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Edmunds: Shoppers should think twice about long-term loans | Lifestyles

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Car buyers have collectively blown past the stop sign of the old 48-month “golden rule” for car loans. In fact, 72- and 84-month loans are now more common than ever, propelled by rising vehicle prices and the reemergence of 0% loans. But long-term loans aren’t without pitfalls.

The average car payment for new vehicles hit an all-time high of $584 in April, according to Edmunds sales data. This reflects a trend of shoppers preferring costlier trucks and SUVs, as evidenced by an average amount financed of $37,618. But in an effort to make the monthly payments more palatable, people are taking out longer auto loans, which also hit a record average of about 73 months.

“Car shoppers are showing that they’re comfortable committing to longer loans to get the vehicles that they want right now, especially with the ongoing availability of 0% deals,” said Jessica Caldwell, Edmunds’ executive director of insights.

Long-term auto loans allow people to spend more on a car while keeping the payments low. But many buyers tend to overlook potential issues down the road that can prove costly. Here are a few reasons why a long-term loan can be a problem.

LOW FINANCE RATES WON’T LAST

In May of 2020, about 47% of vehicle loans were financed for under 3%. The low finance rates in recent months are some of the most generous we’ve seen in years. “But these incentives aren’t going to last forever,” says Caldwell. “It’s going to get tougher for car shoppers to find good deals as inventory declines over the new few months.”

Interest rates will go up as the market begins to recover. A few months ago, the interest rate average was closer to 6%. While many shoppers opt to make their monthly payments smaller with a long-term loan, they pay a steeper price in finance charges, especially when rates are higher.

For example, a current 84-month loan on a $37,000 vehicle at 2% would have finance charges of about $1,912. If interest rates go back up to their pre-pandemic levels, that same loan would incur finance charges of $8,404. Plus, not everyone will qualify for the low promotional rates. Those with bad credit will most likely end up with a higher interest rate.

Americans are not driving their cars “until the wheels fall off.” The data shows they tend to get tired of their cars not long after the loans are paid off, which defeats one of the main advantages of buying over leasing.

The average length of ownership for a new car is about 79 months, according to IHS Markit. Imagine you have an 84-month auto loan, and you get the itch to buy a new car around that common 79-month mark. You’d be stuck with five more months of paying for a car you can’t wait to get rid of.

Contrast this situation with a buyer who chose a five-year loan. At the average ownership mark of 79 months, this buyer has already enjoyed nearly two years without car payments and has the freedom to sell the car whenever the buyer wants.

A tougher yet more common situation is that you might need to get rid of the vehicle sooner than expected. Perhaps you’ve lost your job and can’t keep up with the payments, or you’re having a baby and your current car is too small. When you try to sell your vehicle, you may owe thousands more on the loan than the car is worth.

As with any long-term loan, you spend the early parts of the loan paying off the interest, which means it will take you longer to build equity. What often ends up happening is that people roll the remaining balance of the loan into their next car purchase. But that creates a longer loan commitment and higher monthly payments for the next car.

Resale value is another reason to steer clear of extra-long car loans. If you plan on selling your vehicle when it is paid off, a 5-year-old car is more desirable and more valuable in the used car marketplace than one that’s 7 years old. On average, a 5-year-old car will have lost about 48% of its value when new. A 7-year-old car will have depreciated by about 59%. Put another way, the new vehicle in our example will be worth roughly $19,240 after five years. It drops to $15,170 at the seven-year mark.

EDMUNDS SAYS: Low financing rates are a boon to car shoppers. But they can cause people to buy a more expensive vehicle than they need and stretch out the loan term to make the payments manageable. Educate yourself on the other implications of longer loan terms to avoid making the same mistakes.

This story was provided to The Associated Press by the automotive website Edmunds. Ronald Montoya is a senior consumer advice editor at Edmunds. Twitter: @ronald—montoya8.

Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

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ASK THE MONEY LADY: What you need to know about protecting your credit score | Regional-Lifestyles | Lifestyles

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Dear Greg,

Most people never want to share their social insurance number for fear of a hit to their credit bureau, but unfortunately, you may find it a necessity when asked by your lender, who now needs to ensure identity due to increased consumer fraud.

If you apply for credit at a bank, open a bank account or finance a vehicle, chances are you will need to disclose your social insurance number (SIN).

Many people still believe that they should never agree to an inquiry or give out their SIN number too many times to obtain credit. They think their credit will either become damaged or their credit bureau rating and score will go down. This is sometimes not true – so to help you out, Greg, I’m going to dispel all the myths and also let you know what the banks are looking for.

There are two major credit bureau companies that all financial institutions and merchants use today. They are Equifax and TransCanada Union – agencies that rank and provide an overall score to each person who uses credit.

The system for measuring hits to your credit score is indeed intuitive, meaning it measures and evaluates the type of merchant and inquiry. So, it knows if you are shopping around. If you have several inquiries from different banks because you are rate shopping for a mortgage, you will usually not see any decline in your score, (however, these inquiries must be contained within a 30-day period).

It’s the same thing when you are shopping for a vehicle – multiple hits to your credit bureau from car dealers will not alter the score if contained within 30 days.

But, on the other hand, if you are truly shopping and going to different stores, applying for multiple credit cards, personal and retail loans, or buying items on deferred payment plans, then yes, this will drop your score regardless of the 30-day limit.

Protect your credit

First and foremost, you want to protect your credit. This is the foundation of all lending and is the only way for lenders to judge your creditworthiness for the future. If you always pay your bills on time and have never declared bankruptcy, chances are you will have good credit.

But if you are the opposite, and your credit score is too low, you may find it very difficult to get future credit. Your credit bureau score can range from 300 to 900.

As a general guideline, banks and A-Lenders are looking for clients with scores above 680 and will generally automatically decline applications with scores under 600. Credit card companies are a little more lenient and will go down as low as 530, with auto declines for scores under 500.

Here are some tips to improve your credit and maintain a good rating:

1. Pay your bills two to three days before they are due. Paying them on the due date (especially through online banking) will make you one to two days late. This is recorded on your credit bureau and will definitely lower your score without you knowing it.

2. Do not carry balances on credit cards or personal loans month over month. This means your credit is revolving and will automatically drop your score.

3. Resist the urge to have a lot of open credit cards, even if they have zero balances.

4. You must have some credit. If you had previous bad credit and now are just using cash, you are essentially handcuffing your future. Without re-establishing good credit, the banks will decline you every time.

5. Property taxes and support payments in arrears can also drop your score once they are reported.

6. Mortgage and vehicle payments in arrears once reported (which usually happens after 60 days), are a major hit to your score. Please try to avoid this.

I have heard in the past that some merchants or banks do soft hits to your credit. Please do not get fooled by this. There is no such thing as a “soft hit” or a “hard hit” to your credit bureau. If they have your verbal consent, (even if they don’t have your SIN number) when they adjudicate a consumer credit request, they will hit your credit and it will adjust your score.

Good luck and best wishes,

Christine Ibbotson


Written by Christine Ibbotson, author of four finance books, including the Canadian best-selling book, “How to Retire Debt-Free & Wealthy.” Go to www.askthemoneylady.ca or send a question to i[email protected]

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Bad Credit Credit Cards – Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money | Fintech Zoom | Fintech Zoom

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Bad Credit Credit Cards – Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money | Fintech Zoom

Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money

Thanks to Covid, traders have been processing significant numbers of refunds due to events, such as holidays and weddings, being cancelled.

In many cases, these refunds have been sent back to the credit cards used to pay for the purchase – but this has caused a new problem to emerge in relation to card purchases.

When a trader provides a refund, it usually goes back via the same method as the original payment. So if you pay by credit card, the refund is sent back to that card.

However, many people have cancelled credit cards during the pandemic and have therefore found they cannot access the cash.

So what happens to your refund?

Will I get my money back?



If you’ve cancelled the card, the money will be sent to a holding account

The good news is that your refund is safe, as the money will simply be put into a holding ­account by the card provider.

The bad news is that it can take a long time to retrieve the money.

My advice, if you’re waiting for a refund for goods or services you paid for with a card you have now cancelled, tell the trader immediately and ask for the refund to be paid via an alternative method.

Get the latest money advice, news and help straight to your inbox – sign up at mirror.co.uk/email

Positive balance credit card accounts

When a refund is processed back to a card, it can create a positive balance on your account – usually when you have already paid the most recent card bill.

This potentially presents issues as credit cards are not designed to ‘hold’ money in the same way as a current or savings account.

For this reason, consumers are not encouraged to hold positive balances on a credit card.

If your card has a positive balance and you are likely to use it again soon, your next purchases will rectify the situation.

But if you are not planning to use your credit card again in the short-term, ask the card company to transfer the surplus to your ­current account. Do not withdraw the money via an ATM as this may attract fees.

Credit card cash withdrawals

Financial experts warn that you should not get money out from a credit card as it can have a major impact on your credit rating.

This is because there is a very high interest rate attached to withdrawals and companies will flag any withdrawals up, impacting a customer’s credit file.

Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money

Bad Credit Credit Cards – Bad Credit Credit Cards – ‘My refund has been sent to a credit card that I cancelled’ – your rights to lost money | Fintech Zoom

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Workout My Credit Solutions Rises as an Authority in Credit Repair and Financial Education

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Quality of life is impacted by numerous factors, and one of its most significant determinants is a person’s financial health. For the most part, financial stability involves the ability to provide for themselves or their family members without putting a significant dent in their wallets. As a concept, financial stability as well as financial freedom is easy to understand but achieving and maintaining it is a whole new story. Today, millions of individuals around the world are struggling with money issues, some of which are caused by the outbreak of COVID-19. However, there are those contending with bad credit, in particular, as a result of ill-informed decisions, mismanagement, and more. Widely acclaimed for the extent to which it helps clients get their credit into shape, Workout My Credit Solutions, LLC has emerged as a go-to venture that is currently making waves in the industry.

Also Read | Top 9 Upcoming Credit Repair Companies

This emerging powerhouse was launched by Nicole Fisher, a 25-year-old serial entrepreneur who has earned recognition for her all-out attitude toward lending people a hand through her initiatives. Highly cognizant of the impact of bad credit on one’s financial health, she started Workout My Credit Solutions in May 2020 and, since then, has been making it possible for clients to get approved for credit cards, mortgage loans, and auto loans, to name a few.

In just a year, the credit repair company has seen impressive growth, reaching remarkable heights due to its consistent delivery of top-notch services. Apart from restoring one’s credit into its former glory, Workout My Credit Solutions also delivers financial education because it believes in the importance of equipping clients with the knowledge they need to handle their money better. It acknowledges the existing gaps in the current educational system where ample attention is not given to arming people with the skills they need to secure a financially stable future. “Our goal is to help clients understand how credit works while they are in the process of getting it fixed,” shares Nicole Fisher.

Also Read | Top 9 Upcoming Credit Repair Companies

Additionally, Workout My Credit Solutions, under the leadership of Nicole Fisher, enables clients to get pre-approved mortgage loans after having their credit repaired by this five-star company. The additional service is strategically designed and incorporated into its inventory of offerings to translate into reality the dreams of those wishing to own a home.

On track to taking center stage, Workout My Credit Solutions has been on the receiving end of excellent reviews from everyone who has come under its wing. It takes pride in the long list of accomplishments it managed to snag under its belt shortly after its establishment and is set to reach the forefront of the industry in the coming years.

With its dedication to pushing people toward financial freedom, Workout My Credit Solutions is bound to remain an impressive force. As it carves a path toward the summit, it plans to continue serving as a leading authority in credit repair and financial education.

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