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COVID-19 Pandemic Projected to Hit Millennial Car Buyers Hard

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Many millennials entered the workforce with a financial disadvantage thanks to the 2008 market crash. With the recent COVID-19 pandemic and resulting economic downfall, they’re at risk of fallling even further behind compared to previous generations. Lower credit scores, interrupted employment stability, and less overall wealth could all impact a millennial’s ability to buy a car in the immediate future, as well as get ahead financially in the long run.

Economists believe that the coronavirus pandemic could be worsening conditions for millennials, the group born between the years of 1981 and 1996 that’s also known as Generation Y. The pandemic has affected millions of Americans, with unemployment hitting record highs, but the unemployment rate was higher for millennials.

According to the Pew Research Center, 12.5% of millennials were unemployed in May 2020, which is higher than the rate for Generation X and baby boomers. The Federal Reserve Bank of St. Louis says 4.8 million millennials lost work between February and May of 2020.

Millennials entered a workforce that was being ravaged by the 2007-2009 recession. Due to the slow start of building financial stability, many of them began their adult lives with lower credit scores and less savings than the generations before them, making it harder for them to land on their feet so shortly after they learned to walk.

Not only did the statewide coronavirus shutdowns hit them the hardest, many millennials didn’t have much of a safety net to begin with. The St. Louis Fed reports that over 16% of millennials didn’t have $400 for an emergency expense in 2019. They also say that about 25% of millennial households have more debt than assets.

Millennials are being tested by having to overcome one recession at the beginning of their adulthood, and a possible second as a result of the pandemic. This could lead to them having even lower credit scores, more debt, and even less car buying power.

COVID-19 heavily impacted retail and hospitality industries, which are made up of a younger workforce. While many were eligible for unemployment benefits, the interruption in their work history could have lasting effects on their ability to take on car loans and other forms of credit.

A consistent work history is a cornerstone of getting approved for bad credit auto loans. For borrowers with credit scores below around 660, subprime financing may be their best shot at getting approved. Millennials’ average credit score was 668 in January of this year, according to Experian. It stands to reason that they’re worse off now.

Bad credit lenders generally require borrowers to have six months to one year at their current job. Furthermore, they may be looking for a consistent work history of three or more years with no gaps longer than 30 days between jobs. Shutdowns in many states lasted for three months, which may lead to problems.

With many millennials forced into unemployment, their chance to get approved for a subprime car loan, even after they return to work, may be gone. That is, unless they spend some time rebuilding their credit. Lenders are more lenient with borrowers with better credit.

On top of all this, even those who were fortunate enough to qualify for unemployment benefits during the shutdowns can’t get approved for auto loans. Bad credit car lenders don’t offer loans to people who are only making a temporary source of income, let alone to borrowers without jobs.

The economic repercussions of the coronavirus pandemic are affecting all generations, but millennials are being affected the worst of the bunch. However, the effects are likely to trickle down to members of Generation Z, many of whom are just finishing up their four-year college degrees and attempting to enter the workforce in this turbulent economy.

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Why bad credit doesn’t have to be a life sentence

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JACKSONVILLE, Fla. – No matter if they’re bad or good, credit scores affect everyone’s lives.

Still, for many people, by the time they’ve learned the importance of having good credit, it may be too late.

“If you’ve had late payments, it would take 24 months of on-time payments to rectify the situation,” Jax Federal Credit Union Interim President Mary Svoboda said.

Svoboda said paying someone who claims they can fix your credit quickly is a waste of money.

“It can cost you several hundred dollars, and you can do it yourself,” she said.

Svoboda says those quick-fix businesses check your credit report for discrepancies and then dispute them. She explains how you can do it on your own instead.

“Check your credit report,” she said. “If there is something, it’s very easy to dispute it directly with the lender or through the online process with the credit bureaus. So you don’t need to pay for that.”

If there is any silver lining from the coronavirus pandemic, it is that all three major credit bureaus — Experian, Equifax, and Transunion — allow anyone to check their credit every week without any penalties. Before, you could only do that three times a year.

Svoboda added that Experian now offers a credit boosting service that is free and can help boost your score.

“The credit report would be linked up to your bank account and through your bank account they could see you have regular deposits and you pay your utility bill and your mobile bill on time, things like that,” she said.

Svoboda said some of the most common pitfalls she sees when it comes to credit is people have too many credit cards. She said that should be avoided when you start building credit.

“Sometimes it’s horrible, you see people that have 20 or 30 credit cards, so that is not a good idea,” she said.

That should all be avoided when you start building credit.

If you want to build credit but need some help living within your means, Svoboda recommends getting what’s called a secured credit card. It’s like a debit card in that you can only spend what’s in your account. But unlike a debit card, a secured credit card builds credit.

What if you’re taking steps to fix your credit but can’t wait and need a loan now?

“Right now, what I would encourage someone to do is if you don’t really have any credit, bring me your bank statements and show me, ‘Look at this. I have made a $600 rent payment for the first of the month for a year.’ I’ll say, ‘Let’s do this loan,’” Svoboda said.

While you’re rebuilding your credit score, Svoboda says you should care about it, make it important, and check it. Because a bad credit score doesn’t have to be a life sentence.

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How to Refinance an Investment Property in October 2020

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Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

If your investment property is mortgaged, then it might be time to consider a refinance. Refinancing can lower your interest rate, reduce your monthly costs, and boost your bottom line as an investor. However, rates can also be higher, so you’ll want to compare your options before moving forward.

Here’s what you need to know about refinancing investment property:

Advantages to refinancing an investment property

These are some of the most common reasons you may want to refinance your mortgage, and why they might benefit your situation.

Lower your interest rate

If market rates are lower than the initial rate you qualified for on your loan, then refinancing can help you lower your interest rate. That means a lower monthly payment, a bigger margin between your tenant’s rent and your mortgage, and more cash flow.

Lower your monthly payment

Refinancing to a longer-term mortgage can be another way to lower your monthly payment. If you only have 15 years left on your loan, for example, and then you refinance into a new 30-year loan, your balance is then spread out over many more years and months, thus lowering your payment. Keep in mind though that a longer term means you may pay more interest over the life of the loan.

Pay off your mortgage faster

You can also refinance into a shorter loan term, which would allow you to pay off your mortgage sooner and with less interest paid over time.

Head’s up: Shortening your loan term will mean a higher monthly payment.

Change the type of loan you have

In some cases, you might want to refinance to change your loan type. For example, if you have an adjustable-rate mortgage, you may want to refinance into a fixed-rate loan to keep your rate from fluctuating. Alternatively, you can also refinance to an ARM mortgage from a fixed-rate loan to save on monthly costs. ARM rates are generally lower at the beginning of the loan.

Cash in on your equity

If you’ve built up a good amount of equity in your home, then you might qualify for a cash-out refinance. This lets you take out a loan larger than your current balance, and then keep the difference in cash. You can use those funds in many ways — like for your business or otherwise.

Enable increase of rental income

If your refinance lets you lower your monthly payment or cash in on your equity, you can then use that freed-up cash to make the kind of investments that increase the income your property creates. You can update the property, repair items that need to be fixed, or add amenities that will justify a higher rent.

Pay for additional investment properties

You can also use the additional cash your refinance creates to fund additional investment properties. Use your cash-out refinance funds as a down payment on a new property or to cover closing costs on your next loan. You could even use them to pay for rehab costs on a fix-and-flip investment.

Cover other expenses

The money you free up through refinancing can also go toward other expenses — personal ones like vacations, college tuition, medical bills, or your retirement efforts. You could also use it to pay off credit cards or other debts.

Read More: Cash-Out Refinancing vs. Home Equity Loan

How to refinance an investment property: Step-by-step

Refinancing an investment property works much like applying for your initial mortgage loan. You’ll need to shop for a lender, fill out an application, go through underwriting, and close on the loan.

Here’s how to refinance your investment property, step by step:

  1. Shop for a lender
  2. Compile your financial documents
  3. Submit your application
  4. Lock your interest rate
  5. Work with your lender through underwriting
  6. Close on your loan

Step 1: Shop for a lender

Every lender has different mortgage refinance rates and fees, so it’s important to compare several options before deciding who to go with (Credible can help here).

Remember: You don’t need to use the same lender you did for the original loan.

Step 2: Compile your financial documents

You’ll need a good amount of documentation to refinance your investment property. Essentially, you’ll need anything that pertains to your income, assets, and personal wealth.

Here’s a sample list, though the exact requirements will depend on your lender:

  • Your last two personal tax returns
  • Your last two business tax returns
  • Two recent pay stubs
  • Any W-2s or 1099s
  • Proof of any additional income (disability, Social Security, pension, etc.)
  • Proof of your rental property income
  • The last two months of bank statements
  • The last two months of any asset accounts (IRAs, 401Ks, stocks, bonds, etc.)
  • Proof of your homeowner’s insurance

Step 3: Submit your application

You’ll need the above documents as you fill out your chosen lender’s application. They’ll use it to evaluate your risk as a borrower, determine if you qualify for the loan, and set your interest rate. They’ll also pull your credit report once you’ve submitted the application.

Step 4: Lock your interest rate

Once your application is processed, you’ll want to lock your interest rate to ensure it can’t rise before you close on the loan. Lenders’ lock periods vary, but they usually safeguard you for around 30 to 60 days. You may have to pay a fee if you want a longer lock period.

Step 5: Work with your lender through underwriting

As your lender works to underwrite your loan, they might request other pieces of information or documents along the way. It’s important you respond to these quickly and produce any documentation needed ASAP. The longer you take to respond, the more it could delay your loan closing.

Step 6: Close on your loan

Finally, your lender will assign you a closing date. This is when you’ll sign your documents, pay any closing costs, and finalize the loan. In many cases, refinances can be done at your property, with just a notary at the kitchen table.

Keep in mind: You have three days to change your mind on the refinance (called the right of rescission). If you don’t use this right, your loan will fund after that three-day period, and your refinance will be complete.

What lenders are looking for when refinancing

Lenders tend to be more strict when it comes to financing investment properties and second mortgages. That’s because the risk of default is higher. Typically, a property owner is more likely to stick it out with their personal home than an investment property in hard times.

Because of this, lenders require you to have a good credit score, a low and stable debt-to-income ratio, a bigger down payment (or more equity in the home), and more in cash reserves to qualify for an investment property refinance.

How to qualify for an investment property refinance

You and your property will need to meet certain requirements to qualify for a refinance. These requirements will vary by lender and loan program, but the below chart offers a good high-level look at what sort of standards you can expect to be held to:

Credit score 640 to 720
Debt-to-income ratio 45% (including your new, expected mortgage payment)
Loan-to-value ratio 70% to 85%
Equity reserved 15% to 30%
Cash reserves 6 to 12 months
Property
  • Up to 4 units
  • May need multiple appraisals
  • Must be safe and meet minimum property standards before funding (if you’re using an FHA loan)

How to compare investment and rental property mortgage rates

Rates and fees tend to be higher on investment property loans than traditional mortgages, so it’s especially important that you shop around and compare your options. You’ll want to consider at least a handful of mortgage lenders, making sure to compare interest rates, APRs, closing costs, and other fees when you do.

When comparing your options, you’ll want to look at these line items:

  • Interest rates: A lower interest rate will typically mean a lower monthly payment, but make sure you’re comparing apples to apples. You can’t compare one lender’s 30-year fixed refinance rates to another’s 15-year fixed refinance rates. Make sure you’re looking at the same numbers.
  • APR: APR is the annual cost to borrow the money, including the interest rate and any fees. It’s a good barometer for comparing lenders — especially ones who are really close on interest rates.
  • Rate locks: Refinances have been taking a little longer to process these days due to the high demand, so if one lender gives you a longer rate lock (and their rates and fees are comparable), they might be the better option.
  • Closing costs: The fees you’ll be charged at closing will be wildly different from one lender to the next. Take a look at the total cash you’ll need to bring to closing on each, and see which is lowest. You should also check if any of the lenders have rolled the closing costs into the loan on their estimates. While this lowers your upfront costs, it also means a higher loan balance, a bigger monthly payment, and more interest paid in the long run.

Credible can help make comparing your options easier. With just one form, you can receive detailed loan estimates for several lenders at once. You can also get pre-approved from each lender, allowing you to move forward quickly once you’ve made your decision.

Frequently asked questions about refinancing investment and rental properties

Refinancing your investment property loan can be a complicated process, and you might have some questions along the way. Here are a few of the most common:

Why are interest rates higher on investment and rental properties?

The main reason is that investment properties are riskier for lenders.

Not only are you more likely to default on the loan than someone who lives there, but your income also relies on the property. So, if the market turns sour, the home loses value and your income takes a hit — both of which are risky for the lender.

What is a good investment property mortgage rate?

This depends on the market, your location, and your current rate.

Generally, if you can reduce your rate and you know you’ll own the home long enough to reach the break-even point — or the point at which your refinance saves you more than it cost to execute — then it’s a smart move to refinance.

Should I refinance?

To determine this, you need to know your goals for refinancing. If it’s to save money and you will reach the break-even point, then it may be worth it. If you’re refinancing to get funds to pay off medical bills or the down payment on another property, then the answer depends on how much equity you have.

How often can I refinance?

Typically, there’s no limit to how often you can refinance your mortgage, though some lenders and loans may require some “seasoning” of the loan before you’re eligible. This is essentially just proof you can make your payments for a few months. For example, FHA loans require six months of payments before you can refinance your mortgage.

Can I refinance with bad credit?

There aren’t many home refinancing options for investors with bad credit. Some lenders will allow you to refinance an investment property loan with a score as low as 640. If it’s below this threshold, you may want to spend some time improving your score before applying. Not only will it help you qualify, but it could improve the interest rates you’re given when you do.

Compare your refinance options now

Are you ready to see what rates and loan terms you qualify for on your investment property refinance? Credible can help. You can compare multiple lenders and see prequalified rates in as little as three minutes.

Credible makes getting a mortgage easy

  • Instant streamlined pre-approval: It only takes 3 minutes to see if you qualify for an instant streamlined pre-approval letter, without affecting your credit.
  • We keep your data private: Compare rates from multiple lenders without your data being sold or getting spammed.
  • A modern approach to mortgages: Complete your mortgage online with bank integrations and automatic updates. Talk to a loan officer only if you want to.

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About the author

Aly J. Yale

Aly J. Yale

Aly J. Yale is a mortgage and real estate authority and a contributor to Credible. Her work has appeared in Forbes, Fox Business, The Motley Fool, Bankrate, The Balance, and more.

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5 Moving Loans for Relocation Expenses October 2020

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Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

If you need to relocate, moving loans could help you cover the costs. Moving loans are a type of personal loan specifically for covering relocation expenses, such as hiring movers, renting a truck, and more.

The average cost of a move within your state is $2,300 while an out-of-state move is $4,300 (also accounting for four movers and an average weight of 7,400 pounds). A moving loan could make these costs more affordable.

Here’s what you should know about moving loans:

Personal loans for moving expenses

There are several lenders that offer personal loans for relocating. Moving loans are generally unsecured personal loans, so you don’t have to worry about collateral. The lenders in the table below are Credible’s partners that offer moving loans.

Avant

Avant offers personal loans from $2,000 up to $35,000. A moving loan from Avant could be a good choice if you’re looking for personal loans for bad credit.

  • Rates: 9.95% – 35.99% APR
  • Loan terms (years): 2, 3, 4, 5*
  • Loan amount: $2,000 to $35,000**
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except CO, CT, HI, IA, LA, NV, NY, SC, VT, and WV
  • Min. income: $24,000
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. credit score: 580
  • Time to get funds: As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
  • Loan uses: Debt consolidation, emergency expense, life event, home improvement, and other purposes

Avant personal loans review

*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.

**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

Best Egg

You can get a $5,000 personal loan up to a $35,000 personal loan with Best Egg to cover your moving costs. If you need fast loan funding, Best Egg could be a choice option.

  • Rates: 5.99% – 29.99% APR
  • Loan terms (years): 3, 5
  • Loan amount: $5,000 – $35,000
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except DC, IA, VT, and WV
  • Min. income: None
  • Customer service: Phone
  • Soft credit check: Yes
  • Min. credit score: 640
  • Time to get funds: As soon as 1 – 3 business days after successful verification
  • Loan uses: Credit card refinancing, debt consolidation, home improvement, and other purposes

Best Egg personal loans review

LendingClub

You can borrow $1,000 up to $40,000 with LendingClub. As a peer-to-peer lender, LendingClub could be a good choice if you’re looking for personal loans for fair credit. However, because you’ll have to wait for an investor to accept your loan offer, a LendingClub loan might take a slightly longer time to fund.

  • Rates: 6.95% – 35.89% APR
  • Loan terms (years): 3, 5
  • Loan amount: $1,000 to $40,000
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except IA
  • Min. income: None
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. credit score: 580
  • Time to get funds: Usually takes about 3 days
  • Loan uses: Debt consolidation, paying off credit cards, home improvement, pool loans, vacations, and other purposes

LendingClub personal loans review

Based on a majority of borrowers from LendingClub’s marketing partners who were issued loans between 1/1/19-12/13/19. The time it takes for your loan to be funded may vary.

Marcus

Marcus is the consumer banking arm of Goldman Sachs and offers personal loans from $3,500 to $40,000. You’ll need good credit to qualify for a Marcus personal loan. Marcus could also be a good option if you’re looking for debt consolidation loans, credit card consolidation loans, or home improvement loans.

  • Rates: 6.99% – 19.99% APR1
  • Loan terms (years): 3, 4, 5, 6, 7
  • Loan amount: $3,500 to $40,0002
  • Fees: None
  • Discounts: None
  • Eligibility: Available in all states except MD
  • Min. income: $30,000
  • Customer service: Phone
  • Soft credit check: Yes
  • Min. credit score: 680
  • Time to get funds: Many Marcus customers receive funds in as little as five days
  • Loan uses: Credit card refinancing, debt consolidation, home improvement, and other purposes

Marcus personal loans review

1Rate reduction available for AutoPay.

2You may be required to have some of your funds sent directly to pay off outstanding unsecured debt.

3After making 12 or more consecutive monthly payments, you can defer one payment as long as you have made all your prior payments in full and on time. Marcus will waive any interest incurred during the deferral and extend your loan by one month (you will pay interest during this extra month). Your payments resume as usual after your deferral. Advance notice is required. See loan agreement for details.

Upstart

With Upstart, you can borrow as little as $1,000 or as much as $50,000. If you have a thin credit history, Upstart could be a good option.

  • Rates: 8.13% – 35.99% APR4
  • Loan terms (years): 3 to 5 years4
  • Loan amount: $1,000 to $50,0005
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except IA and WV
  • Min. income: $12,000
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. credit score: 600

    (in most states)
  • Time to get funds: As soon as 1 – 3 business days6
  • Loan uses: Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposes

Upstart personal loans review

4The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart platform will have an APR of 15% and 36 monthly payments of $33 per $1,000 borrowed. There is no down payment and no prepayment penalty. Average APR is calculated based on 3-year rates offered in the last 1 month. Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.

5This offer is conditioned on final approval based on our consideration and verification of financial and non-financial information. Rate and loan amount are subject to change based upon information received in your full application. This offer may be accepted only by the person identified in this offer, who is old enough to legally enter into contract for the extension of credit, a US citizen or permanent resident, and a current resident of the US. Duplicate offers received are void. Closing your loan is contingent on your meeting our eligibility requirements, our verification of your information, and your agreement to the terms and conditions on the www.upstart.com website.

6If you accept your loan by 5pm EST (not including weekends or holidays), loan funds will be sent to your designated bank account on the next business day, provided that such funds are not being used to directly pay off credit cards. Loans used to fund education related expenses are subject to a 3 business day wait period between loan acceptance and funding in accordance with federal law.

Learn More: Personal Loans With No Credit Check

Relocation loans: Pros and cons

Whether moving loans make sense for you depends on your situation. Here are some pros and cons of moving loans to keep in mind:

Pros Cons
  • Typically unsecured, so you don’t need collateral
  • Wide range of loan amounts available
  • Usually have lower rates than credit cards
  • Can come with high fees, depending on the lender
  • Limited options for borrowers with fair or bad credit
  • Interest will add to your overall moving costs

Check Out: Types of Personal Loans

How to qualify for a moving loan

To qualify for a personal loan for moving expenses, you’ll generally need to meet the lender’s credit and income requirements. Every lender has its own set of criteria, so it’s a good idea to research lenders ahead of time.

Credible makes this process easier — you can compare prequalified rates from multiple lenders in two minutes to see what loan option fits your needs.

Compare Rates Now

How to apply for a moving loan

If you decide to take out a moving loan, follow these steps:

  1. Estimate your moving costs: Be sure to consider all of your expenses to figure out how much you’ll need to borrow. For example, you might only need a $1,000 personal loan — or you might need a $10,000 personal loan.
  2. Compare your rates: Many personal loan lenders let you check your rates and loan options before filling out a full application. It’s also a good idea to consider what fees the lenders might charge. Credible makes this easier — you can compare your prequalified rates from multiple lenders at once after filling out a single form.
  3. Pick the option you like most: After comparing lender rates and fees, choose the loan that best fits your needs.
  4. Get your loan funds: Once you’ve made your choice, you can fill out a full application for your loan and submit any required documentation. If you’re approved, you’ll need to sign for your loan to have the funds sent to you. It typically takes one to seven business days to fund a loan — though you might get your money in less than five business days if you take out your loan through Credible.

Ready to find your moving loan?
Credible makes it easy to find the right personal loan for you.

  • Free to use, no hidden fees
  • One simple form, easy to fill out and your info is protected
  • More options, pick the loan option that best fits your personal needs
  • Here for you. Our team is here to help you reach your financial goals

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Checking rates won’t affect your credit

Alternatives to moving loans

You can use personal loans for a variety of purposes, but they’re not always the right choice. Here are some other options that could help cover your moving expenses:

  • Sell unused items: This can be a good way to reduce how much you’ll need to move while making money in the process. However, this takes time and effort.
  • Get help from family and friends: If you need help moving, your family and friends might be willing to pitch up with gifts or no-interest loans. Just be careful not to strain your relationships.
  • Use a 0% APR credit card offer: If you’re considering a personal loan vs. credit card, keep in mind that some credits come with 0% APR introductory offers. This could help you save on interest if you’re able to pay off your balance before this period ends. But if you don’t pay off your balance in time, you could end up paying some hefty interest charges.
  • Save up your money: If you know you’ll be moving in the future, you might have time to set money aside and avoid a cash crunch altogether. A high-yield savings account could be a good way to earn more interest while you’re saving.

Keep Reading: What You Can Use a Personal Loan For

American Moving and Storage Association

About the author

Miranda Marquit

Miranda Marquit

Miranda Marquit is a mortgage, investing, and business authority and a contributor to Credible. Her work has appeared on NPR, Marketwatch, FOX Business, The Hill, U.S. News & World Report, Forbes, and more.

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