Capital One Partners With Turo Car Rental To Offer Bonus Rewards (10x With Venture X; 5x With Venture)

The Offer

Capital One announced today a new partnership with Turo car rental service.

  • Venture X and Venture cardholders will earn bonus points when booking through the Turo app or on Turo.com. Valid May 17 2022 through May 16, 2023.

    • Venture X cardholders will earn 10X miles
    • Venture cardholders will earn 5X miles

Our Verdict

Nice additional perk for the Venture cards, especially Venture X. Capital One often releases these kinds of bonus points partnership offers. Hopefully this one ends up staying around for the long haul.

Source: doctorofcredit.com

Stock Market Today: Stocks Finish Lower as Traders Mull Recession Odds

The potential for the U.S. to slip into recession was the topic du jour Monday as stocks kicked off the week with a wobbly, uneven session.

Over the weekend, former Goldman Sachs chief Lloyd Blankfein told CBS’ Face the Nation that recession was “a very, very high risk factor.” That opinion was met by a number of other calls Monday morning.

Wells Fargo Investment Institute, for instance, says “our conviction is that the chances of an outright recession in 2022 remain low” but believes odds are growing that 2023 could see an economic contraction. UBS strategists say the chances are different depending on where you look – their global economists say “hard data” points to a sub-1% chance of recession over the next 12 months, but the yield curve implies 32% odds.

“There’s no crystal ball to predict what’s next, but historical trends can come into play here. With the [S&P 500] closing 15% below its weekly record, there’s only been two times in the past 60-plus years that the market didn’t fall into bear territory after a similar drop,” adds Chris Larkin, Managing Director of Trading at E*Trade. “This doesn’t mean it’s bound to happen, but there is room for potential downside.”

Larkin says to keep an eye on major retail earnings this week – which will kick off in earnest with Walmart’s Tuesday report – to get a pulse check on the American consumer.

Sign up for Kiplinger’s FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

Monday itself was a fairly quiet affair. Exxon Mobil (XOM, +2.4%) and Chevron (CVX, +3.1%) were among a number of plays from the energy sector (+2.7%) that popped after U.S. crude oil futures jumped another 3.4% to $114.20 per barrel.

Twitter (TWTR, -8.2%) shares dropped after Tesla (TSLA, -5.9%) CEO Elon Musk spent the weekend questioning how much of Twitter’s traffic comes from bots. Wedbush analyst Daniel Ives said the move feels more like a “‘dog ate the homework’ excuse to bail on the Twitter deal or talk down a lower price.” TWTR stock has now given up all its gains since Musk announced his stake in the social platform.

The major indexes finished an up-and-down session with mostly weak results. The Dow Jones Industrial Average managed to eke out a marginal gain to 32,223, but the S&P 500 declined 0.4% to 4,008, while the Nasdaq Composite retreated 1.2% to 11,662.

Also worth noting: Warren Buffett’s Berkshire Hathaway will file its quarterly Form 13F soon. Check back here tonight as we examine what Buffett has been buying and selling. 

stock chart for 051622stock chart for 051622

Other news in the stock market today:

  • The small-cap Russell 2000 closed out the session with a 0.5% dip to 1,783.
  • Gold futures gained 0.3% to settle at $1,814 an ounce.
  • Bitcoin was off 1.6% to $29,551.92 (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
  • JetBlue Airways (JBLU, -6.1%) ramped up its hostile takeover attempt of Spirit Airlines (SAVE, +13.5%) on Monday, urging SAVE shareholders to vote against a buyout offer from fellow low-cost air carrier Frontier Group Holdings (ULCC, +5.9%). JBLU last month offered to buy Spirit Airlines for $33 per share – a premium to the $21.50 per share ULCC offered in February – but SAVE’s board of directors rejected the bid citing concerns over regulatory approval. JBLU followed up in early May with an “enhanced superior proposal,” including paying a $200 million, or $1.80 per SAVE share, reverse break-up fee should regulators block the deal.
  • Warby Parker (WRBY) fell 5.3% after the eyeglass maker reported a loss of 30 cents per share in its first quarter. This was much wider than the per-share loss of 3 cents the company reported in the year-ago period and missed the consensus estimate for breakeven on a per-share basis. Revenue of $153.2 million also fell short of analysts’ expectations. WRBY did maintain its full-year revenue guidance of $650 million to $660 million. “We remain cautiously optimistic on shares as WRBY continues to show ability to grow the top line, open new stores, and is recession resistant as a lower cost option for non-discretionary spend,” says CFRA Research analyst Zachary Warring (Buy). “We see the company leveraging SG&A to become profitable in the second half of 2022.”

Check Out Europe’s Dividend Royalty

If you’re seeking out more stable opportunities amid an uncertain U.S. market … well, the rest of the world is admittedly looking pretty shaky, too. But that doesn’t mean there aren’t a few morsels worth a nibble. 

BCA Research notes that while there’s negative news around the globe, “European benchmarks already discount a significant portion of the negative news.” And looking ahead, inflation there is expected to peak over the summer “as the commodity impulse is decelerating” – that should help stagflation fears recede and help European shares.

Graham Secker, Morgan Stanley’s chief European and U.K. equity strategist, chimes in that his firm remains “overweight [European] stocks offering a high and secure dividend yield.”

We’ve previously highlighted our favorite European dividend stocks, which on the whole tend to produce higher yields than their U.S. counterparts.

But we’d also like to shine the spotlight on Europe’s twist on an American income club: the Dividend Aristocrats. The S&P Europe 350 Dividend Aristocrats have somewhat different qualifications than their U.S. brethren, but in general, they’ve proven their ability to provide stable and growing dividends over time.

Read on as we look at the European Dividend Aristocrats.

Source: kiplinger.com

Swimming Pool Financing: What to Know and Best Pool Loans

Who doesn’t love a relaxing dip in the swimming pool on a sweltering, hot day? And when that swimming pool is in your backyard, it’s even better.

You could bring your friends together over the summer by hosting pool parties. You could teach your kids to swim right at home. If you rent out your place on Airbnb or Vrbo, you could fetch top dollar for the additional amenity.

Sounds like a dream.

If your house didn’t already come with a pool when you moved in, there’s still a possibility of turning your pool fantasies into reality if you have enough space.

And if you don’t have tens of thousands of dollars upfront to spend on a pool construction project, there’s always pool financing.

What Is Pool Financing?

Pool financing is when you borrow money from a financial institution or lender to cover the costs of building a pool. Pool construction typically costs anywhere from $17,971 to $46,481 with the average cost being around $32,059, according to HomeAdvisor.

Of course, the cost will vary based on the size, the type of pool, your location and where you plan to build the pool on your property. Adding a small plunge pool to a cleared, flat space in your backyard will cost considerably less than adding a resort-style pool with waterfalls and a jacuzzi to your property that requires you to cut down multiple trees and level the land.

Besides the personal enjoyment that comes along with having a pool, this addition to your home could boost your property value and make your home more desirable to future buyers, renters or short-term guests.

The high cost to install a pool means that many people rely on pool financing. There are several ways to go about getting a loan for a pool.

Options for Pool Financing

If you want to add a pool to your property, but don’t have the cash upfront, you have several options.

You could get a personal loan (sometimes referred to as a pool loan), a home equity loan, a home equity line of credit or a cash-out refinance. Some pool builders or retailers offer in-house loan programs through their partner lenders. You might also consider using a credit card as your method of financing.

Personal Loans (AKA Pool Loans)

Pool loans are unsecured personal loans offered by banks, credit unions and online lenders. You may be able to get a pool loan through the financial institution where you already have existing accounts, or you might choose to get financed from an online lender or financing consultant company that deals exclusively with pool loans and home improvement loans.

One of the benefits of personal loans is that you don’t have to offer up any collateral. If you stop making payments and default on your loan, you don’t have to worry about your house being foreclosed — though the lender still could sue you. If approved for an unsecured personal loan, you can usually receive funds within a couple of days, much quicker than some other financing options.

Because you don’t have any collateral backing the loan, however, these financing options can come with higher interest rates. Interest rates can start around 3% and go up to about 36%.

A borrower’s credit score, credit history, income and existing debt load all affect the interest rate.

Personal loan terms generally range from about two to 12 years — though some pool loans can have terms up to 20 years or more. You can get loans from $1,000 to over $200,000 to fund simple above-ground pools or elaborate in-ground pool projects.

Home Equity Loans

Home equity loans are essentially when you tap into the equity you have in your home and take out a second mortgage. If you have a significant amount of equity, you could finance your pool project this way.

Home equity loans generally have lower interest rates than personal loans because your home is used as collateral. If you default on your loan, the lender could foreclose on your home.

Also, with home equity loans you’ll face additional fees, like a home appraisal cost and closing costs, so be sure to factor that into your decision making.

Home Equity Line of Credit (HELOC)

A home equity line of credit or HELOC also taps into the equity you have in your home, but it’s a revolving line of credit that you can use for several years instead of a loan that provides you with one lump sum of cash.

With a HELOC, you can pull out funds as needed to finance your pool construction and other home improvement projects. While you’ll only pay back what you borrow, the interest on HELOCs are usually adjustable rates rather than fixed rates. That means your monthly payments can increase during your repayment period.

Cash-Out Refinance

A cash-out refinance is essentially when you replace your existing mortgage with a new mortgage that exceeds what you owe on the house and you take out the difference in cash.

You can then use that lump sum to pay for your pool, and you’ll pay it back throughout the course of your new mortgage — over the next 10 to 30 years depending on your loan terms.

A cash-out refinance might make sense if you’re able to get a lower interest rate than your current mortgage. However, just like with a home equity loan or HELOC, your home is being used as collateral, and you’ll face additional fees involved in the refinancing process.

In-House Financing from the Pool Builder

Some pool companies may directly provide you with pool financing offers, so you don’t have to search for financing on your own. The pool companies typically aren’t offering the loan to you themselves, but they’ve partnered with a lender or network of lenders to provide you with financing options.

This type of financing is the same as applying for a personal loan or pool loan. The benefit is that you get a one-stop-shop experience instead of having to reach out to lenders individually. Your pool contractor may even be able to assist you through the loan process.

The downside is that you could potentially miss out on a better deal by only getting quotes from the pool company’s partnered lenders.

Credit Cards

Because of their high interest rates, credit cards are usually not recommended as options for financing a new swimming pool. However, there can be situations where it’d make sense.

If you’re able to open a zero-interest credit card and pay the balance back before the zero-interest period expires, paying with a credit card can be a great option — especially if it’s a rewards card that’ll give you points, airline miles or cash-back for spending or a bonus just for opening the account.

If you choose this financing option, be sure that you’ll be able to pay off the balance in a relatively short period of time. Most credit cards only offer zero-interest periods for the first 12 to 21 months. After that your interest rate could go up to 18% or more.

Pool Loan Comparisons

Getting quotes from multiple lenders will help you select the best deal for your pool construction project. Here’s what a few top lenders are currently offering.

Lyon Financial

Best for Long Loan Terms

4.5 out of 5 Overall

Key Features

  • Pays the pool contractor directly
  • 600 minimum credit score
  • Offers military discounts

Lyon Financial is a financing consultant that has been in business since 1979 and works with a network of lenders to provide loans for pool and home improvement projects. Unlike personal loans that provide the borrower with the funds upfront, Lyon Financial disburses the funding directly to the pool builder in stages as the project progresses.

Lyon Financial

APR (interest rates)

As low as 2.99%

Maximum loan amount

$200,000

Loan terms

Up to 25 years

HFS Financial

Best for Large Pool Loans

4 out of 5 Overall

Key Features

  • Provides loans up to $500,000
  • Most loans are funded within 48 hours
  • No prepayment penalties

HFS Financial is a financing company that partners with third-party lenders to provide homeowners with the money to construct pools on their property. Use their “60 second loan application” to kick off the loan process. Funds are typically dispersed within 48 hours.

HFS Financial

APR (interest rates)

As low as 2.99%

Maximum loan amount

$500,000

Loan terms

Up to 20 years

Viking Capital

Best for Customer Service

4.5 out of 5 Overall

Key Features

  • Supports a network of pool builders
  • 650 minimum credit score
  • Offers military discounts

Viking Capital is a family-owned business that has been in operation since 1999. The company acts in the capacity of a financial consultant, and partners with a network of lenders to provide multiple loan offers for pool construction projects.

Viking Capital

APR (interest rates)

As low as 5.49%

Maximum loan amount

$125,000

Loan terms

Up to 20 years

5 Steps to Securing Pool Financing

Follow these steps to secure a loan for your pool.

1. Determine What Monthly Payments You Can Afford

Before you dig into your pool financing options, you should be clear on what monthly payment you can afford. Having a pool is a luxury. You don’t want a pool construction project to jeopardize your ability to pay your bills and meet your needs.

Figure out how much disposable income you have to work with by comparing your monthly earnings to how much you typically spend each month.

Don’t forget to factor in maintenance and additional utilities usage when estimating how much you can afford to go toward pool costs.

2. Check Your Credit History

When you’re financing a pool, having a good or excellent credit score will help you secure a loan with a low interest rate. Ideally, your credit score should be 700 or above.

Some lenders may offer you financing if you have fair or poor credit, however you may have to pay a lot more over time due to higher interest rates.

To boost your credit score before applying for a pool loan, follow these steps.

3. Get Cost Estimates for Your Pool

Talk with pool builders to get estimates on the total cost of your desired pool project. Get estimates from multiple pool companies so you have a better idea of what options exist.

If the estimates come in higher than you expected, consider scaling down the size of your pool project or using different materials.

Make sure any additional work — like constructing safety fencing — is included in your estimate.

4. Choose What Type of Financing Your Prefer and Shop Around For Lenders

After you figure out what options are available within your budget, it’s time to decide on what type of financing you prefer.

Will you be applying for an unsecured loan or do you plan to tap into your home equity or refinance your mortgage? Are you going to purchase a small above-ground pool that you could pay off in 15 months using a zero-interest credit card?

Once you know what type of financing you’ll go with, reach out to multiple lenders so you can compare offers and choose the best deal. You may be able to use a competitor’s lower offer to get a lender to reduce their offer even further.

5. Complete Loan Application and Sign Off on All Paperwork

The final step to get your pool project financed is to complete any additional paperwork and sign off on the dotted line. Expect to provide information about your income and other existing debt.

Your credit score may take a dip after taking on new debt, but it should rebound as you make regular, on-time payments.

Alternatives to Pool Financing

Taking on debt for a new pool doesn’t have to be your only option.

You could put off your pool construction project for a few years and save up for the expense in cash. Open a high-yield savings account to use as a sinking fund and don’t make withdrawals from the account until you’ve reached your savings goal.

If you think you’re outgrowing your current home — or are looking to downsize — wait until you’re ready to move and then look for a new home with an existing pool.

Or if you’re okay with not having a pool in your backyard, you’ll save money by visiting public pools or renting private pools from Swimply on occasion. This is a good option if you think you wouldn’t get much regular use of having your own pool.

Frequently Asked Questions

How many years can you refinance a pool for?

You can finance a pool over 20 to 30 years, depending on the type of financing you secure. If you need decades to pay back the loan, you might consider refinancing your mortgage or taking out a second mortgage. Private, unsecured loans typically need to be repaid sooner, however some have loan terms of 20 years or more.

What is the best way to finance a pool?

It all depends on your individual circumstances and preferences. If you’ve built up a ton of equity in your home and want to spread your debt payments over a lot of time, you might lean toward a home equity loan or HELOC. If you’ve got excellent credit and would qualify for a low-interest personal loan (unsecured loan), that might be the better option.

What credit score do you need for pool financing?

Ideally, you’ll want to have a credit score of 700 or higher to get the best interest rates for pool financing. Some companies, however, will accept lower credit scores. As a result, your loan may have a higher interest rate.

What is a good interest rate for a pool loan?

An interest rate around 5% is a good deal for a pool loan. You may be able to find rates even lower if you have excellent credit.

Nicole Dow is a senior writer at The Penny Hoarder.

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Source: thepennyhoarder.com

Is Recession Coming? Watch These Signs

recession market scare crash downturn stock business men
By Andrey Burmakin / Shutterstock.com

There’s no time stamp on when recessions pop up, or how long they last. Our last recession was two months long at the onset of the COVID-19 pandemic in 2020, making it the shortest on record.

The one before that was the Great Recession starting in 2007 and lasting 18 months, the longest downturn since World War II.

If the stock market and economy are keeping you on the edge of your seat, you can look for signs of a recession before it hits. That can help you determine whether you should start preparing for a recession, and the act of getting your finances ready for a possible downturn should give you some peace of mind.

An inexact science

work worry
Stock-Asso / Shutterstock.com

Before we dive into the possible warning signs of a recession, it’s worth noting that predicting a recession is not an exact science.

So, while the following warning signs historically have served as indicators that a recession might be on the horizon, that doesn’t mean they are foolproof. The economy is dynamic, and there is no list of indicators that have preceded every past recession.

Still, the following indicators tend to be a good place to start looking if you’re worried about whether a recession lies ahead.

Sign No. 1: The yield curve inverts

Positive yield curve
hafakot / Shutterstock.com

Typically, long-term bonds pay more than short-term bonds, as illustrated above. This makes sense: If you agree to tie up your money for longer periods, you should be paid more for your trouble. This is why a five-year certificate of deposit (CD) pays more than a one-year CD.

Rarely, however, the reverse is true: Long-term bonds start paying less than short-term bonds. When that happens, a recession often follows. In fact, this situation, known as an inverted or negative yield curve, has proven a highly accurate recession predictor.

Why would long-term bonds ever pay less than short-term bonds? The nation’s central bank, the Federal Reserve — or “the Fed” for short — controls short-term rates, but the market controls the rates on longer-term securities.

The Fed can raise short-term rates, which is exactly what they started doing in March 2022, for the first time since 2018. But if investors start thinking things don’t look so good in the economy, they keep their powder dry by buying long-term bonds. The more they buy and bid up the price, the lower the rates on these securities go.

The yield curve did dip into negative territory in late March 2022. It quickly recovered, but it’s worth noting that it was the first time the yield curve turned negative since 2019 and, before that, 2006.

What to watch: You can find Treasury yields on the U.S. Treasury Department’s website. CNBC also tracks in real time the spread, or difference, between the yields on two-year and 10-year Treasurys.

Sign No. 2: The Leading Economic Index slips

Jenga game at risk of slipping
88studio / Shutterstock.com

The Conference Board’s Leading Economic Index (LEI) is one predictor of global economic health. The Conference Board, a nonprofit research group, describes the index as one of “the key elements in an early warning system to signal peaks and troughs in the global business cycle,” with the LEI specifically anticipating turning points in the business cycle.

Monthly dips in the Leading Economic Index aren’t alarming. However, year-over-year drops in the benchmark have been followed by recessions in the past.

The LEI increased by 0.3% from February to March, and by 1.9% over the six months leading up to March, so there’s no reason for concern based on this indicator right now.

What to watch: Keep an eye on Conference Board press releases or media coverage of the index.

Sign No. 3: Interest rates rise

Federal Reserve
Orhan Cam / Shutterstock.com

Government monetary policy can be another economic bellwether. We’ll explain what to watch, but first, a quick refresher on how it works.

The Federal Reserve influences the economy by using a couple of tools. One of those tools is control over short-term interest rates via the target federal funds rate. If the economy is in the doldrums, it can lower the federal funds rate to encourage consumers and businesses to borrow, buy and invest, which stimulates the economy. That’s why this rate was kept near zero for years following the Great Recession that began in December 2007.

On the other hand, if the economy is growing too fast, that can lead to rising prices, otherwise known as inflation. To cool things down, the Fed raises the federal funds rate, which serves to put the brakes on the economy by discouraging both consumers and businesses from borrowing and spending as much.

While interest rates don’t directly affect the stock market, if businesses have to pay more in interest, that hurts their profits, which will ultimately be reflected in a lower stock price.

Also, as rates rise, investors often sell stocks, driving prices lower. Why do they sell? Think about it: If you can earn high interest from insured bank accounts or guaranteed Treasury bonds, why take a chance on stocks?

Again, the Fed resumed raising the federal funds rate in March 2022, marking the first rate hike since 2018. The hike in May — a half-point — was the largest increase since 2000.

What to watch: The Federal Reserve’s Federal Open Market Committee posts statements, which include any votes to change the federal funds rate, after each of its regularly scheduled meetings. The meetings are also widely covered by the financial media.

Sign No. 4: Consumer sentiment falls

Upset shopper at a grocery store
C.Snooprock / Shutterstock.com

Another economic indicator published by the Conference Board, the Consumer Confidence Survey, monitors everything from Americans’ buying intentions and vacation plans to their expectations for inflation, stock prices and interest rates.

After an uptick in March, consumer confidence fell slightly in April. The Consumer Confidence Index was at 107.3 for the month, down from 107.6. During the recession at the beginning of the COVID-19 pandemic, the index was less than 90.

Fluctuation is normal, especially as economic conditions shift. The pandemic, the rising costs of products and the war in Ukraine can change how people feel about the economy from month to month. But if consumer confidence continues to drop, that could be a sign of a looming recession.

What to watch: The Consumer Confidence Survey is updated monthly. Track press releases for it on the Conference Board’s website. The survey is also widely covered in the media.

Sign No. 5: Business confidence cools

Upset businessman holding his head at his computer
Rido / Shutterstock.com

Like consumer confidence, business confidence can shed light on the direction of the economy.

The Conference Board’s Measure of CEO Confidence remained in positive territory — 57 — in the first quarter of 2022. (The board considers measures of more than 50 points as positive, and lower readings as negative.) But this measure marked the third consecutive quarter of decline.

CEOs’ assessment of the current general economic conditions, and their expectations for the near future, also declined.

The outlook of small-business owners isn’t any rosier, according to the National Federation of Independent Business’ Small Business Optimism Index.

In March, inflation overtook labor quality as the top problem among small businesses. In fact, the share of owners raising their average selling prices reached its highest level in the survey’s 48-year history.

Moreover, the share of owners who expect better business conditions over the next six months fell to its lowest level in the survey’s history.

What to watch: Business confidence gauges like the Measure of CEO Confidence and CFO Survey are updated quarterly. The Small Business Optimism Index is updated monthly.

Sign No. 6: Vanguard’s risk forecast worsens

Vangaurd
Casimiro PT / Shutterstock.com

Vanguard is one of the biggest asset management firms in the world, so its economic outlooks can help paint a picture of how to monitor fluctuation in the economy.

Before the recession that started in late 2007, Vanguard’s six-month forecast had said the probability of a recession in six months was greater than 40%, according to The New York Times.

The firm’s forecast for 2022 — subtitled “Striking a better balance” — was overall optimistic, if cautiously so:

“While the economic recovery is expected to continue through 2022, the easy gains in growth from rebounding activity are behind us. We expect growth in both the U.S. and the euro area to slow down to 4% in 2022.”

In March, however, Vanguard downgraded its 2022 estimated growth for the U.S. from 4% to 3.5% — which is where it remained going into May.

What to watch: Vanguard posts its monthly market perspectives on its “Our Insights” webpage and issues press releases about its annual outlooks.

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

Source: moneytalksnews.com

American Express Transfer Bonus: 25% To Flying Blue (KLM/AirFrance), 1:1.25

The Offer

  • You can currently receive a transfer bonus of 25% when you transfer American Express Membership Rewards points to Flying Blue. Normally you can transfer 1,000 MR points and receive 1,00 Flying Blue miles, during this promotion you’ll receive 1,250(1:1.25).

The Fine Print

  • Valid until 6/15/22

Our Verdict

We saw a 30% transfer bonus last year, but standard is 25%. Previous bonuses are as follows:

Targeted Bonuses

Source: doctorofcredit.com

Guide to Dental Loans

Finding out you need dental work can be scary — and scary expensive. Still, the pain and the price could get even worse if you put off getting care. And sometimes delaying just isn’t an option.

If you don’t have enough money stashed away in your emergency fund, and your insurance won’t cover all your costs, you may want to chew on the pros and cons of taking out a dental loan.

What Are Dental Loans?

Medical financing loans are personal loans that are used to pay for a variety of medical expenses, including dental work and related expenses.

Whether you’re feeling overwhelmed by the upfront cost of a root canal or crown, or you expect to pay a substantial amount over time for braces, aligners, or implants, a dental loan can be a quick and convenient way to get the financing you need.

With a dental loan, you can borrow money to pay for your care, then make monthly payments until the loan balance is paid off.

How Do Dental Loans Work?

Dental loans are usually unsecured personal loans, which means you don’t have to put up collateral to secure the loan. Approval for a loan for dental work will be based on your creditworthiness.

If you qualify, you’ll receive a lump sum of money that’s to be repaid in monthly installments consisting of principal and interest. Since dental loans typically have fixed interest rates, your payments should be the same amount each month throughout the repayment period.

What Can Dental Loans Be Used For?

You typically can use a personal loan to pay for just about anything as long as it’s legal and within the terms of your loan agreement. For example, you can use a personal loan to pay for wedding expenses, home improvements, or legal fees.

Costs related to your dental care are included in common uses for personal loans. These might include treatment — even for expensive elective or cosmetic procedures that may not be covered completely or at all by dental insurance, over-the-counter or prescription medications you might require, transportation. You can even use the funds for the milkshake and soup you might need after your procedure.

Here are approximate costs for some common procedures that could be paid for with a dental loan:

Porcelain Crown

The cost of a crown can vary based on the materials used to make it, as well as the size, shape, and location of the tooth that’s being replaced. Costs for an all-porcelain crown can range from $800 to $3,000. Dental insurance may cover some of that expense, unless the crown is strictly for cosmetic purposes.

Whitening

A basic teeth cleaning may be covered by dental insurance as part of your annual exam. But an in-office teeth bleaching (which can cost $300 to $500 or more) or a laser whitening (which averages $1,000), likely won’t be covered by insurance.

Root Canal

The cost of a root canal could range from about $700 to $1,800 if you don’t have dental insurance. The cost can depend on several factors, including which tooth is being worked on and if the work is done by a specialist. Insurance may take the cost down to between $200 and $1,500.

Aligners

Teeth aligners can be pretty pricey no matter which type you buy, but if you go with an in-office treatment, you can expect to pay between $2,500 and $8,000. At-home brands range from about $1,200 to $3,300. Your insurance provider may pay for some of those costs, but you should check your coverage before ordering.

Veneers

Veneers can range from $470 to $2,000 per tooth, depending on the type and how much prep work is involved. The cost generally is not covered by dental insurance.

Typical Dental Loan Application Process

Your dentist may offer an in-house financing plan to help with costs — especially if he or she specializes in cosmetic procedures. Or the practice may partner with a lender who provides these types of loans. You aren’t obligated to use your dentist’s financing plan, but you may want to check out what the practice is offering. You also can go online to compare dental loan offers from traditional and online lenders.

Compare Offers: Choosing the Right Loan

When you start shopping for loans for dental work, you can go to individual lenders’ websites to see what they have to offer or use a comparison site to conveniently check out multiple lenders.

Getting prequalified with a few different lenders can help you get the clearest idea of what’s available and what’s best for your needs. Lenders typically use a soft credit pull during the prequalification process, so it won’t affect your credit score.

Here are a few things to watch for as you shop for financing:

Annual Percentage Rate

A loan’s annual percentage rate (APR) tells you the amount of interest you can expect to pay on your loan over the course of one year, including any fees or charges you might incur. Because it gives you a complete picture of the cost of the loan (as opposed to just looking at the interest rate), the APR can be a useful tool for comparing various loan offers.

Recommended: APR vs. Interest Rate

Fees

Fees can add up quickly, and they can add to the cost of your loan. Some common fees to look out for could include an application fee, origination fee, late payment fee, returned payment fee, and a prepayment penalty. Low-fee or fee-free loans may save you money over the life of the loan.

Loan Amounts

Some lenders may have loan minimums that require you to borrow more than you need. Before you go loan shopping, you may want to get dental procedure cost estimates to get an idea of how much you’ll have to borrow. Then you can look for lenders who are willing to lend that amount.

Loan Terms

Another important factor to consider is the loan term, or how long you’ll be given to repay the money you’ve borrowed. Of course, you’ll want to find a loan term that feels comfortable (a longer-term can equal lower payments). But a longer-term also could increase the amount you pay in interest over the life of the loan. You may want to think about how the loan length could affect your future financial goals.

Eligibility Requirements

Before you settle on a particular personal loan for dental work, you may want to check out the lender’s eligibility requirements. In the process of checking your personal loan rate, most sites will review your credit scores, credit history, income, and other personal financial information to determine whether you qualify for a particular interest rate or other loan terms.

Many lenders will accept a fair credit score (a FICO® Score of 580 to 669 is considered fair), but a good FICO Score (670 to 739) could qualify you for a more favorable interest rate and other terms. If you have a poor score (lower than 580), lenders may consider you to be a high lending risk, which could affect your eligibility. You may be able to find a loan, but the interest rate will likely be more expensive.

Approval and Funding Timeline

If you can’t get your treatment until you can pay for it — and you need it soon — a quick approval time and rapid funding also could be an important considerations. One of the major pluses of using an online lender can be the convenience and fast application time. If you have all your information ready, it can be easy to apply using an online form. And if you qualify, the money generally can be available within a few days.

Customer Service

Does the lender have a reputation for good customer service? You may want to check into how various lenders deal with consumer questions and problems. At the same time, you can see if there are any perks to building a relationship with a lender that might benefit you in the future.

Applying for a Dental Loan

If you find a lender and loan terms you like, and you’re ready to apply, your next step will be to complete a formal application. You can expect to be asked to verify your identity, income, and current address, and it can make things easier if you gather up the necessary documents ahead of time. You’ll probably need your driver’s license, Social Security number, recent pay stubs and/or bank statements, and a utility bill or some other proof of address.

Once you apply, most lenders will do a hard credit check, which may cause your credit score to drop by a few points temporarily. The lender will evaluate your ability to repay the loan and, if you qualify, your loan will be funded.

Pros and Cons of Dental Loans

Whether you need money for a one-time emergency procedure or for a series of treatments that could add up to a big expense, a dental loan may be an option worth considering. Here are some pros and cons that could help you decide if a personal loan makes sense for your situation:

Pros

Convenient Online Comparison

Applying for a personal loan online can be convenient and quick. Many lenders offer personal loans that can be used for dental treatment, so you can shop for the loan amount and terms that best suit your needs.You may be able to get your approval within a few hours (maybe even a few minutes) and you could receive your money within a few days.

Competitive Terms

If you have a solid credit history, a stable income, and fair or better credit scores, you may qualify for a competitive interest rate and a repayment period you feel comfortable with. (The interest rate on a dental loan is typically lower than the interest rate on a credit card.)

Fixed Payments

With a dental loan, borrowers typically receive a lump sum of money that is repaid in fixed monthly payments. This can make it easier to budget and manage your payments.

Cons

Fees and Penalties

Some dental treatment loans come with fees and penalties that can drive up the overall cost of borrowing. You may be able to keep your costs down, though, by finding a low- or no-fee loan.

Alternatives May Cost Less

If you can qualify for a credit card with a low or 0% promotional rate for purchases, it may be a less expensive way to borrow money — at least for a while. Zero-interest credit cards charge no interest during an introductory period, which typically lasts from six to 18 months. Paying the balance in full within the promotional period is essential to making the most of an offer like this.

Fixed Payments

Having a fixed monthly payment can make budgeting easier, but it doesn’t provide flexibility if you can’t make that payment for some reason. A different financing option, such as a credit card, might offer more adaptable minimum monthly payments.

Pros and Cons of Dental Loans

Pros Cons
Easy to compare lenders online. Some dental loans have fees and penalties that can increase the overall cost.
Terms are competitive and interest rates are generally lower than on credit cards. Alternatives like credit cards with a 0% interest introductory rate may be less expensive.
Fixed monthly payments can make it easy to budget for the expense. Fixed payments don’t allow for budget shortfalls.

Alternatives to Personal Loans

If you can’t afford the dental work you need, there are options besides dental loans that you might want to check out. A few to consider include:

Credit Cards

If you already have a low-interest credit card, you may want to compare the interest you’d pay if you used that card vs. the cost of a dental loan. Or you might want to consider the pros and cons of applying for a low or 0% introductory-rate credit card — if you think you can pay off the balance during the designated promotional period. If you end up using a high percentage of your available credit, however, your credit score could be negatively affected.

Dental Office Financing

Your dentist may offer some type of in-house financing to patients who can’t afford the treatments they want or need. The practice might partner with a lender that offers loans for dental procedures, for example, or the dental office might suggest a medical credit card with a low or 0% introductory rate. These offers may be worth reviewing and comparing to similar options, as long as you’re clear on all the repayment terms.

Grants

There are grant programs aimed at helping seniors, adults and children living in low-income households, and those who have special needs. The Dental Lifeline Network is a nonprofit organization that provides access to dental care for people who can’t afford it. Some dentists also may offer partial grants to attract new patients who need extensive and expensive treatment.

Explore Personal and Dental Loans with SoFi

A dental loan can be a quick and convenient solution if you need cash to pay for an unexpected dental procedure or an elective treatment you’ve been thinking about for a while (like braces, aligners or implants). Whether you’re considering an expensive cosmetic procedure or you need a crown or root canal ASAP, SoFi may offer a personal loan rate that works for your unique financial situation.

There are no fees with SoFi Personal Loans, and borrowers have access to customer support seven days a week. The application can be completed online, and you can check your rate in just one minute.

Take the pain out of dental costs and check your rates on a personal loan from SoFi

FAQ

What credit score do you need for dental implant loans?

Many lenders will offer a dental loan to a borrower with a fair credit score. (A FICO Score of 580 to 669 is considered fair). But a good FICO Score (670 to 739) could improve your interest rate and other terms. If you have a poor score (lower than 580), lenders may consider you to be a higher risk, which could affect your eligibility.

Can you get your teeth fixed with no money?

You may be able to find a research clinic or university dental program that provides free services to volunteer patients who need care. And some dental practices may occasionally offer free care to low-income patients. There are also grants that could help cover costs.

Can you put dental work on a credit card?

Yes, you can use a regular credit card or a medical credit card to pay for dental work. But if you come close to using up the balance on your card, it could affect your credit utilization ratio, which can have a negative impact on your credit scores.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Photo credit: iStock/Sanga Park
SOPL0222004

Source: sofi.com

[Expired] Bank of America Amtrak Spending Offer – Earn 5x Points On All Purchases (4,000 Points Cap)

Deal has ended, view more Amtrak deals by clicking here.

Update 3/15/22: Deal will be back and valid until April 30.

The Offer

No direct link to offer, sent out via e-mail

  • Bank of America Amtrak cardholders are being offered 5x Amtrak points per $1 spent on all purchases until December 31st, 2021 (up to 4,000 points)

Our Verdict

Good deal but it’s a shame there is a cap on it. Previous years we’ve seen a smaller multiple but with no cap.

Hat tip to ADKFlyer

Source: doctorofcredit.com

What Is the MACD Indicator (Moving Average Convergence Divergence)?

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Additional Resources

Traders use a wide range of technical indicators to generate trading signals when making their moves in financial markets. These indicators help traders analyze price action to determine price trends, the momentum of those trends, the best time to buy, and the best time to sell financial assets. 

The moving average convergence divergence indicator (MACD indicator) is one of the most popular tools in a trader’s toolbox. 

The tool is a momentum indicator built under the idea that momentum changes happen ahead of price changes. The idea is that traders can track and analyze the momentum of price movements to determine where the value of the asset is likely headed in the future. 


What Is the Moving Average Convergence Divergence (MACD) Indicator?

The MACD is a momentum oscillator that shows the relationship between two moving averages of a financial asset’s price. Those moving averages include the 26-day exponential moving average (EMA) and the 12-day EMA. Traders also use a signal line with this indicator which is plotted using a 9-day EMA of the MACD. Gerald Appel, founder of the Systems and Forecasts newsletter, developed the indicator in the late 1970s. 


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It’s important that you understand moving averages before going further, because they are the building blocks that form the MACD and the signals it generates. 

Moving averages reveal average prices over time. At the close of every trading session, the new closing price is added into the calculation and the oldest is removed, helping smooth the volatility of price movement in the trading chart.

The MACD uses exponential moving averages (EMAs). EMAs are time-weighted averages, meaning the newest data is given more importance than older data. This makes them more sensitive to the most recent price movements. 


What the MACD Measures

The MACD is a momentum oscillator, meaning it measures the veracity of price movements in the market. 

The concept behind the indicator is that price changes happen as a result of investor movements. When investor demand for an asset climbs, the price of that asset follows, and when demand declines, the price falls. 

Because all investors don’t make their moves at the same time, tracking the speed of price movements, or speeding and slowing of demand, indicates when reversals are likely to occur. Traders see these coming reversals as buy and sell signals. 


How to Calculate MACD

To calculate the MACD, subtract the long-term, 26-period EMA from the short-term, 12-period EMA:

MACD = 12-Day EMA – 26-Day EMA

Most charting platforms do this calculation for you and plot the results alongside an asset’s price chart.

Example Calculation

Let’s say ABC stock has a 12-Day EMA of $25.12 and a 26-Day EMA of $24.93. The moving average convergence divergence formula using the data in the example would look like this: 

MACD = $25.12 – $24.93 = $0.19 

The value of the MACD is plotted on the graph over time. Investors watch as the value increases and decreases, creating buy and sell signals. 

Signals are also created by comparing the movement of a signal line in relation to the MACD line. The signal line is calculated by taking a nine-day EMA of the MACD. 


How to Read the MACD

There are three important lines to watch when reading MACD data:

  1. MACD Line. The MACD line is plotted on the chart based on MACD values over time. When the MACD line crosses above zero, the trend is considered bullish, and the trend is bearish when the MACD line crosses below zero. 
  2. Signal Line. The signal line — the line created by taking a nine-day EMA of the MACD — is also plotted on the chart. Traders pay close attention to the relationship between the MACD line and the signal line, specifically looking for points at which the two lines cross for trading signals. 
  3. MACD Histogram. The MACD histogram is a visualization tool that helps traders measure the difference between the MACD line and the signal line. Investors read these two lines converging or diverging as buy and sell signals. 

Ways to Interpret the MACD

The MACD generates trading signals in multiple ways. Some of the most common ways to interpret the indicator include:

MACD Crossovers

MACD crossovers happen when the MACD line crosses over the signal line on a trading chart, generating signals to buy and sell the asset being analyzed. Here’s how they work:

  • Bullish Crossover. A bullish crossover happens when the MACD line crosses over the signal line. When this happens, it acts as a signal that the stock is headed for an uptrend. 
  • Bearish Crossover. A bearish crossover happens when the MACD line crosses below the signal line. When this occurs, it’s a signal that the stock price is headed for a downtrend. 

Crossovers can also happen without a signal line:

  • Bullish Crossover. When the MACD line crosses over zero, the move is considered to be bullish, signaling upward movement ahead. 
  • Bearish Crossover. When the MACD line crosses below zero, the move is considered bearish, signaling downward movement ahead. 

See the chart below for an example. The chart shows Apple’s daily stock price and the MACD over a six-month period ending April 7, 2022.

At the bottom of the image, you’ll notice a sub-chart with a red line, a black line, and a blue histogram. This section charts the MACD. The black line is the MACD line, and the red line is the signal line. 

Around November 15, 2021, a bullish crossover took place, preceding a sharp rise in Apple’s stock price. In mid-December, a bearish crossover took place, followed by significant downward movement. 

There are two more bullish crossovers and one more bearish crossover on the chart that occured in 2022. Take a moment to see if you can spot them. 

If you spotted the bullish crossovers in late January 2022 and mid-March 2022, and the bearish crossover in mid-February 2022, you’re on the right track. 

MACD Histogram

The MACD histogram is a series of bars plotted in the center of the MACD chart. The bars seem to grow above and fall below the zero line, creating easy-to-spot bullish and bearish signals. 

  • Bullish Histogram Signals. When the MACD line crosses above zero, a bar in the histogram will start a series of bars that climb above the zero line. This event indicates that momentum is moving in the upward direction and an uptrend is on the horizon. 
  • Bearish Histogram Signals. When the oscillator’s line crosses below zero, a bar in the histogram will start a series of bars that fall below the zero line. This event indicates that momentum is moving in the downward direction and signals a downtrend. 

Let’s refer again to Apple’s stock chart for an example:

You’ll notice a series of blue lines in the MACD section at the bottom of Apple’s stock chart. 

In mid-November, a series of blue bars emerged in an upward direction from the center of the chart, suggesting that prices would rise. In mid-December, the bars reversed direction, falling below the zero line, suggesting prices would decline. Following these events, Apple’s stock price did exactly what the signals suggested would happen. 

Bullish signals were also created in late January and mid-March of 2022, and another bearish signal can be spotted in mid-February 2022. Take a moment to study the chart and note how the price of Apple’s stock reacted following these events. 

MACD Divergences

Finally, MACD divergences are used to determine which direction an asset is likely to move in. A divergence takes place when the MACD doesn’t agree with the asset’s price movement. 

For example, if the asset closes the day at a higher high but the MACD moves lower, the move is known as a divergence. Here’s what divergences tell you:

  • Bullish Divergence. When a stock closes the day lower, but the MACD moves into the positive territory, this is known as a bullish divergence. The signal suggests that bearish momentum is slowing and buyers are flooding into the asset. As a result, the price of the asset should head in the upward direction. 
  • Bearish Divergence. When a stock closes the day at a new high, but the MACD moves into negative territory, it’s considered a bearish divergence. This move suggests bullish momentum is slowing and the bears are about to take control. As a result, declines are likely ahead. 

Let’s return to Apple’s stock chart to see what this looks like:

The MACD line started moving downward in mid-December. While the histogram showed bearish momentum, the price of Apple continued to move upward for a few trading sessions. As the divergence between the price of Apple and its MACD grew, a clear reversal began to emerge, leading up to dramatic declines in the price of the stock in the sessions to follow. 

Toward the end of the chart, there’s a bullish divergence, with Apple’s 50-day moving average moving downward while the histogram moved into positive territory. Can you spot it? When you do, you’ll see the stock made a strong move for the top shortly following the divergence. 


Relative Strength Index (RSI) vs. the MACD Indicator

The relative strength index (RSI) is a momentum indicator, just like the MACD. However, the two are calculated in different ways, which can lead to different results from time to time. 

The RSI is also an oscillator, but it’s centered around price gains or losses over time, focusing on extreme highs and extreme lows to determine if an asset is overbought or oversold. This differs from the MACD because it doesn’t use moving averages to determine momentum and momentum direction. 

No single momentum oscillator is perfect. Many traders use both the RSI and the MACD when making their trades, using one to verify the results of the other. 


Limitations of the MACD Indicator

The MACD indicator is an impressive tool, but like most other technical analysis tools, it’s not perfect. Some limitations to consider when taking advantage of the MACD include:

  • Failure to Signal. Although the indicator is great at showing when some reversals are likely to occur, it doesn’t catch them all. In some cases, momentum and price movements occur at just about the same time, and the MACD doesn’t have time to alert traders to the coming reversal before it’s already happened. 
  • False Positives. In some cases, momentum will shift directions for a short period and reverse quickly, while the price stays relatively flat. As a result, traders may act on a signal, and a reversal may not actually happen. 

In short, the indicator doesn’t catch all reversals, and some of the signals it does provide won’t come to fruition. 

Most indicators have their limitations, which is why it’s important for traders to have multiple tools in their toolboxes. 


Final Word

The MACD is an important piece of many successful traders’ trading strategies. The metric helps to determine when prices will rise and fall, but it isn’t perfect. Make sure you couple it with a few other technical indicators to get a full picture when making your moves in the market. 

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Joshua Rodriguez has worked in the finance and investing industry for more than a decade. In 2012, he decided he was ready to break free from the 9 to 5 rat race. By 2013, he became his own boss and hasn’t looked back since. Today, Joshua enjoys sharing his experience and expertise with up and comers to help enrich the financial lives of the masses rather than fuel the ongoing economic divide. When he’s not writing, helping up and comers in the freelance industry, and making his own investments and wise financial decisions, Joshua enjoys spending time with his wife, son, daughter, and eight large breed dogs. See what Joshua is up to by following his Twitter or contact him through his website, CNA Finance.

Source: moneycrashers.com

Loan-to-Value (LTV) Ratio – What It Is & How It Affects Your Mortgage Rate

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Additional Resources

In the fourth quarter of 2021, the median home sold for just over $408,000. 

Could you afford to pay that out of pocket? Probably not. That’s why most homebuyers wind up applying for mortgage loans.

Getting a mortgage can be a long process and lenders look at a lot of factors when deciding whether to approve your application. You also have to go through a similar process when refinancing.

One thing that lenders look for when making a lending decision is the loan-to-value (LTV) ratio of the loan.


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What Is a Loan-to-Value Ratio?

The loan-to-value ratio of a loan is how much money you’re borrowing compared to the value of the asset securing the loan. In the case of a mortgage, it compares the remaining balance of your loan to the value of your house. On an auto loan, it compares the balance of your loan to the value of your car.

Lenders use LTV as a way to measure the risk of a loan. The lower a loan’s LTV, the less risk the lender is taking. If you fail to make payments and the lender forecloses, a lower LTV ratio means the lender has a higher chance of fully recovering their losses by selling the foreclosed asset. A higher LTV means more risk the lender loses some money.

Lenders may have maximum LTVs that they’ll approve. For example, FHA loans require at least 96.5% LTV. Conventional loans require at least 97% LTV, but only for the best-qualified borrowers — most require 95% LTV or lower. Your loan’s LTV can have other important impacts on your borrowing experience, including your interest rate and monthly payment.


Calculating the Loan-to-Value Ratio

Because LTV plays a big role in the overall cost of your loan, it’s a good idea to calculate it before you apply. 

LTV Formula

To calculate the LTV ratio of a loan, you divide the balance of your loan by the value of your home.

The formula is:

(Loan balance / Home value) = LTV

LTV Calculation Example 

Imagine that you want to purchase a home that appraises for $300,000. You apply for a mortgage and get approved for a $270,000 loan.

The LTV of that loan is:

$270,000 / $300,000 = 90%

If you choose to make a larger down payment and only borrow $240,000, your mortgage’s LTV will be.

$240,000 / $300,000 = 80%

As you pay down your mortgage or as your home’s value changes, the loan’s LTV ratio moves away from this initial value. Typically, as you pay off your mortgage, the LTV ratio drops.


How LTV Affects Your Mortgage Rates

Lenders use LTV as a way to measure the risk of a loan. The higher the LTV of a loan, the higher its risk.

Lenders compensate for risk in a few ways. 

One is that they tend to charge higher interest rates for riskier loans. If you apply for a loan with a high LTV, expect to be quoted a higher interest rate than if you were willing to make a larger down payment. A higher rate raises your monthly payment and the overall cost of your loan.

Another is that lenders may charge additional fees to borrowers who apply for riskier loans. For example, you might have to pay more points to secure an affordable rate, or the lender might charge a higher origination fee. A larger down payment might mean lower upfront fees.

One of the most significant impacts of a mortgage’s LTV ratio is private mortgage insurance (PMI). While PMI does not affect the interest rate of your loan, it is an additional cost that you have to pay. Many lenders will make borrowers pay for PMI until their loan’s LTV reaches 80%. 

PMI can cost as much as 2% of the loan’s value each year. That can be a big cost to add to your loan, especially if you have a large mortgage.


LTV Ratio Rules for Different Mortgage Types

There are many different mortgage programs out there, each designed for a different type of homebuyer.

Different programs can have different rules and requirements when it comes to the LTV of a mortgage.

Conventional Mortgage

A conventional mortgage is one that meets requirements set by Fannie Mae and Freddie Mac. While these loans are not backed by a government entity, they must meet Fannie or Freddie’s minimum credit score and maximum loan amount thresholds, among other criteria. Otherwise, they can’t easily be repackaged and sold to investors — the fate of most mortgage loans after closing. 

Conventional mortgages have a maximum LTV of 97%. That means your down payment will need to equal at least 3% of the home’s value. If your LTV is higher than 80% to begin with, you’ll have to pay PMI until your LTV drops below 78%.

Refinancing Mortgage

Refinancing your mortgage lets you take your existing loan and replace it with a new one. This gives you a chance to adjust the interest rate or the length of your loan.

Most lenders aren’t willing to underwrite refinance loans above 80% LTV, but you might find lenders willing to make an exception.

FHA Loans

Federal Housing Administration (FHA) loans are popular with homebuyers because they allow low down payments and give people with poor credit the opportunity to qualify.

If you’re applying for an FHA loan, the maximum LTV is 96.5%, meaning you’ll need a down payment of at least 3.5%. If the LTV value of your mortgage starts above 90%, you’ll have to pay PMI for the life of the loan. If your LTV is less than that amount, you can stop paying PMI after 11 years.

VA Loans

VA loans are secured by the Department of Veterans Affairs. They’re only available to veterans, service members, members of the National Guard or Reserves, or an eligible surviving spouse.

These loans offer many benefits, including the option to get a loan with an LTV as high as 100%. That means that you can borrow the full amount needed to purchase your home. The only upfront costs you need to pay are the fees associated with getting the loan.

USDA Loans

USDA loans, guaranteed by the US Department of Agriculture, are designed to help people purchase homes in designated rural areas. Borrowers also have to meet certain maximum income requirements.

USDA loans can have LTV ratios of 100%, letting borrowers finance the entire cost of their home. The LTV of the loan can exceed 100% if the borrower chooses to finance certain upfront fees involved in the loan.

Fannie Mae & Freddie Mac

Fannie Mae and Freddie Mac are government-backed mortgage companies. Neither business offers loans directly to consumers. Instead, they buy and offer guarantees on loans offered by other lenders.

Together, the two companies control a major portion of the secondary market for mortgages, meaning that lenders look to offer loans that meet their requirements.

For a single-family home, Freddie Mac has a maximum LTV of 95% while Fannie Mae sets the maximum at 97% for fixed-rate loans and 95% for adjustable-rate mortgages (ARMs).


Limitations of LTV

There are multiple drawbacks to the use of LTV ratios in mortgage lending, both for borrowers and lenders.

One disadvantage is that LTV looks only at the mortgage and not the borrower’s other obligations. A mortgage with a low LTV might seem like it has very little risk to the lender. However, if the borrower has other debts, they may struggle to pay the loan despite its low LTV.

Another drawback of LTV is that it doesn’t consider the income of the borrower, which is an essential part of their ability to repay loans.

LTV ratios also depend on accurate assessments of a home’s value. Typically, homeowners or lenders order an appraisal as part of the mortgage process. However, if a home’s value increases over time, it can be difficult to know the home’s actual worth without ordering another appraisal.

That means that you might be paying PMI on a loan without realizing that your home’s value has increased enough to reduce the LTV to the point that PMI is no longer necessary. You can always order another appraisal, but you’ll have to bear the cost — typically around $500 out of pocket.


LTV vs. Combined LTV (CLTV)

When looking at a property, lenders often use combined loan-to-value (CLTV) ratios alongside LTV ratios to assess risk.

While an LTV ratio compares the balance of a single loan to the value of a property, CLTV looks at all of the loans secured by a property and compares them to the home’s value. It’s a more complete way of assessing the risk of lending to someone based on the value of the collateral they’ve offered.

For example, if you have a mortgage and later get a home equity loan, CLTV compares the combined balance of both the initial mortgage and the home equity loan against your home’s appraised value.


LTV Ratio FAQs

Loan-to-value ratios aren’t easy to understand. If you still have questions, we have answers. 

What Is a Good LTV?

What qualifies as a good LTV ratio depends on the situation, the loan you’re applying for, and your goals.

An LTV over 100% is pretty universally seen as bad because you wouldn’t be able to repay your loan even if you sold the collateral asset.

In general, a lower LTV ratio is better than a high LTV ratio, especially if you want to avoid paying for PMI on top of your mortgage loan payment.

The 80% threshold is a particularly important breakpoint, especially for conventional loans. If you have an LTV of 80% or lower, you can avoid PMI on conventional mortgages, saving hundreds of dollars per month early in the life of your loan. At 80% LTV, you’ll qualify for a good interest rate, though dropping to 70% or even 60% could drop your rate further.  

How Can I Lower My LTV?

There are two ways to lower the LTV of your mortgage: pay down your mortgage balance or increase the value of the property.

Your loan’s LTV will naturally decrease as you make your mortgage payments. You can speed up the process by making additional payments to reduce your balance more quickly.

If you make improvements to your home, it can increase your home’s value. Real estate prices may also rise in your area, bringing your home’s value up too. However, to formally update the value of your home, you’ll need to pay a few hundred dollars to get it appraised again.

What Does a 50% LTV Ratio Mean?

A 50% LTV ratio means that you have 50% equity in your home. In other words, the total loan balance secured by the home — whether it’s a first mortgage, home equity line of credit (HELOC), home equity loan, or some combination of the three — is half the appraised value of the property.

As an example, your loan-to-value ratio is 50% if your home is worth $200,000 and you still owe $100,000 on your mortgage.

What Does a 75% LTV Ratio Mean?

A 75% LTV means that your loan balance is three-quarters of your home’s value. For example, if your home is worth $200,000 and your remaining mortgage balance is $150,000, your LTV is 75%.


Final Word

LTV ratio is one way that lenders look at the risk of making a loan based on the value of the collateral securing it. In the real estate world, LTV is a very important measure because it impacts things like private mortgage insurance and mortgage interest rates.

If you’re looking to avoid paying PMI or trying to get out of paying PMI on your loan, you’ll want to take steps to lower your mortgage’s LTV ratio. You can do this by investing in home improvements that increase the value of your home, then ordering a professional appraisal, or by paying extra principal each month to reduce your mortgage balance faster.

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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