What You Should Know About Loans and Interest Rates

Taking out loans and credit has become the norm in today’s society. Instant gratification, ‘I want it now’ mind frame, and paying for things with borrowed money. Borrowing money has become easier than ever with banks, credit companies and private individuals lending money to almost everyone. Each time you take out credit you are hit with an interest rate. The interest rate is that special figure which is going to cost you a lot more money than you initially borrowed.

Say you borrow $1000, the interest rate is 15%, then you are going to pay back an extra $150. The interest rate your loan or credit card will have will depend on who the lender is, your credit history and how much you are borrowing.

Interest is how loan lenders make their money. It would make no sense to lend money to people without making a profit. However, not all interest rates are created equal. For second-chance loans, for example, the interest rate is usually much higher than when you take out a mortgage. Interest rates on credit cards vary from bank to bank, credit company to credit company. Some places offer credit cards with small interest rates of about 7-10%, while others stick to ridiculous interest rates that sit at about 25%. Yes, people still use them.

Interest rates are the extra amount you are forced to pay when you take out any sort of loan and they come in various packages. Some interest rates can be variable, others fixed. Variable and fixed interest rates are very common when taking out a mortgage. When an interest rate is variable the credit company can reduce it and increase it as it sees fit. So today you’re interest rate might be 10%, but if you’re on a variable rate it can go up to 15% or down to 8% at little notice and no say from you. Fixed interest rates are ones that are fixed to stay the same for a certain period of time. If interest rates are low and you know that there’s a risk that they are going to increase then it’s a good idea to get them fixed for one to five years.

Contrary to many people’s beliefs, interest rates can be negotiated. Remember, you are the client and banks and other credit companies want clients so that they can make money.

The problem is that most people don’t negotiate because they are clueless or they don’t know how to. Whenever you apply for credit you should consider asking for a lower interest rate. Your success will depend not only on your negotiation skills but also on your credit history and your relationship with the bank or credit company. Don’t be afraid to ask, the worst thing they can say is no but you might be surprised and get a much better offer, especially when you tell them you want to be a long term customer.

Interest rates are not only calculated on credit and when you take out loans. They are calculated on your savings account also. In this case, you want to have the highest interest rate possible so that your money works for you. If you have $1000 sitting in your savings account, and the interest rate is 5%, then you $1000 is going to make you an extra $50 by the end of the year.

Interest rates aren’t always bad. Sure they cost the borrower money, but they can make the saver money too. If you want to pay less interest, then the only thing to do is either don’t take out any loans or when you borrow money to pay it back as soon as you can.

By making extra repayments you will reduce the life of your loan and pay less interest.

Financial Steps To Take Before Buying A Car

Before buying a car, it’s very obvious that you have done your research about selecting the right model. But the way to afford your dream car also goes in hand to hand with your financial situation and we will discuss ways to save your money before buying a new car.

Scrutinizing The Credit Scores:

While planning on getting the financing done for the car, the credit score is the most important factor in getting one with the lowest interest rates. Your credit score apparently reflects your financial image and your risk factor and lenders go through these hard facts before deciding upon a rate or whether to at all lend you the money. So, it’s always advisable to check your credit scores, now for free at my company’s website, CreditKarma.com or on other sites. Do check and aim that your score remains above 720 credit score because that remains a yardstick for getting the best interest rates.

Figuring Out The Spending Structure:

While making a decision on purchasing a car, deciding upon the budget is important because it makes you realize whether you can afford it or not. First, take the net income of yours and calculate a 10 to 20% of that for your monthly car expenses. Now everyone’s living standards and situations are different so percentages can vary but this 10-20% rule remains a baseline for budgeting.

Saving For Down Payment:

Keeping a fund handy to pay off the down payments is always justified. This can be explained like this, if you don’t have a good credit score, chances are more that you may get a loan only with a down payment option. Also, interest rates depend on the credit scores so in a case of high interest rate, paying off more in down payments will potentially save hundreds of thousands of dollars. That being said, though down payment while buying a car is not mandatory but definitely strongly advised. If the down payment rate is 20%of the car’s price with 10% being the minimum rate for refurbished cars then the average price of the new car was more than $35000 in 2018 where $7000 was needed to make as the down payment. So, you may keep saving for the down payment or select from ales expensive car.

Choosing From Different Financing Options:

One can always make full cash payment to buy a car, thus negotiating on the price but realistically speaking that number of people are very few. So it’s better to do an extensive research to avail the best option and to get the sweetest deal. Dealer sponsored financing is easier to find, but they never gives you the best rates so it is always better to look into local banks, credit union where they have more open financing policies and gives you a much lesser rate than dealer sponsored deals. So never shy away from researching and comparing various auto loans, carefully monitoring the loan term, the APRs as well as if there is charges, fees or penalties. Also, if you get sanctioned of a pre – approved loan, you get the upper hand while negotiating for a good price. Always try to keep the loan tenures to five years or less because longer the loan term, the interest costs keep on skyrocketing. Also try keeping a buffer time before making the purchase so that you have abundant time to choose a financing option else there is always chance that you will fall prey to a dealer’s loan and his terms because you ran out of time.

Planning the Trade-In

Privately selling or trading your used car is a very popular way to fund the down payment in cases of requirements of a new car, provided it is in a decent condition. You can visit a marketplace like CarMax or trade at the dealers where they will trade – in for a financed car or will give you a loan while you will be paying off for your old ride. But the best way to sell the car will always be a trade-off between getting the highest bid for the vehicle and convenience. Though a dealer will save up you time and hassles compromising your price though. So if you are a newbie it will be better to sought after a dealer because finding the right customers can become quite a challenge. However Kelley Blue Book’s is nice place for such new players to explore and to get a decent offer.

These are the top 5 steps to become a pro for a car purchase!

How Personal Finance Software Helps You Get More Out Of Your Money?

Personal finance makes life simpler. It may take some time to learn how to use it but in the end, you will have a great understanding of personal finances along with good control. Mentioned below are ways how it will help you get more out of your money.

Set Alerts:

By setting alerts you will remember everything. When it will be a closing on a particular bill due date, you will be aware of what time you should spare. If you have been charged a late fee, you will have an idea about it once you open your bill or log in to that account. You can set alerts that will be triggered when there will be a drop in rate of interest or during availability of a better deal on any credit card or loan. Alerts are delivered to your phone as a text message or email. Keep the timing as well as frequency, dollar amounts along with various particulars to customize the alert system that will work ideally for the way you will be able to manage money.

Track Your Investments:

The personal finance software will not stop with money in and out. It will also help to keep an eye on your investments. Having your entire investment portfolio handy, you can quickly have a look at how well your investments are performing. You can also understand which investments require attention and also compare your choices to investments made by others. Investment suggestions on the basis of your style as well as goals of personal investing are also provided by personal finance software. If a brokerage firm tucks away any fee in the fine print, the software will let you know about it.

Manage Your Spending:

Keeping all the finances in one place will help how to understand how you spend your money. Most of the personal finance software will use your accounts to set up easy-to-read charts along with graphs related to where as well as how you keep on spending. Start focussing on the trends that will impact your personal financial goals. If you find that you shop a lot, then reduce it. Use the amount that you have spent on any unused membership in a gym to encourage you to work often or otherwise cancel it.

Create Individual Categories:

Some of the personal finance software comes with more than 100 categories that are pre-loaded. But you do not have to use it similar to other’s rules. You can customize the categories and create new ones on your own. You can also maintain some of the standard ones as well as add some others that will suit your requirements. If you want you can break your shopping to smaller categories for groceries, clothing, lawn as well garden and pet supplies. When you will purchase a product, the software’s smart interface will apply it to the correct category each time.

Make Use Of Graphs:

This software will allow you to view itemized areas available in your budget. But it will also allow you to step back and have a clear view of your personal finances completely. Handy graphs will reveal every segment that you want and the way you wish to see it. It is also done in simple language. Become aware of your personal net worth, study individual accounts, gain knowledge about where discretionary spending is happening the most, look out for trends with your saving and expenses and also discover those things that you might have overlooked.

Include Mobile For Tracking:

Mobile will make your budgeting simple, quick as well as convenient. Your budget will go along with you everywhere. Understanding your budget will free you from sudden expenses and fear of overdraft fee or any over limit charge on the credit card. You can keep the application using personal finance software on more than one mobile. Such a feature will help everyone who contributes to budget and is responsible for it to keep track of purchases and also on the same account.

Personal finance software has the potential to aid you in taking control of the money and achieving your financial aims. While some focuses more on budgeting and expense tracking, others give importance to investing portfolios along with income taxes. Search well and find out the right one for you.

How To Get Out Of Debt Fast?

Debt is like the giant black cloud of fright that keeps on looming over your head. There are various avenues of clearing of debts quickly and it all starts with the right planning because without a plan you can’t start from anywhere.

Developing A Financial Strategy:

It is basically a paper or a sheet consisting of an overview of your entire financial picture. A copy of the financial game plan form can be found on our Recommendations page. This form will show you the right path to give you that financial clarity so that you can earn enough to pay off your own debts as well as highlighting those areas where you need to pull back the spending. Once you know your monthly expenses and your monthly income, maintain a written record of those.

This game plan form will aid you to decide at that instant whether you are making enough to pay off your debt and then try to figure out how to pay off those quickly. This simple task as it seems may have been possible by only some rearrangement of the spending or by bringing in more money or it can be a mix of both the ways. This form should be considered as the initial assessment of the situation which will eventually give you a bigger picture to use and to create a more detailed plan to pay off the debts quickly.

Deciding On What To Pay First:

Once you have the idea of how much you owe the strategical part to counter the debts. As a starter, you should start by prioritizing which debts needs to be paid off first, whether it be the credit cards or the education loans or whatever is there based on their interest rates. You can start with the loans with the maximum interest rates at first. For example, if Credit Card A has a limit of 1000 bucks along with a 12% interest rate and another B credit card has 1500 bucks with 6% interest, you will put down a total of 150 bucks every month, which is the minimum payment of 3% on one and putting the rest on the other.

In this way, we will save more money if we pay off Credit Card A faster than the other credit card. Now that you have prioritized, a plan of action needs to be worked upon. In the case of Education or Student loans, it is actually possible to save thousands of dollars every year just by paying the debt a little more than usual every month. For example, if you have a $10000 student loan at an interest rate of 6.8% with a 10-year long repayment tenure, you need to pay only approximately $115 every month to abide by the standard monthly payment.

Monthly Tracking Of Finances:

Effective tracking of finances every month is another very important step to get out of the debt. You have to be intentional about your finances in order to create a solid financial picture. You must restrict yourself from spending money unaccountably because in that way you will always keep on wondering where all the money got disappeared and if you fail to understand where your money is going you will never be able to accumulate enough money to clear off your debts. So, the best way is to create a tracker budget which will help in tracking all the cash inflows at the top and outflows at the bottom. Here, it must be addressed that though many people think that paying bills on time are all that matters, but in reality summation of all these small purchases ads up to a significant amount at the end of each month and you may be surprised to see how much money gets spent on trivial unnecessary matters.

Paying off The Debts With The Extra Cash:

This step cannot be overlooked because by if you keep on paying your debts with whatever extra or unexpected income you are having, it can really boost up the chances of paying off your debts real fast.

Debt Refinancing:

Sometimes it does makes sense to opt for refinancing because it is always preferable to pay a lower interest rate than paying over 15% in interest over some old loans. This is very smart tactics and Credible can help you in searching many such lenders who can provide you refinance rates astoundingly low like only 4.99% APR.

So, remember all these steps and eliminate debt and thus live a happy and rich life.

How To Save Money With A Credit Card Balance Transfer

While carrying high interest debt, it is difficult to think about how another credit card will possibly aid your situation. But the right type of credit card such a balance transfer card will actually offer some relief. So consider the benefits of balance transfer properly.

Define Balance Transfer

Transferring the balance implies that you are moving all or at least a part of a debt from one of your credit card to another. People are seen to make use of balance transfer credit cards to get benefited by lower rate of interest. So switching your debt to a card that comes with lower rate of interest will allow you:

  • to pay less rate of interest on the existing debt
  • to organize all the finances by making several monthly payments consolidated into one

Ways To Save Money With Balance Transfer

Select Balance Transfer Carefully:

Get an idea of all the credit cards, balances, and rates of interest. Select one or more credit cards with high rates if interest whose balance you wish to transfer to save some money on interest. There is a need that the balance will be in your name to qualify for the transfer. So if your spouse is having a credit card balance with high interest and you have great credit, then you can use a 0% offer to aid him to pay off this old balance and then start together debt-free.

Evaluate The Fee For Balance Transfer:

If there is any balance transfer fee, note and calculate how much you need to pay on that amount you wish to transfer. It is usually 3%-5%. So you will have to pay $30-$$50 for every $$1000 that you will transfer. If in the fee the capital amount is included then you can transfer larger balances easily. So if the balance transfer fee is of 3%, till a maximum of $75. You can transfer a balance of $5000 but because of the capital you do not have to pay $150 but $75 which is an effective rate of interest of only 1.5%

Ensure How Much Transfer Is Required:

Check the limit on your new credit card. You can place a request for a balance transfer of more than the available line of credit. The balance transfer fees will count toward that limit. So if you have $10000 in your available credit, you would not be able to transfer a $10000 balance with a 3% fee for balance transfer. You will require $10300 in your available credit to complete this transaction. The maximum you can transfer is $9700 approximately.

Decide The Place For The Balance Transfer funds:

Decide whether you want it to directly go to another creditor to clear off the balance or you want the amount to be deposited in your bank accounts in order to pay off the other debts. Make sure that in the latter scenario, a deposit of funds in the bank account is not considered as a cash advance. If you take a cash advance accidentally then you will pay interest immediately on the transaction and at a high rate.

Examine The Time Limit for Completing The Transfer:

In case of a new credit card, you will have to get the balance transfer completed within a few days. It is usually 1-2 months in order to get any promotional rate. Become aware of it before getting a new credit card. If you complete the transfer after the window closes then you will have to pay the regular rates of interest.

Meet The Basic Needs:

If your new account is with the same credit card company whose balance you wish to pay off, you cannot perform a credit card balance transfer. A past due payment with the creditor to which you wish to transfer the balance or in case of filed bankruptcy, your balance transfer request will be declined.

If money can be saved at the time of the promotional period, despite any balance transfer fees, you will come out ahead of any debt easily. So instead of spending your savings, work it into your balance to get out of debt faster than it was possible.