Connect with us

Bad Credit

How Much Is Auto Insurance?

Published

on

Advertiser Disclosure

If you have a car, you need auto insurance to protect you from sudden, and possibly enormous, financial costs in case you’re involved in an accident. According to MyCarInsurance123.com, the national average monthly car insurance premium is $135. That works out to $1,625 per year.

While knowing how much car insurance costs on average can be insightful, it’s important to understand the factors insurers look at when setting rates. That way, you can figure out how to get the coverage you need at a price that fits your budget. 

We’ve researched the top U.S. auto insurance companies and provided our findings in our review of the best car insurance companies for 2020.

Fill out the form to get personalized quotes for auto insurance coverage and see how much it is for you:

How Auto Insurance Companies Set Their Premiums

Car insurance rates vary widely based on many factors related to a driver, vehicle, and location. Each company emphasizes some factors more than others, which means insurers may quote the same driver vastly different rates for the same coverage. That’s why it’s important to get multiple quotes before you purchase a policy.

Factors Related to the Driver

Factors Related to the Vehicle

Factors Related to Location

  • Age
  • Gender (except where prohibited by law)
  • Marital status
  • Driving history
  • Credit score (except where prohibited by law)
  • Gap in coverage
  • Frequency/amount of driving
  • Make/model
  • Speed and performance
  • Size
  • Safety features
  • Age
  • Severe weather/natural disasters
  • Population density/congestion
  • State laws on required coverage
  • No-fault state laws
 

Personal Factors That Can Affect Your Insurance Premiums

Insurers look at many factors to decide how much auto insurance costs. Some of those factors are beyond your control.

Age

Age has a significant effect on car insurance rates. Drivers 25 and under are generally considered riskier than middle-aged drivers because they don’t have much experience. Rates are highest for teen drivers, then they begin to fall in the early 20s as drivers gain more experience behind the wheel. Premiums tend to be lowest for drivers in their 40s, 50s, and 60s, then climb from the age of 70 onward.

A full-coverage policy for a 20-year-old with a clean driving record will cost about $3,000 per year. A 25-year-old with a good driving record can expect to pay around $2,000 in annual premiums for a full-coverage policy. Insurance rates for younger drivers can vary due to several other factors, such as the type of vehicle and zip code.

Gender

Young males usually pay higher insurance premiums than females of the same age. That’s not always the case, however, since California, Hawaii, Massachusetts, Pennsylvania, North Carolina, Montana, and some parts of Michigan prohibit auto insurance companies from considering gender when setting premiums.

Marital Status

Your marital status can affect your insurance rates. Married people are statistically less likely to be involved in car accidents than single people. This may be because married drivers think about the safety and financial security of their family members more than single drivers and therefore tend to be more cautious. 

In addition, married couples typically enjoy lower premiums because they have car insurance policies that cover multiple vehicles and drivers. They also frequently bundle policies for auto, homeowners, and life insurance through the same company. All those actions can make customers eligible for discounts.

Credit Score

You may be surprised to learn that your credit score can affect the amount you pay for car insurance. Most insurers look at a driver’s credit score when setting premiums (except in California, Hawaii, and Massachusetts, where the practice is illegal). Drivers with lower credit scores tend to file more insurance claims than drivers with better credit.

Driving History

Your accident history and any tickets you have received can affect your auto insurance rates. Multiple tickets or citations for serious offenses, such as reckless driving or DUI, can cause your insurance rates to skyrocket. Yahoo! Finance cited a study by Insurance.com that found that a DUI caused insurance premiums to rise by 79 percent on average, while a ticket for reckless driving led to a 73-percent rate hike.

Gap In Coverage

If your car insurance coverage lapsed, your rates will most likely be higher when you get a new policy. You might not have to pay higher premiums, however, if your coverage lapsed because you were deployed for military service.

Driving Habits

How often and how far you drive your car can influence your insurance premiums. The more you drive, the greater the chance that you will get into an accident. Where you park your car is also important since your vehicle will be safer if it’s parked in a garage than it would be on the street or in a shared parking lot.

How Your Car Affects Your Insurance Costs

People who buy fast cars are more likely to get into accidents, so they pay higher auto insurance premiums. 

Sedans, minivans, and SUVs are considered more sensible vehicles, and people who drive them generally have more affordable insurance rates than owners of sports cars. 

Larger cars are safer in accidents since they absorb an impact better than smaller vehicles. 

Safety and security devices, such as anti-lock brakes and anti-theft systems, can lower insurance rates. 

Used cars cost less to insure than new ones. Take those factors into consideration if you’re thinking about buying a car in the near future.

How Your Location Influences Your Car Insurance Rates

Car insurance premiums vary by location. Here is a list of average auto insurance rates broken down by state. The table below shows the places with the highest and lowest average auto insurance premiums.

Most Expensive States to Insure a Car

Least Expensive States to Insure a Car

  • North Carolina
  • Virginia
  • Maine
  • Iowa
  • Idaho
 

Some parts of the U.S. are more prone to severe weather and natural disasters. That means drivers in those locations are more likely to be involved in accidents than those who live in some other parts of the country. Accidents are more common in densely populated locations, so drivers in urban areas tend to pay higher premiums than those in more sparsely populated places. Lower-than-average income and a high percentage of uninsured motorists can raise average rates.

Required And Optional Insurance Coverage

The types of car insurance coverage that are required depend on the state where you live. New Hampshire and Virginia don’t require auto insurance. 

  • In New Hampshire, uninsured residents can be held responsible for up to $50,000 in liability and up to $25,000 in property damage for an accident or have their license and registration suspended. 
  • In Virginia, residents can pay the state $500 per year instead of purchasing car insurance, but that doesn’t provide any coverage if a driver causes an accident.

In states where auto insurance is required, laws require minimum amounts of coverage in specific categories. We want to stress that it’s usually not a good idea to just buy the bare minimum. That might save you money each month, but if a serious accident resulted in damage or injuries beyond your limits, you would be on the hook for the difference. That could put your other assets, such as your home, as well as your family’s financial security, at risk.

When it comes to optional coverage, you need to decide what makes sense for you. For example, personal injury protection (PIP) will cover medical bills for you and your family if you get injured in a car accident. It can also cover funeral costs and lost wages.

If you have a car loan or lease, you’re required to have collision and comprehensive coverage. 

  • Comprehensive covers theft, vandalism, and damage from other causes, excluding crashes.
  • Collision covers damage to your car as a result of a crash. 

If comprehensive and collision coverage aren’t required, it might not be a good idea to pay for them if you don’t drive your car often or if it isn’t worth much.

No-Fault States

In some states, known as no-fault states, each driver injured in an accident must file a claim with his or her own insurance company, regardless of which driver was at fault. In those states, PIP coverage is required.

Several variations on the no-fault model exist in different states. The right to sue for injuries and pain and suffering is restricted to varying degrees.

The following states and territory have no-fault insurance laws. In states marked with an asterisk (*), no-fault auto insurance is optional. That means drivers can choose a no-fault insurance policy or a traditional tort liability policy that allows parties injured in a car accident to sue the party found to be at fault.

Premiums for no-fault insurance coverage vary based on the characteristics of the driver, vehicle, and state. State laws have different minimum amounts of PIP coverage required. 

Michigan requires drivers to have unlimited PIP coverage and $1 million in property protection insurance. Michigan also has car insurance premiums that are much higher than the national average.

Ways To Save On Car Insurance

If you’re currently paying high car insurance premiums, there are several steps you can take to lower your bills:

Ask If You Qualify For Discounts

Car insurance companies offer various discounts to save customers money. You might qualify for lower premiums if you’re a safe driver, a homeowner, a good student, a military member or veteran, or a member of a particular organization. You could also get lower premiums by bundling multiple policies, such as auto, homeowners, and life insurance, through one company.

Buy A Safer And/Or Used Car

If you plan to buy a new car, look for one that is equipped with safety features. Avoid a sports car and consider buying a used vehicle.

Drive Safely And Limit Your Driving

Focus on driving safely. If you have a spotty driving history, you might want to choose an insurance company that will allow you to install a tracker in your vehicle that monitors your driving habits, so you can qualify for safe driving discounts.

Driving a lot puts you at higher risk for an accident. Using public transportation, carpooling, or moving closer to work could lower your premiums.

Improve Your Credit

If you have bad credit, focus on paying your bills on time and lowering your credit card balances. If you have high interest rates, a balance transfer card or debt consolidation loan could help you eliminate your debt faster.

Only Pay For Coverage You Need

Consider eliminating coverage you don’t need. Just don’t focus so much on saving money that you leave yourself underinsured.

Raise Your Deductible

The deductible is the amount of money you will have to pay out of pocket before your insurance company will give you money to settle a claim. Deductibles are typically $500 or $1,000, but they can be higher or lower. A higher deductible usually means lower monthly premiums. Raising your deductible might save you money each month, but you should only make that change if you have enough money in an emergency fund to cover the deductible if you get into an accident.

Compare Quotes From Several Insurers

All auto insurance companies consider a number of factors when setting premiums. Since each company assigns a different amount of importance to each of those factors, you could receive a wide range of quotes for the same coverage. This is why it’s important to get quotes from several companies before you choose a policy.

Should You And Your Spouse Combine Auto Insurance Coverage?

If both you and your spouse have good driving records, combining your coverage on one insurance policy could lower your premiums since many car insurance companies give multi-car discounts. 

Compare your existing policies and get quotes for a combined policy from several insurers. Some insurance companies allow domestic partners, as well as married couples, to have joint policies.

If one of you has a good driving record and the other has had several accidents or received multiple tickets, you should talk to insurers about whether you would be better off with a joint policy or two separate ones. In some cases, combining coverage would cost less, especially if you got a multi-car discount, while in other circumstances you’d save money with separate policies.

Note that even if you got two policies, insurers would consider both your driving records since one of you might drive the other’s car and get into an accident. The person with the better driving record might be able to exclude the other spouse from the policy to keep the rates down, but the policy wouldn’t pay for damage or injuries if the non-covered spouse drove the car and caused an accident.

Comparison of Top Insurance Providers

We’ve looked at many of the leading auto insurance companies in the U.S. and believe these are among the best. Contact individual companies to get specific quotes for your vehicle, location, and situation.

USAA

GEICO

Progressive

  • 5.0 stars overall
  • Best for current and former members of the military and their families
  • Lowest premiums in many states
  • 4.5 stars overall
  • Best for students and military
  • Known for competitive rates and discounts
  • 4.5 stars overall
  • Gives customers several ways to earn discounts
  • Convenient online policy management

State Farm

AAA

Nationwide

  • 4.5 stars overall
  • Best for students
  • Largest U.S. auto insurer
  • Offers apps that that customers earn discounts
  • 4.0 stars overall
  • Regional clubs
  • Insurance coverage available to customers with roadside assistance memberships
  • 4.0 stars overall
  • Best for senior citizens
  • Competitive rates
  • Several discounts available
 

In our opinion, USAA is the best car insurance company, but its coverage isn’t available to everyone. Policies are only issued to individuals who have served in the military and members of their families. USAA’s high customer satisfaction earned it an A++ rating from AM Best and the top spot on J.D. Power’s 2019 Auto Claims Satisfaction Study. In addition, USAA offers the lowest rates in many states, as well as discounts for safe drivers, good students, multi-vehicle policies, and other reasons.

GEICO is a top choice for many drivers because of its competitive prices. It also offers money-saving discounts for current members of the military and veterans, students, loyal customers, and good drivers, as well as drivers whose vehicles are equipped with anti-theft devices. GEICO received an A++ rating from AM Best and an A+ rating from the Better Business Bureau.

Progressive has earned an A+ rating from AM Best. It offers customers several ways to earn discounts. The deductible savings bank reduces the deductible by $50 for each six-month period without a claim. The company’s Snapshot app can monitor customers’ driving and reward safe drivers with lower rates. Customers who bundle policies can enjoy lower premiums.

State Farm is the largest U.S. car insurance company. It has four insurance apps that let customers earn discounts, manage their policies, and submit claims. State Farm also offers a variety of discounts to save customers money.

How To Find Affordable Auto Insurance

It’s difficult to give a straight answer to the question “How much is car insurance?” Insurance companies consider many factors related to a driver, a vehicle, and the location when setting premiums. Each insurer has its own policies and considers some factors more important than others. If you need car insurance, you should request quotes from several companies and compare them to figure out which insurer can provide you with the best coverage at the most affordable rate.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

Village of New Paltz might expand eligibility for revolving loan fund | Local News

Published

on

NEW PALTZ, N.Y. — The village is considering expanding eligibility for a little-used revolving loan fund to include the needs of businesses being hit hard by the COVID-related economic slowdown.



Village of New Paltz trying to help residents get refunds from waste haulers

Village of New Paltz Mayor Tim Rogers




Mayor Tim Rogers said Tuesday that the $500,000 loan fund could be used to help businesses with more than just the purchase of personal protective equipment allowed under state and federal programs.

“We’re trying to piggyback off of the existing language for the revolving loan fund,” he said. “We just wanted to make it somewhat broad in terms of recognizing COVID impacts.”

One thing the village is considering is eliminating the rule that prohibits the use of the fund for emergency situations or business operations.

“Here we are flipping it and saying that you can,” Rogers said.

Guidelines for the loan program, which was established with funding from the U.S. Department of Housing and Urban Development, were last updated in 2013. The loan fund’s current interest rate is 3%.

Rogers said the fund has received only two loan applications over the past six years, and one of those was rejected.

“There’s only been one that we awarded and one that we straight up denied,” he said, noting that the rejection was because of the applicant’s bad credit history.

Rogers said the COVID-19 pandemic has created something of an economic irony in the village: decreased foot traffic in the business district but a significant increase in applications for building permits.

“[Village Safety Inspector] Cory Wirthmann believes our busy Building Department is partially a function of people traveling or vacationing less,” the mayor said. “ Money they would have spent is now going to home improvement wish list projects or just deferred maintenance, like finally choosing to replace the old roof.”

Comments about expanding the revolving loan fund should be emailed to  assistant@villageofnewpaltz.org. A loan application and information about the process can be found online at bit.ly/npaltz-loans.

For local coverage related to the coronavirus, go to bit.ly/DFCOVID19.

Source link

Continue Reading

Bad Credit

Will Missing One Car Payment Hurt My Credit Score?

Published

on

The short answer is yes: skipping one car payment can hurt your credit score, but not until it hits a certain mark. One missed payment doesn’t destroy your credit score forever, but it can stay on your credit reports for years.

Missed Payments and Your Credit Score

One or two missed payments may not be enough to completely ruin a good credit score, but they can lower your credit score quite a bit. How much your credit score can drop depends on many things, including how much credit history you have and how much time has passed since your missed payment.

How much a missed payment can impact your credit score is heavily influenced by how many missed payments you currently have reported, your current credit score, your credit utilization, how many accounts you have, and more. In other words: your drop in credit score due to one missed car payment is likely to be unique to you. The drop in points could be anywhere from 10 to 100 points, or more.

Will Skipping One Car Payment Hurt My Credit Score?If you have a thin credit file or little to no credit history, one missed car payment can be devastating to your credit score. And, in some cases, having a good credit score and then a reported 30-day missed payment could hurt your credit score more because you have more to lose.

The severity of the missed payment matters too. If you’re 30 days on the payment, it’s not as bad as being 90 days late. Most creditors report missed payments in these timeframes: 30 days; 60 days; 90 days; 120 days; 150 days; and then delinquent/charge-offs after that. The longer you let that missed payment go on being missed, the worse it is for your credit score.

To bounce back from a missed auto loan payment, be sure to make that payment as quickly as you can. The sooner you make up that payment, the better off you are.

How Long Are Missed Car Payments Reported?

Missed and late car payments can remain on your credit reports for up to seven years. How much they damage your credit score lessens each year, but it can still impact your overall credit score years afterward.

Your payment history is the most influential part of your credit score: a whopping 35%. In terms of credit repair, this means making all of your bill payments on time is important. If you have an auto loan that isn’t currently being reported – meaning your loan and on-time payments don’t show up on your credit report – the missed and late payments are likely to be reported anyway. Even auto lenders that don’t generally report their loans to the credit bureaus typically report missed/late payments.

If you think you’re about to miss a payment and you want to avoid hurting your credit, you have some options to explore.

Ask Your Lender for a Deferment

Lending institutions understand that times can get tough. If you think you’re about to miss a payment, contact your lender right away and ask what options are available to you. Keep your lender in the loop if you’re going through rough times – the sooner you get ahold of them the better.

This is especially true right now, given the current pandemic. Many borrowers left without work have been forced to find alternatives to making payments and needed assistance with their car loans and mortgages. There is a process that allows borrowers to take a breather and gather themselves, and it’s called a deferment.

A deferment, in a nutshell, pushes the pause button on your auto loan. Most times, lenders pause the car payments for up to three months and add those payments to the back of the loan term. If you qualify, you may be able to recenter yourself and get back on track. After the deferment is up, the car payments resume and you continue paying as normal.

The only downsides to this option are that your interest charges continue to accrue, and your loan term is extended. However, in the grand scheme of things, a few more months of a car payment and interest charges is better than default or multiple missed payments!

There is a common stumbling block to deferments though: most lenders don’t approve these plans unless your current on the loan. If you’ve already missed one payment or more, then the lender isn’t likely to approve it.

Is Refinancing Your Auto Loan an Option?

If you’re struggling to keep up with your current car loan, refinancing for a lower monthly payment could be the answer.

Refinancing involves replacing your current loan with another one, typically with a different lender. Most borrowers refinance to lower their monthly payments by either lowering their interest rate or extending their loan term (sometimes both).

To refinance, you also need to be current on your auto loan. Most lenders that offer refinancing don’t consider borrowers with multiple missed/late payments on their car loan. Additionally, you generally need to meet these requirements for refinancing:

  • Must have equity in the car or the loan balance must be equal to the vehicle’s value
  • The car is under 10 years old with fewer than 100,000 miles
  • Your credit score has improved since the start of the loan

You may need to meet other requirements, depending on the lender you choose. Refinancing doesn’t typically require a “perfect” credit score, but you may need a good one to qualify.

Ready to Get a More Affordable Car?

If you’re struggling to make ends meet and worried about skipping payments, then it may be time to sell your car and get something more affordable. If you’re concerned that a poor credit score could get in the way of your next auto loan, then consider a subprime lender through a special finance dealership.

Subprime lenders are indirect lenders that are signed up with certain dealers. They assist borrowers in all sorts of unique credit circumstances, and they could help you get into a more affordable vehicle if you qualify.

Finding a subprime lender can be as simple as completing our free auto loan request form. Here at Auto Credit Express, we work to match borrowers to dealerships with bad credit lending resources in their local area, at no cost and with no obligation. Get started today!

(function(d, s, id){ var js, fjs = d.getElementsByTagName(s)[0]; if (d.getElementById(id)) {return;} js = d.createElement(s); js.id = id; js.src = "http://connect.facebook.net/en_US/sdk/debug.js"; fjs.parentNode.insertBefore(js, fjs); }(document, 'script', 'facebook-jssdk'));

Source link

Continue Reading

Bad Credit

How to Avoid a Prepayment Penalty When Paying Off a Loan | Pennyhoarder

Published

on

Look at you, so responsible. You received a financial windfall — stimulus check, tax refund, work bonus, inheritance, whatever — and you’re using it to pay off one of your debts years ahead of schedule.

Good for you! Except… make sure you don’t get charged a prepayment penalty.

Now wait just a minute, you say. I’m paying the money back early — early! — and my lender thanks me by charging me a fee?

Well, in some cases, yes.

A prepayment penalty is a fee lenders use to recoup the money they’ll lose when you’re no longer paying interest on the loan. That interest is how they make their money.

But you can avoid the trap — or at least a big payout if you’ve already signed the loan contract. We’ll explain.

What Is a Loan Prepayment Penalty?

A prepayment penalty is a fee lenders charge if you pay off all or part of your loan early.

Typically, a prepayment penalty only applies if you pay off the entire balance – for example, because you sold your car or are refinancing your mortgage – within a specific timeframe (usually within three years of when you accepted the loan).

In some cases, a prepayment penalty could apply if you pay off a large amount of your loan all at once.

Prepayment penalties do not normally apply if you pay extra principal in small chunks at a time, but it’s always a good idea to double check with the lender and your loan agreement.

What Loans Have Prepayment Penalties?

Most loans do not include a prepayment penalty. They are typically applied to larger loans, like mortgages and sometimes auto loans — although personal loans can also include this sneaky fee.

Credit unions and banks are your best options for avoiding loans that include prepayment penalties, according to Charles Gallagher, a consumer law attorney in St. Petersburg, Florida.

Unfortunately, if you have bad credit and can’t get a loan from traditional lenders, private loan alternatives are the most likely to include the prepayment penalty.

Pro Tip

If your loan includes a prepayment penalty, the contract should state the time period when it may be imposed, the maximum penalty and the lender’s contact information.

”The more opportunistic and less fair lenders would be the ones who would probably be assessing [prepayment penalties] as part of their loan terms,” he said, “I wouldn’t say loan sharking… but you have to search down the list for a less preferable lender.”

Prepayment Penalties for Mortgages

Although you’ll find prepayment penalties in auto and personal loans, a more common place to find them is in home loans. Why? Because a lender who agrees to a 30-year mortgage term is banking on earning years worth of interest to make money off the amount it’s loaning you.

That prepayment penalty can apply if you want to pay off your loan early, sell your house or even refinance, depending on the terms of your mortgage.

However, if there is a prepayment penalty in the contract for a more recent mortgage, there are rules about how long it can be in effect and how much you can owe.

The Consumer Financial Protection Bureau ruled that for mortgages made after Jan. 10, 2014, the maximum prepayment penalty a lender can charge is 2% of the loan balance. And prepayment penalties are only allowed in mortgages if all of the following are true:

  1. The loan has a fixed interest rate.
  2. The loan is considered a “qualified mortgage” (meaning it can’t have features like negative amortization or interest-only payments).
  3. The loan’s annual percentage rate can’t be higher than the Average Prime Offer Rate (also known as a higher-priced mortgage).

So suppose you bought a house last year and then wanted to sell your home. If your mortgage meets all of the above criteria and has a prepayment penalty clause in the mortgage contract, you could end up paying a penalty of 2% on the remaining balance — for a loan you still owe $200,000 on, that comes out to an extra $4,000.

Prepayment penalties apply for only the first few years of a mortgage — the CFPB’s rule allows for a maximum of three years. But again, check your mortgage agreement for your exact terms.

The prepayment penalty won’t apply to FHA, VA or USDA loans but can apply to conventional mortgages — although the penalty is much less common than it was before the CFPB’s ruling.

“It’s more of private loans — loans for people who’ve maybe had some struggles and can’t qualify for a Fannie or Freddie loan,” Gallagher said. “That block of lending is the one going to be most hit by this.”

How to Find Out If a Loan Will Have a Prepayment Penalty

The best way to avoid a prepayment penalty is to read your contract — or better yet, have a professional (like an attorney or CPA) who understands the terminology, review it.

“You should read the entirety of the loan, as painful as that sounds, because lenders may try to hide it,” Gallagher said. “Generally, it would be under repayment terms or the language that deals with the payoff of the loan or selling your house.”

Gallagher rattled off a list of alternative terms a lender could use in the contract, including:

  • Sale before a certain timeframe.
  • Refinance before a term.
  • Prepayment prior to maturity.

“They avoid using the word ‘penalty,’ obviously, because that would give a reader of the note, mortgage or the loan some alarm,” he said.

If you’re negotiating the terms — as say, with an auto loan — don’t let a salesperson try to pressure you into signing a contract without agreeing to a simple interest contract with no prepayment penalty. Better yet, start by applying for a pre-approved auto loan so you can get a pro to review any contracts before you sign.

Pro Tip

Do you have less-than-sterling credit? Watch out for pre-computed loans, in which interest is front-loaded, ensuring the lender collects more in interest no matter how quickly you pay off the loan.

If your lender presents you with a contract that includes a prepayment penalty, request a loan that does not include a prepayment penalty. The new contract may have other terms that make that loan less advantageous (like a higher interest rate), but you’ll at least be able to compare your options.

How Can You Find Out if Your Current Loan Has a Prepayment Penalty?

If a loan has a prepayment penalty, the servicer must include information about the penalty on either your monthly statement or in your loan coupon book (the slips of paper you send with your payment every month).

You can also ask your lender about the terms regarding your penalty by calling the number on your monthly billing statement or read the documents you signed when you closed the loan — look for the same terms mentioned above.

What to Do if You’re Stuck in a Loan With Prepayment Penalty

If you do discover that your loan includes a prepayment penalty, you still have some options.

First, check your contract.

If you’ll incur a fee for paying off your loan early within the first few years, consider holding onto the money until the penalty period expires.

Pro Tip

If you don’t have a loan with a prepayment penalty, contact your lender before sending additional money to ensure your payment is going toward principal — not interest or fees.

Additionally, although you may get socked with a penalty for paying off the loan balance early, it’s likely you can still make extra payments toward the balance. Review your contract or ask your lender what amount will trigger the penalty, Gallagher said.

If you’re paying off multiple types of debt, consider paying off the accounts that do not trigger prepayment penalties — credit cards and federal student loans don’t charge prepayment penalties.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

This was originally published on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through actionable and inspirational advice, and resources about how to make, save and manage money.

Source link

Continue Reading

Trending