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Is There Such a Thing as a Car Loan Down Payment That’s Too Big?

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It’s true that a down payment is one of the best things you can do for yourself in terms of getting a good deal on an auto loan, especially when you have bad credit. Though there’s no such thing as a down payment that’s too large, you might save some money by paying for a car outright if you have the cash. However, if you want to improve your credit score, an auto loan may still be the way to go.

A Down Payment’s Impact on an Auto Loan

Is There Such a Thing as an Auto Loan Down Payment That's Too Big?When you make a down payment on an auto loan, you’re lowering the amount you have to finance. This means paying less for the vehicle overall by saving money in interest charges. This can be a big plus for borrowers with poor credit because the lower your credit score, the higher the interest rate you’re likely to qualify for.

Interest is the cost of borrowing money. The lower your rate, the less you pay to finance a car. Interest is accrued daily based on the unpaid principal balance of your loan, so making a large down payment means there’s less money for you to be charged interest on.

A large down payment not only saves you money, it can make a difference in other ways as well. A down payment shows lenders that you’re willing to invest in your own success. In fact, borrowers who make a significant payment up front are more likely to complete their auto loan with fewer bumps in the road – most people don’t want to feel like they threw away their money in vain.

Depending on your lender and your situation, a down payment can help you qualify for a lower interest rate, get offered a wider selection of vehicles to choose from, or qualify for a more favorable loan term. Additionally, if you make a large enough down payment, you can shorten or eliminate the time your car spends with negative equity!

The down payment amount you’re required to have on an auto loan varies by lender and individual situation. In some traditional lending situations, you may not need much down if you have good credit. However, if you have bad credit, lenders typically require a down payment of around $1,000 or 10% of the vehicle’s selling price.

Using a Large Down Payment Wisely

If you have a large amount of money to put down on a car loan, you certainly can. Making the biggest down payment you possibly can afford gives you the chance to qualify for a much better vehicle than you may have otherwise. You could also get a more moderately-priced car and get yourself a smaller monthly payment.

As we mentioned, one of the benefits to a down payment is keeping your vehicle out of negative equity. When you have negative equity, you owe more on your auto loan than the car you’re financing is worth. This happens more than you might think, especially with newer vehicles. This is because depreciation robs your car of value – around 11% of a new vehicle’s value is lost on average as soon as you drive it off the lot.

Depreciation is defined as the loss of value over time, and it can’t be stopped. You can slow or stop it’s impact on your car’s equity, though. When you make a down payment of at least 20% of your vehicle’s value, you’re setting yourself up for future equity success.

The more you put down, the more equity your vehicle can retain. If you choose to use a bigger down payment, say 50% of the car’s selling price, you eliminate the need to worry that there won’t be any value left in your vehicle if you need to trade it in or sell it before your loan term is over.

One downside to using a down payment that’s so large is that it could deplete your savings. It’s a good idea to keep a bit of money in the bank as a car owner. This way, you’re not stuck in a bind if anything unexpected happens.

Why Not Just Buy a Car for Cash?

If you have a significant amount of money to put down, you may want to consider purchasing a used vehicle for cash. This way, you’re not saddled with a loan payment for the next five to eight years or more. If you’re looking at financing a car with a price tag of $10,000 and plan to use a $5,000 down payment, you could opt instead to purchase a used vehicle for just the 5K, and not worry about it.

If you’re struggling with credit issues, though, an auto loan is a wonderful way to build credit. So, you could take your $5,000 down payment and cut a $10,000 loan in half. This means you’re only financing $5,000, which makes a huge difference in the amount you have to pay each month. Having an affordable loan payment means you’re more likely to be able to make all your payments on time, which raises your credit score.

Additionally, financing allows you to expand your car options. If you want a nicer, newer vehicle, but don’t have all of the cash on hand, you can put what you have down and finance the rest.

Let Us Point the Way

Improving your credit with an auto loan is a great way to qualify for better rates and terms on your next loan. Bad credit borrowers who need a car loan may feel like they don’t have many options, especially if you’ve been turned down for lending before. There are lenders out there for people who are struggling, and they’re called subprime lenders.

They base your auto loan approval on factors besides just your credit score, and are only found through special finance dealerships. Here at Auto Credit Express, we know where to find the lenders you’re seeking.

In fact, we have gathered a large network of these dealers all across the country, and we want to connect you to one in your area. If you’re ready to take on a car loan simply fill out our secure auto loan request form today.

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If You Want Consumers to Lose, Network Regulation is a Must – Digital Transactions

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After the current U.S. Congress was sworn in, a predictable chorus of merchants, lobbyists, and lawmakers demanded new interchange price caps and other government mandates to decrease credit card interchange fees for merchants. The tired attacks on credit cards are an easy narrative that focuses almost exclusively on the cost side of the ledger, while completely ignoring the cards’ important role in the economy and the regressive effects of interchange regulation. 

To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents. For decades, they have promised these interventions would eventually benefit consumers. But the lessons from the Durbin Amendment in the United States and price cap regulation in Australia is clear. Although some policymakers bemoan the current economic model, arbitrarily “cutting” rates for the sake of cuts completely ignores the economic reality that as billions of dollars move to merchants, billions are lost by consumers. 

For the uninitiated, let’s break down what credit interchange funds: 1) the cost of fraud; 2) more than $40 billion in consumers rewards; 3) the cost of nonpayment by consumers, which is typically 4% of revolving credit; 4) more than $300 billion in credit floats to U.S. consumers; and 5) drastically higher “ticket lift” for merchants. 

Johnson: “To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents.”

These are just some of the benefits. If costs were all that mattered, American Express wouldn’t exist. Until recently, it was by far the most expensive U.S. network. Yet, merchants still took AmEx because they knew the average AmEx “swipe” was around $140, far more than Visa and Mastercard. 

Put simply, for a few basis points, interchange functions as a small insurance policy to safeguard retailers from the threat of fraud and nonpayment by consumers. Consider the amount of ink spilled on interchange when no one mentions that the chargeoff rate for issuing banks on bad credit card debt exceeds credit interchange.

Looking abroad, interchange opponents cite Australia, which halved interchange fees nearly 20 years ago, as a glowing example of how to regulate credit cards. In truth, Australia’s regulations have harmed consumers, reduced their options, and forced Australians to pay more for less appealing credit card products. 

First, the cost of a basic credit card is $60 USD in many Australian banks. How many millions of Americans would lose access to credit if the annual cost went from $0 to $60? Can you imagine the consumer outrage? 

In a two-sided market like credit cards, any regulated shift to one side acts a massive tax on the other. For Australians, the new tax fell on cardholders. There, annual fees for standard cards rose by nearly 25%, according to an analysis by global consulting firm CRA International. Fees for rewards cards skyrocketed by as much as 77%.

Many no-fee credit cards were no longer financially viable. As a result, they were pulled from the market, leaving lower income Australians, as well as young people working to establish credit, with few viable options in the credit card market.

Even the benefits that lead many people to sign up for credit cards in the first place have been substantially diluted in Australia because of the reduction of interchange fees. In fact, the value of rewards points fell by approximately 23% after the country cut interchange fees.

Efforts to add interchange price caps would have a similar effect here in the U.S. A 50% cut would amount to a $40 billion to $50 billion wealth transfer from consumers and issuers to merchants. For the 20 million or so financially marginalized Americans, what will their access to credit be when issuers find a $50 billion hole in their balance sheets? 

The average American generates $167 per year in rewards, according to the Consumer Financial Protection Bureau. Perks like airline miles, hotel points, and cashback rewards would be decimated and would likely be just the province of the rich after regulation. Many middle-class consumers could say goodbye to family vacations booked at almost no cost thanks to credit card rewards.

As the travel industry and retailers fight to bounce back from the impact of the pandemic, slashing consumer rewards and reducing the attractiveness of already-fragile businesses is the last thing lawmakers and regulators in Washington should undertake.

Proposals to follow Australia’s misguided lead in capping interchange may allow retailers to snatch a few extra basis points, but the consequences would be disastrous for consumers. Cards would simply be less valuable and more expensive for Americans, and millions of consumers would lose access to credit. University of Pennsylvania Professor Natasha Sarin estimates debit price caps alone cost consumers $3 billion. How much more would consumers have to pay under Durbin 2.0?

Members of Congress and other leaders should learn from Australia and Durbin 1.0 to avoid making the same mistake twice.

—Drew Johnson is a senior fellow at the National Center for Public Policy Research, Washington, D.C.

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Increase Your Credit Score With Michael Carrington

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More than ever before, your debt and credit records can negatively impact you or your family’s life if left unmanaged. Sadly, many Americans feel entirely helpless about their credit score’s present state and the steps they need to take to fix a less-than-perfect score. This is where Michael Carrington, founder of Tier 1 Credit Specialist, comes in. Michael is determined to offer thousands of Americans an educated, informed approach towards credit restoration.

Michael understands the plight that having a bad credit score can bring into your life. His first financial industry job was working as a home mortgage loan analyst for one of the nation’s largest lenders. Early on, he had to work a grueling schedule which included several jobs seven days a week while putting in almost 12-hour days to make $5,000 monthly to get by barely.

“I was tired of living a mediocre life and was determined to increase the value that I can offer others through my knowledge of the finance industry – I started reading all of the necessary books, networking with industry professionals, and investing in mentorship,” shares Michael Carrington. “I got my break when I was able to grow a seven-figure credit repair and funding organization that is flexible enough to address the financial needs of thousands of Americans.”

With his vast experience in the business world, establishing himself as a well-respected business leader, Michael Carrington felt he had the power to help millions of Americas in restoring their credit. Michael learned the FICO system, stayed up to date on the Fair Credit Reporting Act (FCRA), found ways to improve his credit score, and started showing others.

The Tier 1 Credit Specialist uses a tested and proven approach to educate their clients on everything credit scores. Michael is leveraging his experience as a home mortgage professional, marketing executive, and global business coach to inform his clients. He and his team take their time to carefully go through their client’s credit records as they try to find the root of their problem and find suitable financial solutions.

The company is changing lives all over America as it helps families and individuals to repair their credit scores, gain access to lower interest rates on loans and get better jobs. What Tier 1 Credit Specialists is offering many Americans is a chance at financial freedom.

Michael Carrington has repaired over $8 million in debt write-ups and has helped fund American’s with over $4 million through thousands of fixed reports. “I credit our success to being people-focused,” he often says. “The amount of success that we create is going to be in direct proportion to the amount of value that we provide people – not just our customers – people.”

Because of its ‘people-focused goals, the Tier 1 Credit Specialist is determined to help millions of Americans achieve financial literacy. It is currently receiving raving reviews from clients who are completely happy with the credit repair solutions that the company has provided them.

Today, Michael Carrington is continuing with a new initiative to serve more Americans who suffer from bad credit due to little or no access to affordable resources for repair.

The Tier 1 Credit Socialist brand is changing the outlook of many families across America. To do this, the company has created an affiliate system that will provide more people with ways of earning during these tough economic times.

As a well-respected international business leader and entrepreneur with numerous achievements to his name Michael Carrington aims to help millions of Americans achieve the financial freedom, he is experiencing today. Tier 1 Credit Socialist is one of the most effective credit repair brands on the market right now, and they have no plans for slowing down in 2021!

Learn more about Michael Carrington by visiting his Instagram account or checking out the Tier 1 Credit Specialist website.

Published April 17th, 2021



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Does Having a Bank Account With an Issuer Make Credit Card Approval Easier?

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Better the risk you know than the one you don’t.

When it comes to personal finance, nothing is guaranteed. That goes double for credit. That’s why, no matter how perfect your credit or how many times you’ve applied for a new credit card, there’s always that moment of doubt while you wait for a decision.

Issuing banks look at a wide range of factors when making a decision — and your credit score is only one of them. They look at your entire credit history, and consider things like your income and even your history with the bank itself.

For example, if you defaulted on a credit card with a given bank 15 years ago, that mistake is likely long gone from your credit reports. To you and the three major credit bureaus, it is ancient history. But banks are like elephants — they never forget. And that mistake could be enough to stop your approval.

But does it go the other way, too? Does having a bank account that’s in good standing with an issuer make you more likely to get approved? While there’s no clear-cut answer, there are a few cases when it could help.

A good relationship may weigh in your favor

Credit card issuers rarely come right out and say much about their approval processes, so we often have to rely on anecdotal evidence to get an idea of what works. That said, you can find a number of stories of folks who have been approved for a credit card they were previously denied for after they opened a savings or checking account with the issuer.

These types of stories are more common at the extreme ends of the card range. If you have a borderline bad credit score, for instance, having a long, positive banking history with the issuer — like no overdrafts or other problems — may weigh in your favor when applying for a credit card. That’s because the bank is able to see that you have regular income and don’t overspend.

Similarly, a healthy savings or investment account with a bank could be a helpful factor when applying for a high-end rewards credit card. This allows the bank to see that you can afford its product and that you have the type of funds required to put some serious spend on it.

Having a good banking relationship with an issuer can be particularly helpful when the economy is questionable and banks are tightening their proverbial pursestrings. When trying to minimize risk, going with applicants you’ve known for years simply makes more sense than starting fresh with a stranger.

Some banks provide targeted offers

Another way having a previous banking relationship with an issuer can help is when you can receive targeted credit card offers. These are sort of like invitations to apply for a card that the bank thinks will be a good fit for you. While approval for targeted offers is still not guaranteed, some types of targeted offers can be almost as good.

For example, the only confirmed way to get around Chase’s 5/24 rule (which is that any card application will be automatically denied if you’ve opened five or more cards in the last 24 months) is to receive a special “just for you” offer through your online Chase account. When these offers show up — they’re marked with a special black star — they will generally lead to an approval, no matter what your current 5/24 status.

Credit unions require membership

For the most part, you aren’t usually required to have a bank account with a particular issuer to get a credit card with that bank. However, there is one big exception: credit unions. Due to the different structure of a credit union vs. a bank, credit unions only offer their products to current members of the credit union.

To become a member, you need to actually have a stake in that credit union. In most cases, this is done by opening a savings account and maintaining a small balance — $5 is a common minimum.

You can only apply for a credit union credit card once you’ve joined, so a bank account is an actual requirement in this case. That said, your chances of being approved once you’re a member aren’t necessarily impacted by how much money you have in the account.

In general, while having a bank account with an issuer may be helpful in some cases, it’s not a cure-all for bad credit. Your credit history will always have more impact than your banking history when it comes to getting approved for a credit card.

For more information on bad credit, check out our guide to learn how to rebuild your credit.

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