaviors, such as your savings rate and earning potential.

Additional features:

  • Loan amounts up to $35,000
  • Loan terms as short as 12 months and as long as 36 months
  • Competitive rates for borrowers with limited credit
  • Low fees

Best for Debt Consolidation: Upgrade

Upgrade is a flexible personal credit solution that offers both personal loans and an unsecured personal line of credit. 

Although its credit lines also work for credit card debt reduction, Upgrade’s debt consolidation loan is specifically designed for that purpose. It offers:

  • Loan amounts up to $50,000, although borrowers with bad credit may qualify for less
  • Competitive interest rates
  • Option to receive loan proceeds in an account you control or have Upgrade pay off your creditors directly

Best for Larger Loan Amounts: Upstart

Upstart is a loan broker with a relaxed underwriting process that’s appropriate for some applicants with impaired credit — defined as minimum credit scores below 600 on the FICO scale. Upstart considers noncredit factors like educational attainment and work history. Although Upstart’s interest rates are broadly competitive, origination fees can range as high as 8%.

Additional features:

  • Borrow up to $50,000, although borrowers with low credit scores may receive lower offers
  • Repayment terms as long as 60 months
  • No prepayment penalties
  • Funding as soon as the next business day in some cases

Best for Secured Loans: OneMain Financial

OneMain Financial is one of the few online lenders for bad credit that offers secured loans — loans guaranteed by borrower assets, known as collateral. The most common type of collateral for OneMain Financial loans is the title to a vehicle, such as a car or motorcycle.

Additional features:

  • Borrow up to $20,000
  • Loan terms as long as 60 months
  • Branch-based loan specialists offer a better customer service experience than some competitors

Best for Rapid Funding: Avant

Avant funds personal loans in as little as 24 hours and has a minimum credit score below 600. These two selling points make it the best choice for borrowers with bad credit scores who need money fast.

Additional features:

  • Borrow up to $35,000 if your application qualifies
  • A credit builder credit card offers spending limits up to $1,000 (separate application required)
  • Relaxed underwriting standards that consider a range of noncredit factors — applicants with fair or impaired credit can still get approved
  • Avant forgives its late payment fee under some circumstances

Methodology: How We Select the Best Installment Loans for Bad Credit

We use these key factors to select the best lenders for people with bad credit. Each relates to the borrower experience in some way.

Loan Size

Some bad-credit loan providers specialize in smaller loans. Others have a wider range of permissible loan amounts.

While it’s rare for people with poor credit to qualify for large loans (say, above $50,000), we favor lenders that issue small and medium-sized loans to subprime borrowers.

Interest Rates

The personal loan business is competitive, so the interest rates you see in your loan offers won’t vary too much from lender to lender. 

That said, some lenders are known for shaving a percentage point or two off the going rate. Those that do this without tacking on extra fees come out ahead in our estimation. 

Just remember that lenders often deduct fees from the initial loan amount before distributing the proceeds. This raises the effective loan cost, which is why the true annual percentage rate (APR) is often higher than the advertised interest rate.

Loan Fees

Bad-credit loan fees tend to be higher than fees on loans for people with excellent credit. But fees vary quite a bit from lender to lender, so it really pays to shop around. 

The origination fee is the biggest fee you’re likely to pay on a personal loan. Look for lenders that offer low origination fees or waive them altogether. You’ll see this and other loan fees clearly listed in the loan disclosures you receive when you apply.

Loan Purpose

Most lenders allow you to use your unsecured loan proceeds for just about anything. You can use your loan to:

Some lenders are less generous. They restrict borrowers’ use of personal loan proceeds. Most often, this means they require borrowers to put loan proceeds toward high-interest credit card debt. They might even pay off those debts directly so that borrowers don’t have the option to use the funds as they see fit.

All else being equal, we prefer less restrictive lenders. That said, if your primary goal is to pay down high-interest credit card debt and a restrictive lender is the best fit for your needs, by all means proceed.

Application and Underwriting Process

Every lender takes a different approach to managing and underwriting borrower applications. Among the most important considerations for borrowers are:

  • Whether the lender performs a credit check during the process — most do, but a few substitute other criteria so as not to penalize borrowers with limited or nonexistent credit
  • The sales model — is the application process largely automated or does the borrower need to deal with a human loan officer, who might be pushy?
  • How the borrower submits documentation of income, assets, and other information requested by the lender

Funding Speed

Online personal loans generally fund within a few business days, but when days or even hours matter, it pays to go with a lender that gets the job done fast. The quickest lenders offer next-day or even same-day funding once the loan closes.


Online Installment Loans for Bad Credit – FAQs

You have questions about online installment loans for people with bad credit. We have your answers.

What Is an Installment Loan?

An installment loan has a fixed principal (loan amount), term (payoff period), and installment schedule (loan payment schedule, usually monthly). Most installment loans have fixed interest rates and fixed monthly payments as well. Loan proceeds arrive in a lump sum after the loan closes.

Common examples of installment loans include unsecured personal loans, auto loans, and mortgages (home loans). 

An installment loan is different from a credit line, the other main type of consumer credit product. 

Credit lines are more flexible than installment loans. Borrowers can draw as little or as much as they want up to the maximum allowable borrowing amount (credit limit), and although they must make monthly payments, the minimum payment amount is typically lower than an installment loan. But making only the minimum payment prolongs payoff and increases total interest expense.

Common examples of credit lines include credit cards and home equity lines of credit.

How Do You Get an Installment Loan?

Our guide to getting a personal loan explains the steps. There’s a bit more to it, but here’s the gist:

  • First, figure out how much you can afford to pay each month. Calculate your monthly payment using estimated loan amounts, interest rates, and loan terms.
  • Check your credit score to get a better sense of how lenders will view your application and your likely interest rate.
  • Get prequalified with one or more personal loan providers.
  • Compare loan offers, hopefully with multiple lenders.
  • Gather application documents and apply for the loan.
  • Close on the loan after you’ve successfully completed underwriting.

How Much Do Installment Loans for Bad Credit Cost?

If you have poor credit, you’re going to pay higher interest rates and probably higher fees than borrowers with good or excellent credit. That’s just a fact. 

Your actual interest rate depends on a number of factors:

  • Your income and assets
  • Your credit score — there are gradients even within the general “subprime” credit category
  • Your lender’s underwriting process, which might not be transparent
  • How much you’re borrowing

Are Bad-Credit Loans Payday Loans?

Bad-credit installment loans are not payday loans. Payday loans are also available to people with bad credit or no credit, but they have shorter terms and higher costs than online installment loans. Unlike installment loans, they typically roll over unless they’re paid off in full, compounding interest and fees.

Payday loan borrowers frequently find themselves trapped in cycles of high-interest debt. These cycles can be difficult to break without drastic measures like declaring bankruptcy. So it’s best to avoid them altogether. If you need to bridge a short gap until your next paycheck, look to lower-cost paycheck advance apps instead.

Are There Alternatives to Online Loans for Bad Credit?

If you need to borrow more than your preferred paycheck advance app allows, consider a secured credit card. 

Most secured credit cards require an upfront security deposit after approval, but once that’s done, you have the flexibility to borrow up to your credit limit and pay off the balance over time. Secured credit cards have high interest rates in comparison to unsecured credit cards but are broadly comparable to bad-credit installment loans.

Otherwise, you can use a credit card cash advance, borrow money informally (from family or friends), seek sources of emergency assistance that may or may not require repayment, or run a crowdfunding campaign.


How to Choose the Best Online Installment Loan for Bad Credit

We stand behind all of the lenders on this list. But we can’t personally select the very best lender for your specific needs.

Fortunately, that’s easier than you might think. If you’re looking to qualify for a personal loan without great credit, focus on the following:

  • Interest Rate. Your loan’s interest rate has a major impact on its total cost. When all else remains constant, a lower interest rate means a lower borrowing cost. Remember that fees deducted from loan proceeds, such as origination fees, increase the annual percentage rate (APR) above the advertised interest rate.
  • Monthly Payment. If you don’t think you can afford your loan’s monthly payment, reduce the principal or put off applying altogether. Just because your lender thinks you can handle it doesn’t mean it’s a good idea.
  • Loan Fees. Bad-credit loans often carry high fees. Make sure you understand the actual cost of your loan, not just the interest rate. And avoid loans with prepayment penalties.
  • Loan Term. Lengthening your loan term lowers your monthly payment but increases the total interest charged over the life of the loan.

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Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

Source: moneycrashers.com