Category

Loan

Talk to a credit counselor before taking out a loan.

Need A Small Loan? Here’s What to Do

By | Loan

Despite your best efforts, unexpected emergencies can crop up and leave you scrambling to find ways to cover the expenses. Instead of financing the costs with a credit card, you might want to consider taking out a small personal loan (for a few thousand dollars or less). A small loan might offer a lower interest rate than you would find on a credit card. As a bonus, making regular payments on a personal loan will add some variety to your credit mix — one of the key elements of a high credit score. In order to protect your credit, it’s critical to do your research when you are considering taking out a small loan. Even though you might be tempted to resort to the quickest or easiest option, that probably wouldn’t be the right choice for your credit. Here are the steps to take when you need a small loan.

Contact Your Local Credit Union

A credit union can often extend very competitive loan rates for consumers with less-than-stellar credit scores. You will likely have to become a member before you can take out a loan with a credit union, but this could be a savvy financial move anyway. Be sure to check out the requirements for holding an account at a credit union. Along with lower interest rates, credit union loans also boast more flexible payment arrangements and, when evaluating your loan application, will typically review more than just your credit score. Because of the lower rates they offer, a credit union could be your least expensive option when you need a small loan.

Research Online Lenders

The loan market is rife with online lenders — some great, some good, and some downright predatory. As with most loans, you will generally need to present a decent credit score to qualify for the most favorable interest rates on these small loans. However, there are plenty of online lenders that cater especially to borrowers with middling or poor credit. To protect yourself, you’ll want to look for a lender offering fixed monthly payments for a short term, such as between three and 12 months. That limits the amount of interest you’ll ultimately be forking over.

Explore Small Loan Features

Comparing the APR rates on small loans is essential. The next step, then, should be nailing down exactly what you need from the loan. Make a list of your “must have” features, as well as the ones that would just be “nice to have.” Would you like the flexibility of being able to reschedule a payment? Is a loan with no introductory fees a must? Could your lender possibly restructure your interest rate while you’re in the middle of the repayment period? Make sure you investigate all the features of your small loan candidates; the added convenience and flexibility could be just as important as the APR rate.

Consider Banks

All banks offer personal loans, but you’re more likely to find friendly service and an understanding ear at your neighborhood financial institution. Similar to credit unions, local banks may offer the small personal loan amounts that you need, at a favorable rate. You can also resort to more well-known nationally run banks, but these are more likely to require higher credit scores among the loan application credentials, and some will not consider approving loans below a certain amount. It’s worth first checking with the bank where you currently hold accounts, as they may offer a discounted rate for already established customers.

What to Avoid

Some consumers pop into the nearest payday loan shop when they need a small loan. Payday loan shops are known for offering small loans to those with credit problems. But if you can, it’s best to avoid this quick fix at all costs. Payday loans generally come loaded with fees and steep interest rates, which will only sap your finances further. You might even end up having to take out another loan to cover the costs of the initial one, which could set a vicious cycle in motion.

Turn to Us for More Help

We know just how important it is to have a clean credit report when you need a small loan. After all, the better your credit appears to a new lender, the more attractive — and inexpensive — your loan package will ultimately be. Give us a shout today at Ovation Credit and find out how we can help you realize your low-cost personal loan goals.

refinancing home loan

Does Refinancing Hurt Your Credit Score?

By | Loan

When you swap out a current loan’s lender for a new lender, it’s a chance for a fresh start.  Refinancing a loan — typically a mortgage, auto, or student loan — can make solid financial sense for several reasons. Most importantly, you’ll likely score a lower monthly payment, which will stretch your budget further. Ideally, the refinanced loan will also allow you to save on interest costs over the lifetime of the loan. Certain types of refinancing loans might offer you the opportunity to consolidate debt from other loans, or even extend access to cash for other expenses. As impressive as these benefits might sound, refinancing does come with its own set of risks. Depending on the type of loan, your decision to refinance could have several repercussions on your credit score. We took a look at the various effects of refinancing on your credit score to help you make your decision.

Before You Start

Check in with your credit report, just as you would when applying for a new loan. You’ll want to sit down and carefully review any recent additions to your report, as well as negative transactions or history. If you don’t recognize something in your report, now is the time to dispute the error. When your credit report is in solid shape, you stand to gain the most from refinancing — as you will be able to qualify for loans with more favorable terms and a lower interest. Even if you don’t spot a mistake, the credit report check-in provides some visibility into your current credit situation. You may want to continue to keep tabs on your credit report over the next few months, as you may notice some fluctuations during the refinancing process.

Hard Inquiries

Each time you apply for a loan, the creditor will run your credit report. This results in what’s known as a “hard inquiry,” which will be classified as such on your credit report. Although hard inquiries might cost you a few points from your credit score, the impact is generally a slight one. If you plan to apply with multiple lenders to nail down the best possible rate, try to squeeze your rate-shopping into a short window of time, such as less than 45 days. Major credit scoring models may view the numerous inquiries as just one, provided they are done in a fairly compressed time period. That’ll lessen the total blow to your credit. Note that you might see a hard inquiry on your report for up to two years, but it will gradually lose its effect on your credit as time passes.

Losing Out on Older, Positive History

Part of achieving a solid credit score is the length of your credit history. When you switch lenders, however, you may shorten the average age of accounts — a critical piece of the credit score puzzle. Depending on the credit scoring model, your refinanced loan might be treated as a brand-new loan with zero payment history. If the payment history remains on the refurbished loan, it may not weigh as heavily in the overall score calculation. Either way, you’ll lose out on a healthy source of valuable credit score points — although you will be able to reverse this effect over time once you build back up a history of on-time payments to your new lender.

Your Debt Levels May Jump

Some people opt for a “cash-out refinance,” which allows them to borrow cash immediately. The amount of cash you borrow will be tacked on to the new loan amount. For example, if your mortgage is $250,000 and you borrow $25,000, your total loan amount will be $275,000. This can be a dangerous arrangement, as you’re ballooning your debt levels and increasing your overall credit utilization. As a result, lenders and creditors might view you as a riskier prospect in the future.

Your credit score is just one of the many concerns you may have when you are considering refinancing one of your major loans. Turn to us if you need an extra hand whipping your credit report into shape before a refinance. At Ovation Credit, we specialize in working with credit agencies and disputing inaccurate items quickly and efficiently. Contact us today for a free consultation and learn how we can help you.

Leasing Vs. Buying a Car

By | Loan

Should you lease your next car, or should you buy it? It can be a tricky decision, with various positive and negative aspects to both options. An important factor ― one that some people neglect to consider ― is how each choice can affect a credit report.

It turns out that leasing and buying can have a similar impact on your credit score, so long as you’re able to make all of your payments in full and on time.

Leasing vs Buying Car

 

How Leasing Helps (and Sometimes Hurts) Credit Reports

Leasing a car can help you to improve your credit report. And, if you have no credit history to speak of, a leased automobile can assist you in creating one.

When you lease, you agree to pay a certain amount per month over a certain period of time. If you’re never late when paying, your creditor will let the major credit bureaus know, and it should strengthen your score.

A car lease is an example of an installment account. Whenever you’re paying sums of money in equal increments over a preset duration, you have such an account. Mortgages and student loans are two other kinds of installment accounts.

A full 35 percent of your credit score is based on the payments you make to your lenders. If you only have a few creditors, your car lease can have a significant impact on your score. In fact, if your score is lower than you’d like it to be, you might try leasing a car for the sole purpose of raising it.

Of course, if you miss one or more of your lease payments, you may lower your credit score. Before taking out a lease, then, take a hard look at your income, expenses and monthly budget. Be absolutely sure that you have the means to make your payments. Moreover, don’t forget that you’ll be responsible for paying for your vehicle’s upkeep.

Buying a Car

What about taking out a car loan in order to purchase an automobile? How might that course of action affect your credit score?

Well, the same basic principles are at play here. When you make your payments to your creditor on time, your credit score will go up, and when you don’t, it’ll go down.

The main difference is that with a car loan, your monthly installments would almost certainly be higher than they would be with a car lease.

What’s more, just as your auto loan payments can affect your credit score, your credit score can affect your payments. That is, if you have a good or outstanding score when you apply for such a loan, you’ll be eligible for a lower interest rate than you would be if your score were less than optimal.

With a lower interest rate, your car loan payments will present less of a financial burden, making it more likely that you’ll be able to pay all of them and ultimately raise your credit score. As you can see, when it comes to personal finances and credit scores, things so often get either progressively better or progressively worse.

Taking out an auto loan can improve your credit report in another way. Credit bureaus like it when people diversify their sources of credit. Specifically, they tend to reward individuals for relying on installment credit as well as revolving, or renewable, credit. A credit card is an example of the latter. Thus, if credit cards are currently the only kind of credit that you’re taking advantage of, you might find that securing a car loan automatically boosts your credit score by a few points or so.

Leases and Loans: Risks Usually Worth Taking

Whether you’re trying to obtain an auto loan or a lease, potential creditors may first conduct a hard inquiry into your credit history. And, every time such an inquiry takes place, your credit score will go down a little. With that in mind, it’s wise not to apply for too many leases or loans. Instead, do some research into available lenders, and then approach one reputable creditor at a time.

Also, in some cases, the fact that you’ve taken out a new account ― be it a lease or a loan ― can slightly ding your credit score. That’s because credit bureaus realize that leases and loans bring people new financial risk. Nevertheless, over the long haul, submitting all of your payments on time will have a net positive effect on your credit report.

As a final word of advice, it often makes sense to consult a credit repair company before you apply for an auto lease or loan. The experts at such an organization can scrutinize your credit reports and clear up any errors and misunderstandings that are damaging them. That way, your score will increase, and you’ll obtain the most favorable terms possible. Those pros can also answer any questions you have about leases and loans. Soon enough, you’ll be behind the wheel of a new vehicle, and you won’t have any extra financial worries to distract you as you cruise around.

Sources:

http://budgeting.thenest.com/leasing-car-improve-credit-score-21987.html

https://www.credit.com/credit-reports/tips-for-improving-your-credit-types-of-accounts/

http://www.experian.com/blogs/ask-experian/does-leasing-car-build-credit/

http://finance.zacks.com/happens-credit-return-leased-car-pay-difference-9907.html

http://www.marketwatch.com/story/how-will-leasing-a-car-affect-my-credit-score-1304360356298

https://www.wisepiggy.com/credit_tutorial/credit_score/does-buying-car-affect-credit.html

Credit Changes After Co-Signing a Loan

By | Loan

Co-signing on a loan is a big decision. You are putting your name on something that is not even for yourself. It requires trusting the other party to be as responsible a borrower as you are. This can be disastrous, but sometimes it works out okay.

Co-Signing Loan

Regardless, there are implications to your credit profile. Your score could drop, and you could even be left on the hook for the balance. If the other applicant fails to repay and the debt goes to collections, it can really hurt you.

Here’s typically what happens when you co-sign.

Applying Results in a Hard Inquiry

Your credit score has an initial drop from the hard inquiry. This occurs when your credit file gets pulled by the lender to see if your creditworthiness can secure the loan. Typically, your score will drop anywhere from 5 to 25 points after one or more hard inquiries in a specific time frame.

This factor is pretty negligible. Your credit score will lift back up soon after, as long as the loan gets repaid on time. Hard inquiries also only stay on your report for two years and usually impact your credit score for no more than one year.

Your Credit Report Gets a New Account

Assuming that the co-signed loan is approved, there’s now a new account showing on your credit report. How it appears will depend on the specific loan. But, in most cases, it will be an installment debt. This means the borrower must pay a fixed amount across so many intervals of time.

This type of debt will post as the full balance until it’s paid entirely. If it is a one-time need, the goal should be to cover the debt right away. The longer you carry the co-signed loan on your report, the more your score gets calculated with higher debt balances.

As with any debt, the credit reporting agency will notify the bureau every so often. Any payments made on time, or late, will get marked both on the credit report of the co-signer and the borrower. This late payment can impact the credit score of both parties. If it is your first late payment, it could mean 100 points or more lost.

Credit Utilization Ratio — How Does It Change?

Thankfully, co-signing on a loan is not the same as helping someone get a credit card. These installment debts will not play a role in your credit card utilization rate. This means that the second-biggest factor of your credit score will not be harmed. Since 30 percent of your FICO score depends on your credit utilization stance, this is a very good thing to realize.

However, while it doesn’t hurt your utilization rate, it almost does in the perspective of a new lender. Assume you try to qualify for a mortgage: Suddenly, the total debt you carry is higher. If you qualified for a $160,000 home loan prior to co-signing a $15,000 line of credit, now, until it gets paid, you might only be approved for $145,000.

Worst Case Scenario — Credit Score Damage From Co-Signing

By being eligible to co-sign, chances are you take your creditworthiness seriously. The amount you help someone borrow might be negligible versus what you can already borrow yourself. If so, the worst case scenario is that you have to pay the debt yourself — including any interest and penalties.

However, the damage is more crippling if you are unaware of payments in arrears. It is imperative to communicate with the borrower. You need to know if there will be a late payment — so you can prevent it from happening in the first place. As mentioned earlier, your scores could drop 30 to 100 points or more after just one 30-day late entry on your credit report.

Thankfully, there’s a bit of power for the co-signer. You have the right to request monthly statements. This is the simplest way to ensure payments are always made on time, and if a missed payment occurs, you can act on it quickly.

Your credit score will already have enough downward pressure. Just look below at how your co-signed loan can weigh in on some of the main credit rating factors:

  • Payment history: 35% of your FICO score depends on your payment history. Any late payments can be severely damaging to your score. A single missed payment could drop your score enough to cost you tens of thousands, especially if you plan to refinance your home soon. Your next loan will get approved with a lesser score, subjecting you to worse interest rates than normal.
  • Credit age: 15% of your score is made up of the length of your credit history. This new account is fresh and will influence a lower average age for your open accounts. It will close at some point and no longer be a factor. Regardless, while the account is open, it will only reduce the average credit age of a co-signer.
  • New credit: 10% of your score is also fundamentally backed by your new credit. FICO looks at whether you can really afford any new debt you take on. There might be large loans in your name already, and your credit score qualifies you as a co-signer. Yet, you might not be seen as someone able to afford more debt right now. Even though it is not technically yours, it is for this part of your score calculation — which is risky.

Conclusion

Co-signing a loan might not hurt your credit profile as much as you think. It’s more of a concern if you plan to finance a big purchase in the near future. But, absolutely never co-sign unless you trust the other borrower. Also, make sure to have funds available elsewhere in case you suddenly need to pay the loan off to save your credit.

Sources:

https://www.credit.com/credit-reports/what-is-a-hard-inquiry/

http://budgeting.thenest.com/late-payment-affect-cosigner-24854.html

https://www.thebalance.com/how-will-a-late-payment-hurt-my-credit-score-960543

http://www.creditcards.com/credit-card-news/help/5-parts-components-fico-credit-score-6000.php

http://www.moneycrashers.com/cosigning-loan-reasons-risks/

How Credit Scores Impact Mortgage Loans

By | Credit Repair, Credit Scores, Home Buying, Loan, Mortgage, Your Credit

Credit Scores Impact Mortgage Loans

Are you working towards financing a home? You probably know how your credit rating will impact your loan qualification. You pretty much need the minimum credit rating for FHA home loans, which is a 580 FICO score. If you cannot qualify for FHA insurance, you will be hard-pressed to find any lender until you fix your credit.

There are many implications that your credit rating can have on your prospective home loan, such as whether you actually qualify for the mortgage, how low of an interest rate you will get and what type of lender will work with you.
Now, there’s also an unspoken factor: how much your mortgage will cost in total.

How Your Mortgage Could Cost More

When you apply for home financing with a bad credit score, it is unlikely that a major bank will approve you. Since it is the major banks that get the best borrowing rates in the first place, your alternatives will be more costly. In the worst case scenario, only a private lender would consider you.

You might be somewhere in the middle and can get a home loan through a financial institution that accommodates bad credit borrowers. There are many reputable lenders in this area, but you still face the issue of a higher interest rate. This is because the banks know you are a higher risk.

Tip: Get your mortgage through a highly legitimate financial institute that works with bad credit borrowers while also offering traditional home loans. That way, you can repair your credit while holding the costlier loan and refinance under the same lender after your credit score improves.

Your credit score does not have to hold you back from a mortgage. You just need to make sure it’s not unexpectedly costing you extra.

What Will Your Credit Score Cost You?

When applying for a home loan, your decided interest rate is mainly calculated based on your credit score. So if you were to apply for a mortgage right now, what would this mean to you?

It all depends on where you live …

Let’s use Manhattan, New York as an example, seeing as how even a one-bedroom will easily set you back $400,000 or more.

Say you are buying an apartment for $400,000 and you give the minimum of 10 percent down. This leaves you with a $360,000 principal to finance through a mortgage provider. Let’s say the mortgage will run for 30 years and it’s a fixed-rate loan.

Below shows your total interest cost for the lifetime of the mortgage. These calculations come from MyFICO.com’s Loan Savings Calculator, which estimates your interest rate based on your FICO score range.

  • 620 to 639 FICO score: $319,418 total interest (4.793% APR)
  • 640 to 659 FICO score: $277,706 total interest (4.252% APR)
  • 660 to 679 FICO score: $245,727 total interest (3.825% APR)
  • 680 to 699 FICO score: $230,167 total interest (3.613% APR)
  • 700 to 759 FICO score: $217,414 total interest (3.437% APR)
  • 760 to 850 FICO score: $201,683 total interest (3.217% APR)

To put it into context, you are looking at saving $117,735 over 30 years by financing with perfect credit instead of below-average credit. From another perspective: your monthly payment will be about $327 less!

How to Make Your Mortgage Cost Less

There are some tricks that can help you qualify for a more affordable mortgage. Four simple ways to do this include:

1. Refinance Your Mortgage After You Buy

Your mortgage payments go through on time for half a decade, and suddenly the huge debt does not keep your credit score suppressed. The result could be seeing your credit rating go up by a considerable amount since when you first qualified for the mortgage. If this is the case, you could refinance the mortgage to lower your interest rate and ultimately make the rest of the mortgage term cheaper for you.

2. Rent-to-Own the Place First

If you are repairing your credit, but you want your new home now, you could try to buy through a rent-to-own agreement. You will be able to guarantee the seller gets the asking price as long as you follow through with financing at the end of the term. While the rent-to-own contract will set you back a little in equity, the much lower interest rate will create much more savings.

3. Wait a Little Before Buying

While this is not the most exciting solution, sometimes it makes a lot of sense. Say you have a bad debt in collections from six years ago. If that’s the case, waiting roughly a year will cause the negative item to leave your credit report and thus it will not hold back your FICO score. The end result could be a huge boost in your credit rating, or at least enough to score you a better interest rate.

4. Purchase Under Owner Financing

If you want your new home now, but rent-to-own will not work, you might be able to purchase via owner financing. This means the seller holds the mortgage for you for so long (usually 1 to 3 years), and then you can get your mortgage and make a balloon payment to buy it out. You can use the in-between time to repair your credit and this will help you secure a good interest rate. In the meantime, you will be paying on the home under the current mortgage conditions and your bad credit status will not cost you more.

Owner financing is really the only cost-effective and sound way to approach buying a home with bad credit. Otherwise, you could be throwing well over $100,000 out the window. That’s a lot of extra money to pay, especially if you are actually eyeing a one-bedroom apartment.

To conclude, get your credit repaired before applying for a mortgage because the cost of doing so is minuscule in comparison to what you will save on interest payments.

Sources:

  • http://www.fha.com/fha_credit_requirements
  • http://www.myfico.com/crediteducation/calculators/loanrates.aspx
  • http://www.investopedia.com/articles/mortgages-real-estate/10/should-you-use-seller-financing.asp

6 Credit-Score-Ruining Car Loan Traps You Can Avoid

By | Credit Repair, Credit Scores, Loan

car-loan-trapsSometimes there seems to be a science to getting a car loan that won’t leave you in need of credit repair. One key is to be prepared! Here are six common pitfalls the American consumer falls into when taking out a car loan.

1. Not looking past the monthly payment

Reframe the question from “Can I scrounge up this amount every month?” to “Should I?” Think bigger-picture here. If you view buying a less-expensive car in terms of how much you could be saving every month, it starts to look a whole lot shinier! And doing this will help you stand strong in your priorities when negotiating the overall price tag.

2. Not considering other financing options

Patiently researching before you pull the trigger is always good practice, but especially when you’re about to commit to a car loan. Don’t assume the dealer has the best financing option; sometimes you are paying for convenience. Check out what banks or credit unions have to offer before you step on the lot.

3. Not knowing to negotiate the interest rate

Did you know that you can haggle over the interest rate as well as the price tag? Be willing to ask the lender or dealer for a lower interest rate; this is one way you can save money over the life of the auto loan.

4. Taking a longer-term loan to reduce monthly payments

You already know to think “bigger picture” when it comes to the monthly payment. Now think about how long you could be tied to this loan, as well as the interest (that you negotiated). The longer the term of the loan, the higher the interest expense. Even if it means you need to downgrade your car options, consider getting a loan with a shorter term — it could be worth it in terms of money saved and credit preserved.

5. Not paying enough up front

The preparation you put into taking out an auto loan should include determining, and saving for, your down payment. A higher down payment means a shorter-term loan, lower monthly payments, and a lower interest rate. Experts recommend paying 20 percent up front.

6. Not knowing one’s credit score

The last surprise you need on the lot is to discover that your credit score is too low for a good interest rate. You can be prepared against all of the other traps listed above, but if your credit score is lower, your interest rate will be higher. Make sure you check yourself out before they do!

Not happy with that credit score and concerned you’re going to wind up with a higher interest rate on top of a car loan? If you don’t know how to improve your credit, contact Ovation for a free consultation. Our credit repair programs are customizable and our customer service is always available!

Enjoy the Tradition of Sharing a Long-Standing Family Name, Not a Blended Credit Report!

By | Credit Reports, Loan

Your poor credit score may not be a case of identity theft, or even the result of irresponsible management of funds. That is, if you have a shared name with a loved one. The tradition of honoring husbands, fathers, and grandfathers by passing down family names is a treasured custom, but can be downright tricky to manage with creditors. Applicants filling out credit applications may not always include generational titles (Jr., II, III) or keep the spelling of their name consistent (for example, David, Dave or Jonathan, Jon). To make matters worse, some relatives live under one roof, not allowing differing addresses to help with proper identification. And, while a similar birth month and date can also lead to account confusion, one or all of these mentioned factors can lead to an unintentional blended credit report. In fact, some duplicate name issues happen among those who are not even related.

There are Preventative Measures

We are all guilty of filling out paperwork as fast as lightning, but for those born with an inherited identification challenge or simply a common first and last name, careful review is suggested. Some other tips that can help avoid confusion;

  • On all forms, remain consistent with name spelling and always include identification clues such as “junior” or “senior”.
  • Offering all of the requested information, such as phone number, address and social security number (even if you prefer to be unlisted), can avoid a mix-up.
  • Additionally, an annual review of your credit history can nip an emerging problem in the bud.

What to do if Credit is Already Affected

Dispute, dispute, dispute. When someone else appears on your credit history, manage the mistakes by addressing the issues with the three credit bureaus–TransUnion, Equifax and Experian. The bureaus will present the disputes to the lender; however, the process can be long and daunting.

As we’ve written before, hiring a professional credit restoration company to work on your behalf, like Ovation, can help speed-up or improve the process of removing inaccurate credit report information.

Our experience working with the credit bureaus eases the credit repair process because we naturally anticipate industry tactics and responses. Ovation programs and services consist of disputing credit items, personal information and inquiries to all three credit bureaus, and disputing credit items directly with the creditor. Each program we have is customized to individual needs.

Ovation Credit Services is Happy to Help

Call us today for a free consultation to learn more about our services and how quickly you may be back in good credit standing.

 

Buying a Car: Cash vs. Financing

By | Ask a Credit Expert, Loan

auto-financingThere are so many reasons to need a car – and many more reasons to want a car. Oh the love affair we have with our vehicles. But deciding how to pay for a new car can sometimes be as difficult as choosing the paint color.

Pay in cash or finance? There are pros and cons to both options. Ultimately, the best course of action will be determined by your overall financial health and goals.


Cash Pros

Imagine a life without a monthly car payment – sounds great right? That money could be used for savings, paying down debt or investing for retirement. And that’s not the only reason to pony-up cash at the dealership. Cash buyers usually pay less than those who finance. Even if the dealership is offering 0% APR, there are often rebates for cash customers, not to mention having cash-in-hand puts you in a stronger bargaining position. Owning your vehicle from day one also gives you the ability to decide when and if you want to sell your car


Cash Cons

Paying cash will seem a lot less fun when you realize what your budget allows. Even for luxury vehicles the financing terms may seem affordable, but when you need to scrimp and budget your way to a lump-sum payment for a vehicle, your dream car might be out of reach. Another con of paying in cash is handing-over that hard earned savings. Maybe you had to deliver newspapers or swear off Starbucks to save your car money and now that you bought your car, you no longer have that financial cushion you worked so hard to build. But, remember, without a monthly car payment you should be able to rebuild a sizeable savings account (even if you do return to your latte habit).

 

Financing Pros

Banks, Credit Unions, car dealerships – they all want to pay for your car, so let them. When you finance a vehicle, the lender technically “owns” the car and they will want to protect their asset. That means warranty programs that may not be available if you pay in cash. Financing is also particularly smart for people, like students, who need to build credit history. Part of your credit score is determined by the types of credit you have (mortgage, credit cards, student loans, etc.) and a car loan is one type of credit. Also, if your credit score is good (in the 700s) you will likely get offered one of the best interest rates.

It may seem counter-intuitive, but if you have a really great credit score and you have enough savings to pay cash (without depleting your emergency fund), you should finance. If you take the cash to pay for your car and put in a high-interest savings account, finance your car for 0%APR and have the car payments set-up to automatically come out of that savings account – you will actually make a little money from the interest earned. You get the benefits of not “paying” for your car every month, plus the warranty benefits of financing.

 

Financing Cons

Of course, there are cons to financing. As mentioned before, the monthly payment can really drain your budget and eat-up your free cash. Also, cars always lose value. When your financing terms are over and you decide to sell, you will sell the car for much less than you paid for it. If your credit score is suffering, that vehicle purchase can get really expensive, really quick. No matter what your credit score, there are many lenders who are willing to offer car loans – but, at very high interest rates. That monthly car payment will hurt a lot more if it’s the size of your mortgage payment.

Consider your entire financial picture when you decide how to purchase your next vehicle. Do you have a good enough credit score to secure reasonable financing? Will a used car fit your needs until your debt is under control? Your car needs to be able to get you where you need to go in life, but it shouldn’t detour your financial goals on the way there. If your credit is on a detour then call Ovation Credit for a Free Consultation and see what you can do to bring your credit report and score back on track.

 

Consolidated Student Loans – 5 Things to Know First

By | Debt, Loan

Student-Loans-Ovation-Credit

You may think that your time at college was a priceless experience, but the people who loaned you money are all too willing to tell you exactly what that post-secondary education is worth. Dealing with multiple loans from either a private bank or from the government (or both) can be overwhelming. Consolidated student loans – or making those multiple loans become one single loan – can not only be more convenient, but it can also save you money.  But whether you’re trying to improve your credit score, get a lower monthly payment, or just consolidate into one single payment, there are some things you should know before considering loan consolidation.

1. Federal and Private Don’t Mix

Because of the low interest rates on federal student loans, they generally can’t be consolidated with your private student loans.  You can consolidate multiple federal loans into one loan and multiple private loans into a new single loan, for a total of two new loans. Keep in mind with federal loans that once consolidated, the original loans no longer exist. You will lose the borrower benefits offered by the government, such as rate discounts, principal rebates and cancellation benefits.

2. One New Monthly Payment

When you go to a bank or a private lender for a consolidation loan, that new lender pays off all of your outstanding loans. One new loan is then created by the lender for the amount they paid to close out the old loans, plus interest. Since a brand new loan is created, this means that you can negotiate the interest rate and the length of the loan. Often consolidated student loans offer a longer period of time over which to pay the loan back, which would reduce your monthly payment, but would of course increase the total amount you’re paying over the life of the loan.

Private lenders are much more willing to consolidate student loans than they have been in the past. They’re also offering consolidation loans with variable rates as low as 4.25%. Variable rates are beneficial because they generally have a lower starting rate than fixed rates. However, keep in mind that a variable rate will fluctuate– so your monthly payments may rise and fall over time.

3. What’s Your Number?

Your FICO number, that is. Your credit score will affect both your ability to get a consolidated student loan and the interest rates you’ll be able to secure. If you’ve been delinquent with paying your existing loans a new lender will see you as risky. However, if your FICO score has improved by 50 to 100 points, you’re a great candidate for a better interest rate on a consolidated student loan. If your FICO score is low, start making regular, on-time payments to your credit cards, student loans and utilities. In a year or two, your score should improve and consolidation may be more viable.

4. My Loan, Your Loan

When you first signed for your student loan, you may have needed a co-signor (probably a family member) who had better credit than you. When you apply for a consolidation loan, which is a brand new loan, you may still need a co-signor if your credit score hasn’t improved. However, some private institutions are removing co-signors from consolidated student loans after one-year of perfect re-payment.

If you managed to build your credit score while at college, you may be able to get the consolidated student loan on your own. Having the loan in your name only will further help you strengthen your credit.

5. Extra! Extra!

Always ask about any additional fees that you may incur by having a consolidated student loan. Will you have to pay a fee for closing your other loans early? Some lenders have penalties for pre-payment. A pre-payment is a monthly payment that exceeds the amount due – regular pre-payments can significantly reduce the principal of your loan over time, which means less money for the lender.

There are many factors to consider before consolidating your loans. You’ll want to do the math and see exactly what your savings will be, including any fees. But, if you’re having some difficulty paying all your loans on time, consolidation might be the best way to save your credit score – lowering your monthly payment and making re-payment more manageable. Remember, consistent on-time payments are the best way to dig yourself out of student debt and build your credit.

 

Easiest Way to Pay Student Loans? Don’t Have Them!

By | Debt, Loan, Personal Finance, Save Money

Most well-paying jobs require a college education, but graduates spend the bulk of their first few years just paying off their student loans. After four or five years of endless studying and late-night pizza deliveries, you have a diploma – and about $100,000 in student loan debt.

In a depressed economic climate, student loan debts are being put aside just to pay the bills; this causes many loans to go into default. Do not be a victim of high education debt! With hard work and excellent time management skills, you can graduate from college without student loans.

While the full-ride scholarship is rare, there are many partial and specialized scholarships available. The college itself often has many different scholarships available for everything from sports to academic majors. Some high schools have scholarships contributed by various alumni and can be based on scholastic merit or activity.

Various organizations and charities also provide scholarships. If you are or a parent is a member of veterans, social or other organizations, you can check to see if they have scholarships. A scholarship doesn’t have to be paid back and can be as little as fifty to several thousand dollars. Attending the school where your parents attended may also give you access to alumni scholarships.

You may be able to pay your way through college using monthly payments. This requires having a job while you are enrolled, and it can be challenging to work and study simultaneously, but many students find the right balance. You can also save money by only going to college half-time or by starting at a community college. Most financial aid offices offer monthly payment plans to help you manage the cost. You can spend a few years flipping burgers during college and go into your corporate job debt free.

For some, delaying college and working prior to attending, to save up money for tuition, might be the right choice. You can even work during high school. Many high schools partner with local community colleges so that students can earn college credit at a much lower price. Exploring these options, as well as taking AP classes that grant college credit when you successfully pass the AP test can also reduce your overall student debt burden.

While these tips won’t help those currently straddled with the heavy burden of student debt, these tips can help those who are just beginning to consider college:

  • Attend a state school instead of a private school, to benefit from lower tuition rates
  • Rent books instead of buying them, to save hundreds of dollars each semester
  • Get hired by a company that offers a tuition reimbursement program
  • Live at home instead of in dorms and save $5,000 – $8,000 a semester or more

If you want to graduate with no student loans, then you need to exhaust every cost saving measure before and during your college career.

Call Now for a FREE Credit Consultation

CALL US NOW