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How do rent-to-buy cars work?

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Some car-related terms and phrases are complicated, but rent-to-own isn’t one of them. In fact, the meaning of rent-to-own is exactly what the name suggests. You rent the car during the agreement period, and at the end of this term, you become its owner.

How does rent-to-own work?

After your home, your car is possibly the most expensive purchase you’ll make. Often people fund the purchase with a car loan. However, if you have a bad credit history or a low credit score, you may find it challenging to get auto finance. Rent-to-own cars are another option. Basically, it allows you to own a vehicle without a traditional loan.

Under a rent to buy cars agreement, you’ll pay for its weekly use. You enter into a contract and will buy the vehicle at the end of the agreement period. The weekly payments cover the use of the car and contribute towards its ultimate purchase.

Once the rental period ends and you make the final payment, the ownership is transferred to you. The contract may require you to make a down payment at the start of the term or a lump sum amount at the end of the agreement period.

Pros and cons of rent-to-own

Rent-to-own may seem an attractive option, especially if you’re not eligible for a regular auto loan due to a low credit score. However, before you rush into the decision, you must do your research and understand the terms and conditions of rent-to-own car loans. Sometimes, this arrangement may cost you more over a longer term.

Is a rent-to-own car arrangement right for you? That comes down to your personal situation and preferences. Consider the following pros and cons to make an informed decision:

Pros of rent-to-own cars

  1. When compared to regular auto finance, rent-to-own agreements do not require extensive credit checks. Some lenders may not even do a credit check, which means you’re more likely to get approval even with a poor credit history. Don’t forget to check the rental amount against your budget to ensure that you can manage the payments each month.
  2. As there is no loan, rent-to-own arrangements do not have any interest component. If you opt for a regular car loan, the interest could stack up to several thousand dollars during its duration.
  3. When you make regular rental payments, it can help improve your credit score. Of course, your credit score may be negatively impacted if you delay or default on the rental payments.
  4. Some agreements for rent-to-buy cars include your insurance and registration costs as part of the weekly payments. This way, the amount you have to pay remains the same, and you can budget your expenses more easily. 

Cons of rent-to-own cars

Of course, there are several cons to consider as well. 

  1. For the duration of your rental, the company retains ownership, which is not transferred to you until the last payment. You don’t have the freedom to make changes to the vehicle to suit your needs. Additionally, you cannot use the car as security for another loan.
  2. As per the rent-to-own agreement, you may have to make a lump sum payment at the end of the contractual period to gain ownership of the car. The amount varies, and you should read the fine print to understand how much this will be if you go down this route before signing the contract.
  3. Compared to other options, rent-to-own car agreements may come with higher fees, such as costs for direct debit, account keeping, termination fees (if you break the contract before its end), and late payment penalty. Some of these charges may be substantial, and when combined with the rental payments, the rent-to-own contract may become very expensive over the long term.
  4. A regular car loan has a monthly instalment; however, rent-to-own contracts usually require more frequent payments. So you have to remember and manage these weekly payouts.

Before you opt for the rent-to-own option, take into account the pros and cons. You may need to pay higher setup fees for rent-to-own deals. Evaluate whether rent-to-own suits your financial situation and objectives. 

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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