The Crazy World of Engagement Ring Financing

A man proposing and holding up an engagement ring

Ah, to be young and in love. When you find that perfect match and gather the courage to pop the question, it feels like you’ve got the world on a string. Then you go shopping for an engagement ring and discover the true price of love.

These days, you can expect to fork over more than $6,000 for an engagement ring—ouch!

Before you start hyperventilating while looking at your modest savings, take a step back. There are a number of ways you can surprise that special someone with the ring of their dreams—without losing your shirt in the process:

  1. Jewelry store financing
  2. Credit cards
  3. Personal loans
  4. Unconventional avenues

To help you make the best engagement ring purchase decision, let’s take a closer look at each financing option.

1. Jewelry Store Financing

All major jewelry stores offer financing, with many promoting interest-free financing for 6 to 12 months. But these offers come with a catch: miss a payment or fail to pay off the balance in time, and you’ll pay a lot more.

Typically, if you make one late payment or fail to pay off the balance during the promotional period, that interest is charged retroactively from the date of purchase. That means an extra 6 to 12 months of interest will be added to the balance you owe.

Here’s a sample of what some major jewelers typically offer:

  • Jared The Galleria of Jewelry: Jared financing offers a plan that charges no interest for the first 12 months. But you are required to put down a 20% deposit and have a Jared credit card.
  • Kay Jewelers: Kay Jewelers offers promotional financing through the Kay Jewelers Credit Card. If qualified, you can get 12 months of special financing, but a down payment or minimum purchase may be required.
  • Shane Co.: Shane Co. financing gives you multiple choices. If you can pay the ring off within six months, you can avoid any interest. If you need more time to pay, they have four financing options available ranging from 9.99% to 12.99% APR.
  • Zales: If you have the company’s credit card, Zales payment options range from 6 to 36 months in length, and you can purchase a ring without a down payment. They charge no interest if the balance is paid in full within six months for a minimum purchase of $300, within 12 months for a minimum purchase of $1,000, or within 18 months for a minimum purchase of $5,000.

[This information may have changed from the date of publication. See each jeweler’s website for current rates and promotional offers.]

However, keep in mind that in-store financing could ding your credit if there are multiple inquiries on your credit report, so don’t apply for store credit until you know you’ve found the perfect ring.

2. Credit Cards

You could use your own credit card to buy your baby that sparkler. If you want to go this route, make sure you do it the smart way.

  • Go for zero interest: Before slapping this large purchase onto your current credit card, check out zero-interest promotional offers that let you open a new account or transfer your current balance. Read the fine print so you don’t get stuck with retroactive interest if you can’t pay off the balance during the introductory period.
  • Cash in on rewards: If a new, zero-interest promotion isn’t a possibility, make the most of this purchase by using a credit card with a generous rewards program. Cards that offer cash back are your best bet, but airline miles are another good option—especially if you’re planning an exotic honeymoon getaway.

Credit cards can be convenient, but they can also be expensive if you don’t use them wisely. Consider all the implications of charging this expense before making a purchase. If all you can afford is the minimum monthly payment, you could end up paying for the engagement ring for most of your marriage.

3. Personal Loans

This is likely the most expensive option. Using a personal loan to finance your engagement ring will add a big dose of interest to the overall cost. But for those who can’t qualify for a zero-interest option, it may be the only choice.

There are two types of personal loans: secured and unsecured. Here’s what you need to know about each one:

  • Unsecured personal loans: An unsecured loan doesn’t require any collateral but often comes with a high interest rate. They are usually approved more quickly than other lines of credit, so you won’t have to wait a week or longer to make your purchase. But beware of fraudulent companies and payday loans that promise quick cash for astronomical interest rates.
  • Secured personal loans: Many banks offer secured personal loans. Approval requires a form of collateral, which could be something like your savings or, if you own one, your home. Other secured loans may use your car for collateral. Because collateral is part of the deal, you can get a lower interest rate, but you risk losing your collateral if you can’t meet the repayment terms of the loan.

For those who can afford the monthly payments and have okay credit, a personal loan could end up being the better deal in the long run. If you can score a personal loan with interest under 10%, we recommend taking it over using a credit card. You’ll also want to check your credit to make sure you don’t have any unpleasant surprises that can derail your engagement ring plans.

4. Unconventional Avenues

No, we’re not suggesting a jewelry heist, but there are some other (legitimate) ways to purchase an engagement ring without going into major debt.

  • Downsize: We know your sweetie deserves the best, but you’re just starting out your lives together. Why not go for a simpler engagement ring now and upgrade it at your fifth or tenth wedding anniversary?
  • Go retro: Vintage rings are all the rage, and many of them are much less expensive than a brand-new ring. If there isn’t a family ring to pass on, take a look at what Etsy and eBay have to offer. This way you can score a unique ring with character that doesn’t cost a fortune.
  • Get a part-time gig: Take on a part-time job at a jewelry store and dive into that employee discount. You can also put all your earnings toward the ring.
  • Purchase the diamond separately: Don’t be dazzled by a pretty setting or fancy box. The diamond is what you’re really after. You can save big when you buy a loose diamond. Plus, this way you can design a custom setting just for your betrothed.

Getting engaged is a once-in-a-lifetime experience, and you want it to be special. But you don’t need to start out your married life awash in a sea of debt—especially if you plan to buy a home in the near future. Avoid short-sightedness when it comes to the engagement ring. Take stock of all your options, and avoid any potential financing fiascos. Check that your credit is in good standing before you set foot in a jewelry store. You can get a free credit report through Credit.com.

Image: Ingram Publishing

The post The Crazy World of Engagement Ring Financing appeared first on Credit.com.

The Crazy World of Engagement Ring Financing

A man proposing and holding up an engagement ring

Ah, to be young and in love. When you find that perfect match and gather the courage to pop the question, it feels like you’ve got the world on a string. Then you go shopping for an engagement ring and discover the true price of love.

These days, you can expect to fork over more than $6,000 for an engagement ring—ouch!

Before you start hyperventilating while looking at your modest savings, take a step back. There are a number of ways you can surprise that special someone with the ring of their dreams—without losing your shirt in the process:

  1. Jewelry store financing
  2. Credit cards
  3. Personal loans
  4. Unconventional avenues

To help you make the best engagement ring purchase decision, let’s take a closer look at each financing option.

1. Jewelry Store Financing

All major jewelry stores offer financing, with many promoting interest-free financing for 6 to 12 months. But these offers come with a catch: miss a payment or fail to pay off the balance in time, and you’ll pay a lot more.

Typically, if you make one late payment or fail to pay off the balance during the promotional period, that interest is charged retroactively from the date of purchase. That means an extra 6 to 12 months of interest will be added to the balance you owe.

Here’s a sample of what some major jewelers typically offer:

  • Jared The Galleria of Jewelry: Jared financing offers a plan that charges no interest for the first 12 months. But you are required to put down a 20% deposit and have a Jared credit card.
  • Kay Jewelers: Kay Jewelers offers promotional financing through the Kay Jewelers Credit Card. If qualified, you can get 12 months of special financing, but a down payment or minimum purchase may be required.
  • Shane Co.: Shane Co. financing gives you multiple choices. If you can pay the ring off within six months, you can avoid any interest. If you need more time to pay, they have four financing options available ranging from 9.99% to 12.99% APR.
  • Zales: If you have the company’s credit card, Zales payment options range from 6 to 36 months in length, and you can purchase a ring without a down payment. They charge no interest if the balance is paid in full within six months for a minimum purchase of $300, within 12 months for a minimum purchase of $1,000, or within 18 months for a minimum purchase of $5,000.

[This information may have changed from the date of publication. See each jeweler’s website for current rates and promotional offers.]

However, keep in mind that in-store financing could ding your credit if there are multiple inquiries on your credit report, so don’t apply for store credit until you know you’ve found the perfect ring.

2. Credit Cards

You could use your own credit card to buy your baby that sparkler. If you want to go this route, make sure you do it the smart way.

  • Go for zero interest: Before slapping this large purchase onto your current credit card, check out zero-interest promotional offers that let you open a new account or transfer your current balance. Read the fine print so you don’t get stuck with retroactive interest if you can’t pay off the balance during the introductory period.
  • Cash in on rewards: If a new, zero-interest promotion isn’t a possibility, make the most of this purchase by using a credit card with a generous rewards program. Cards that offer cash back are your best bet, but airline miles are another good option—especially if you’re planning an exotic honeymoon getaway.

Credit cards can be convenient, but they can also be expensive if you don’t use them wisely. Consider all the implications of charging this expense before making a purchase. If all you can afford is the minimum monthly payment, you could end up paying for the engagement ring for most of your marriage.

3. Personal Loans

This is likely the most expensive option. Using a personal loan to finance your engagement ring will add a big dose of interest to the overall cost. But for those who can’t qualify for a zero-interest option, it may be the only choice.

There are two types of personal loans: secured and unsecured. Here’s what you need to know about each one:

  • Unsecured personal loans: An unsecured loan doesn’t require any collateral but often comes with a high interest rate. They are usually approved more quickly than other lines of credit, so you won’t have to wait a week or longer to make your purchase. But beware of fraudulent companies and payday loans that promise quick cash for astronomical interest rates.
  • Secured personal loans: Many banks offer secured personal loans. Approval requires a form of collateral, which could be something like your savings or, if you own one, your home. Other secured loans may use your car for collateral. Because collateral is part of the deal, you can get a lower interest rate, but you risk losing your collateral if you can’t meet the repayment terms of the loan.

For those who can afford the monthly payments and have okay credit, a personal loan could end up being the better deal in the long run. If you can score a personal loan with interest under 10%, we recommend taking it over using a credit card. You’ll also want to check your credit to make sure you don’t have any unpleasant surprises that can derail your engagement ring plans.

4. Unconventional Avenues

No, we’re not suggesting a jewelry heist, but there are some other (legitimate) ways to purchase an engagement ring without going into major debt.

  • Downsize: We know your sweetie deserves the best, but you’re just starting out your lives together. Why not go for a simpler engagement ring now and upgrade it at your fifth or tenth wedding anniversary?
  • Go retro: Vintage rings are all the rage, and many of them are much less expensive than a brand-new ring. If there isn’t a family ring to pass on, take a look at what Etsy and eBay have to offer. This way you can score a unique ring with character that doesn’t cost a fortune.
  • Get a part-time gig: Take on a part-time job at a jewelry store and dive into that employee discount. You can also put all your earnings toward the ring.
  • Purchase the diamond separately: Don’t be dazzled by a pretty setting or fancy box. The diamond is what you’re really after. You can save big when you buy a loose diamond. Plus, this way you can design a custom setting just for your betrothed.

Getting engaged is a once-in-a-lifetime experience, and you want it to be special. But you don’t need to start out your married life awash in a sea of debt—especially if you plan to buy a home in the near future. Avoid short-sightedness when it comes to the engagement ring. Take stock of all your options, and avoid any potential financing fiascos. Check that your credit is in good standing before you set foot in a jewelry store. You can get a free credit report through Credit.com.

Image: Ingram Publishing

The post The Crazy World of Engagement Ring Financing appeared first on Credit.com.

Who Do I Call If I Lost My Social Security Card?

social security card

If you lose your Social Security card, you’ll have to order a replacement card from the Social Security Administration (SSA). But unfortunately, a simple phone call will not do the trick. Instead, you will have to apply online using a my Social Security account or supply verification to a Social Security office in person or by mail.

Online Application for a Replacement Social Security Card

To apply online with a my Social Security account, you’ll need to meet all the following criteria:

  • You are an 18-year-old or older US citizen with a US mailing address.
  • You have a driver’s license or other state-issued identification from a specific list of states.
  • You are not requesting any changes to your card, including a name change.

In-Person or Mail Application for a Replacement Social Security Card

If you don’t meet the criteria for an online application, you have to apply in person or by mail. And you’ll need to gather a few documents to supply verification to the SSA office.

Documents must be current (not expired) and must show your name, date of birth or age, and—when applicable—a recent photograph. And they have to be originals, not photocopies. There are two separate categories of documents, and you’ll need one from each:

  • Citizenship
    • US birth certificate
    • US passport
  • Identity
    • US driver’s license
    • State-issued non-driver identification card
    • US passport

If you don’t have any of the documents from the Identity category and can’t get a replacement in 10 days, you can use another current document. It still needs to show your name, date of birth or age, and preferably a recent photograph. The following cards are often acceptable forms of ID:

  • School identification card
  • Employee identification card
  • US military identification card
  • Health insurance card other than a Medicare card

If you were not born in the US and have not established citizenship with SSA, you’ll need to provide acceptable proof of citizenship as well. 

Children’s Application for a Replacement Social Security Card

While some teens may have their driver’s license already, many minors don’t. And if your child doesn’t have a passport yet, you may have to dig around for alternative documentation.

A birth certificate may prove age or citizenship, but as the SSA states, “Social Security needs evidence that shows the child continues to exist beyond the date of birth.” Therefore, you’ll also have to produce a more recent document with their name, identifying information, and—if possible—a recent photograph. There are a few documents you could use:

  • Adoption decree
  • State-issued non-driver identification card
  • Doctor, clinic, or hospital record
  • Religious record
  • School identification card

In addition, a parent must provide their own proof of identity and, if required, their proof of citizenship or a current Department of Homeland Security document such as a green card. 

How Long Does It Take?

If you can get to a local SSA office just before opening, you can get in and out of there in about 15 minutes. If you can only go later in the day, the wait time could vary from location to location. After they process your application, they’ll give you a letter indicating that a card has been requested, which you can show to employers or other parties who request a Social Security card. Your new card will arrive within two weeks.

For online or mail requests for a replacement card, the application process could take a tad longer. But after your application is processed, you can expect your new card within two weeks.

Once you get your card, be sure you keep it in a safe place only you or trusted family members can access, such as a safe or lockbox.

Don’t Forget the Next Step

If you’ve lost your Social Security card, replacing it is just one step. A lost card could make you an easy target for identity theft, so you should take additional steps to protect your identity, especially if you suspect the card may have fallen into the wrong hands. Here’s what to do: 

  • Get a free annual credit report to make sure you recognize all information reported there.
  • Keep a close eye on your credit scores for abrupt changes, which could signal fraud. You can get a free credit report snapshot updated monthly through Credit.com.
  • If you notice suspicious activity, consider placing a fraud alert on your credit reports. In severe cases, a credit freeze may be appropriate. 

Note that monitoring your credit is an ongoing task. Once your information is compromised, it could be at risk for years to come.

If you’ve lost your Social Security card, use the information above to get your replacement. And remember to keep a vigilant eye on your credit activity to ensure your Social Security number hasn’t fallen into the wrong hands.
Image: Fuse

The post Who Do I Call If I Lost My Social Security Card? appeared first on Credit.com.

7 Steps to Help You Get Out of Your Rental Lease

security deposit

Whether you’re renting an apartment, house, or duplex, your home ought to feel like a safe place—one that’s comfortable and secure. But what happens if something alters that safe space? Can you break your lease? And what happens if you do—is your credit doomed?

To help you navigate these troubling waters, we’ll cover common reasons tenants want to break their lease and what you should do if you’re ready to break yours.

Common Reasons Tenants Break a Lease

There are a variety of reasons people want to terminate their lease early—but here are just a few that could apply to you.

  1. The rental unit is uninhabitable. A landlord is obligated to perform general property maintenance and ensure the property adheres to health and safety codes. Circumstances that could make a property uninhabitable include the presence of black mold, a lack of running water, or a lack of proper waste disposal.
  2. The landlord illegally entered your rental space. Landlords must provide legitimate reasoning as to why they are entering your home.
  3. You are on active military duty.
  4. You are a victim of domestic violence.
  5. The rental space falls into foreclosure or is illegally rented to you.

What to Do If You Need to Break Your Lease

If you need to get out of your lease, here are seven essential steps.

1. Read Your Lease and Document Everything

Before you take action, be sure to look over your lease. “Read it three times!” says Joel S. Winston, a litigation lawyer at Winston Law Firm, LLC. Your lease should spell out the procedures and penalties for canceling early.

“The lease that you signed and that no one reads—that’s going to control how difficult and expensive it will be to break a lease,” Winston says.

Just don’t make up problems with the property that don’t exist to get out of your current lease. “Try to be open and honest and approach your landlord in a nice and friendly manner,” Winston recommends.

However, if there are problems and you feel the landlord isn’t adequately fixing them, put the complaints and problems in writing. Just make sure you keep a copy of the document for your records. And if push comes to shove, carefully look over your lease for details that cover what happens if you terminate the lease early, including whether you will be held responsible for the entire remaining term of the lease or a lesser amount.

In many states, landlords can’t use the fact that you left early as a windfall. However, if they can only rent the unit at a lower rate than you were paying for the remainder of your lease, you may be required to make up the cost difference. You may also have to pay for the advertising costs to find a replacement tenant.

2. Communicate Thoroughly

Let your landlord know what you want to do and why you want to terminate the lease. Some may be more flexible than others. A large property management company might be unsympathetic to your financial woes, but an individual owner might be more compassionate.

Also, as difficult as it may be, try to think of the circumstances from a landlord’s perspective.

Terminating a lease early may put an owner-landlord into a financial bind, especially if they have to spend time and money securing a new tenant. It’s not out of the question to assist your landlord in finding an adequate replacement, but it’s ultimately their decision.

3. Get Confirmations in Writing

Make sure you get written confirmation of any changes to the lease. If your landlord says you can move out early with a small penalty or no penalty, get that in writing. Never rely on a verbal agreement—otherwise it will be your word against theirs. You may be tempted to keep things cordial and light, but a handshake isn’t going to help you pay off a creditor or debt collector.

Store these written confirmations in a safe place you’ll remember. It won’t do you any good if you can’t find that information when a collection agency contacts you.  And should you end up in collections or in court, the written terms in the lease will likely prevail.

If the landlord won’t budge, won’t put anything in writing, or won’t compromise, you can still create your own paper trail by communicating in writing and keeping a record of the letters you sent.

4. Don’t Forget the Walk-Through

No matter how anxious or excited you are to move out, protect yourself from unexpected charges by doing a walk-through with your landlord and getting a written record of the results. We wouldn’t recommend leaving your rental until you’re able to do this. Should your landlord refuse to do a walk-through, take detailed pictures—or better yet, video—of the property’s status the day you leave.

5. Don’t Make Assumptions

When it comes to breaking your lease, avoid assumptions. Specifically, don’t assume your security deposit will take care of any remaining balance or fees you owe.

“When you are breaching the contract, it doesn’t always entitle the landlord to scoop up your security deposit. For example, in New York, the landlord has to go to the housing court to file a complaint in order to take that.” Winston says.

Similarly, if you live with a roommate and you pay your portion of the rent but your roommate does not, this missing payment has financial repercussions. If you both signed the lease, you are both fully responsible for the entire rent check, regardless of what the two of you have worked out between yourselves. But if your name is the only one on the lease, you may be the one stuck holding the bag.

6. Know That There Are Exceptions to the Rules

You may have legitimate reasons for breaking a lease that aren’t spelled out in the actual lease, like a safety or health reason directly connected to the property.

“Essentially, the ‘warranty of habitability’ is a landlord-tenant legal doctrine requiring landlords to maintain rental real estate in reasonable conditions that are fit for tenants to live safely,” explains Winston.

Winston goes on to say, “The warranty of habitability is accepted law in most every jurisdiction in America. In some states, the warranty has been established by decades of case law (i.e., Implied Warranty). But in other states, the warranty has been expressly established by legislation.”

There may be state-specific laws that allow you to break a lease early. For example, in Washington, one legitimate reason for terminating a lease is the landlord failing to make certain types of repairs within a specific period of time—as long as mold isn’t part of the problem.

7. Get Help

Landlord-tenant laws are state-specific. So it’s a good idea to research your rights as a tenant before signing your name on the dotted line. If you believe a landlord’s actions are illegal, you may be able to get help from legal aid programs, a local housing agency, or a consumer protection attorney in your state.

Understand that even if you do everything right, problems can come up. For example, an unknown balance can wind up in collections and you may not hear about it until the damage to your credit score is done. Or if you terminated your lease early, the leftover balance may be reported to specialty credit reporting agencies used by landlords—and these reports could catch you by surprise the next time you try to rent.

Whatever the reason, keep detailed and legible records of what transpired long after you think you’ll need them—seven years is usually safe. Also, frequently review your credit report and credit scores to make sure you’re aware of any significant changes. You can get two free credit scores updated monthly at Credit.com.
Image: iStock

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Can I Get a Car Loan If I Have No Credit?

buy a car with no credit

Yes, lenders have auto loans for people with no credit, but getting one is not guaranteed. It will depend on the lender’s flexibility, the down payment you can afford, and the kind of car you want to buy. It may even depend on how you ask.

Phil Reed, senior consumer advice editor for the consumer auto site Edmunds has some good advice on how to get a car loan with no credit. He says a surprising number of people simply walk into a dealership and say, “Hi, I have no credit, and I want to buy a car.” He doesn’t recommend this approach. Instead, he offers these five tips for people who need a no-credit car loan.

1. Get Pre-Approved

If you have no credit or a thin credit profile, you should try to get preapproved for a loan before heading to the dealership. This will let you compare rates with any loan the dealer may offer. It may also give you a bargaining chip when negotiating the final deal.

If you have a relationship with a bank or credit union, you should start looking for financing there. Reed recommends making an appointment to meet with your bank’s loan officer in person.

“Make a case for yourself,” he says. That means bringing your pay stubs and bank account records with you. You should also check your credit reports, if they exist, and credit scores. You want to know as much about your credit profile as a lender would. If you don’t know your credit score, don’t worry—you can check your credit score for free every month on Credit.com.

If you can’t get a loan from your financial institution, you may be able to find a no-credit auto loan online. Just make sure it’s from a reputable lender. Credit.com can also help you find auto loan offers from trustworthy lending institutions.

2. Negotiate a Good Price

A dealership could beat the offer you get from your bank or credit union. However, if you know you’re already approved for a loan, you can focus on comparing rates and prices instead of worrying about financing.

Reed says that it’s important to be wary. You don’t want to feel so indebted to the dealer for “giving” you a loan that you fail to negotiate the price of the car. And if the dealer’s financing isn’t better than the bank’s, at least you still have an approval in your pocket.

Having a good down payment or trade-in can also help your case. A trade-in would reduce the amount you’ll need to borrow, and a larger down payment would show the lender some commitment on your part. Edmunds recommends putting at least 10% down on a used car, so start saving now.

3. Choose the Right Car

Be sure the car you’re buying is affordable for you, even if it’s not the car you’d choose if you had more money and better credit. “If you have no credit, it’s not the time to get your dream car,” Reed says. “You have to choose the right car and the right amount [to borrow].”

You want reliable transportation you can afford. Making regular, on-time payments won’t just pay down your load, it will also build your credit, so don’t get a loan that requires higher payments than you can comfortably make.

Sites like Kelley Blue Book, Cars.com, and Edmunds can help you find information on the cars that match your budget. When you’re at the car dealership, remember your budget and don’t spring for optional add-ons you don’t really need.

4. Don’t Let Interest Rates Scare You Off

Reed cautions that when you get a loan with no credit, the interest rates you’re offered may seem appallingly high, but that’s part of the cost of having no credit history.

When you don’t have a credit score, lenders can’t assess how big of a risk they’re taking by giving you a loan. To protect the money they’re lending, they will likely treat you as a high-risk borrower, which means the loan will have a higher interest rate.

As you make payments, you’ll establish a pattern of reliably paying back money. Over time, you can improve your interest rate by refinancing. Reed says that, according to a dealership employee, a customer once lowered his interest rate from 13% to 2% in two years’ time by improving his credit and refinancing.

5. Give Yourself Some Credit, Not a Cosigner

Reed advises against cosigning—a process that involves checking someone else’s credit and using that score to qualify for a loan. It might get you a lower rate and help you get approved, but Reed says that if you bite the bullet and pay a higher interest rate rather than get a cosigner, you’ll have the opportunity to build credit.

In addition, having a cosigner will tie that person’s credit to yours, and the way you repay your car loan will influence their credit. Reed says if you’re going to do it, do it only as a last resort, and make sure the cosigner is a relative.

Bottom line, though, as Reed explains, “It’s asking a lot.” It’s better to finance the car yourself, pay on time, and build your credit. That way, the next time you need a loan, you won’t have to worry about whether you’ll qualify.

Good credit doesn’t just help you get reliable transportation: good credit can make a huge difference in improving your financial security and the peace of mind that comes with it. Start tracking your credit for free today at Credit.com. Your new car will get you moving around town, but your new credit score will get you moving up in the world.

Image: iStock

The post Can I Get a Car Loan If I Have No Credit? appeared first on Credit.com.

My New Car Is a Piece of Junk. Can I Return It to the Dealer?

My Car Is a Piece of Junk. Can I Return It to the Dealer?

Once upon a time, you loved your car. You loved it so much that you agreed to the payment terms and drove it home from the dealer or, dare we say, a private seller. But now, that love has grown cold and you wish you’d never laid eyes on it. And to make matters worse, you’re bound to its existence and monetary depreciation—thanks to that sweet-little-pain-in-the-butt payment book. Or at least, that’s what you’re afraid of.

If you’re wondering if you can return your unwanted car without any more financial obligation, read on. We’ll discuss whether it’s possible and what you can expect.

Can I Return My Car?

Readers have asked us if they can just “give the keys back” and get a car that is reliable and without unanticipated problems—specifically, a vehicle they can confidently drive with their family, friends, or pets in tow. The short answer is yes, but there’s a variety of potential repercussions and unseen problems.

Before you do anything, find out the following:

  1. If you purchased your car through a private seller, does your state have a “lemon law”?
  2. If you purchased your car through a dealership, does the dealer have a return policy?

If you can answer “yes” to either of these questions, look into these options further to see if your circumstances apply and what you’re entitled to.

However, if you have no recourse under your state’s lemon law and your situation doesn’t qualify for a dealership’s return policy, returning the car is going to be a little tricky and could have credit implications—which you’ll want to consider, especially if you plan to lease or purchase another car once you give the other one back.

Returning the Car to the Dealer

Despite how liberating and freeing a car return may feel, giving the vehicle back to the dealer won’t erase your debt. In fact, the consequences could be just as frustrating as the junk car itself.

“Technically, if you give the car back, it is the same as a repossession,” Matt Briggs, co-founder and CEO of RentTrack, explains. “Keep in mind you have a legal obligation to pay the terms of the loan and the car dealer is typically not the finance company who holds the loan (unless they are ‘buy here pay here’). Either way you cannot simply ‘give back’ the vehicle to a dealer and walk away.”

So look at it this way: to simply give the car back is to consent to automobile repossession—meaning the car would be sold at auction, and you would be responsible for the difference in what the car brought at auction and the amount you still owe on the car.

Plus, you’d be on the hook for expenses involved in this process, such as repossession, towing, title and sale, and storage. So if you leave the car at the dealership, you still owe the debt—which could total to more than the dang clunker is worth—and you’re out a working vehicle.

Concerned about what could happen to your credit score? According to Experian, a car repossession stays on your credit report for seven years—even after the original account goes delinquent. You can see how your debt has affected you by getting a free credit report summary on Credit.com, which will explain what factors influence your credit score.

Car Debt and Bankruptcy

There is a way, however, to force a dealer to “eat steel,” says Eugene Melchionnne, a Connecticut bankruptcy attorney. To do so, you can surrender the car and discharge the debt in bankruptcy—but then you’d have to apply for bankruptcy. “There is also a process for ‘cramming down’ the debt to the value of the car in bankruptcy, and in a Chapter 13 case, you can spread the balance owed over an extended period of time,” he says.

“For example, if the car loan is for $20,000, but the car is worth $10,000, the loan can be reduced to $10,000, and if there are, say, four years left to pay at $500 per month, the payments can be spread out to a maximum of five years on the lowered balance, resulting in $330 or more a month savings,” Melchionne explains.

Selling or Trading the Car Instead

With all that said, it might be simpler and cheaper to sell the vehicle yourself or trade it in for something else, which is what Matt Briggs suggests you do.

“[At] most repossession auctions, the cars sell for a much lower price than the retail value, so you may end up owing more than you would if you sold it [as a] private party (using a website like AutoTrader, eBay, or Cars.com) or if you traded it in on a different vehicle.”

The Bottom Line

For most of us, simply driving the car back to the dealership and handing over the keys, however tempting, is not a workable strategy. So after you dig yourself out of this mess, do as much due diligence as possible before you buy next time.

“Bottom line,” Briggs said, “you have a legal obligation to pay the car loan in full, so make sure you are getting a good deal before you sign on the dotted line.”

 

Image: hemera

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Will Debt Consolidation Help or Hurt Your Credit?

Debt isn't always a bad thing. In fact, it can help your small business thrive.

From student loans to a house mortgage, debt accumulation is stressful and overwhelming. As you make moves to get out of debt, you might want to consider consolidating credit cards or other loans to save you time and money. But that begs the question—does debt consolidation help or hurt your credit?

The answer depends on how you consolidat­e and what you do with your debt afterward.

1. Debt Consolidation Loans

Getting a new loan to pay off other debts is the most popular way to consolidate. It’s certainly what most people think of when they consider consolidation. But finding a loan that has decent terms and is designed specifically for the purpose of consolidation can be challenging—especially if your credit scores are a bit lower due to the balances you’re carrying.

It’s certainly not impossible, though. Look for reputable debt consolidation companies that will work for your specific situation.

Tip: Triple check lenders’ certifications to make sure you’re dealing with a legitimate site if you’re shopping for a loan online. Scams abound.

Effect on Your Credit: Consolidating credit cards with high balances using an installment loan (i.e. a loan with fixed monthly payments) may actually benefit your credit rating, especially if you use the loan to pay off credit cards that are near their limits. At the same time, any new loan can cause a short-term dip in your credit scores—so don’t be too surprised if you see your credit score change slightly when taking out a new loan.

2. Debt Management Plans

Debt management plans are often confused with debt consolidation—however, they’re very different programs. Debt management plans (DMPs) are offered through credit counseling agencies and, much to many people’s surprise, they don’t actually consolidate your debt.

Instead, you make a “consolidated” payment to the counseling agency, which then pays each of your creditors—usually at a reduced interest rate. Even though you’re making only one or two monthly payments, the counseling agency doesn’t actually pay off your creditors for you—it simply acts as a middle man to help you repay your debts and ensure that the creditors get the money they’re owed. These programs are available regardless of credit scores, so if you are having trouble consolidating, a DMP might be worth considering.

Tip: If you choose to move forward with a DMP, you should close or suspend your credit card accounts. Unfortunately, you’re not permitted to use credit cards while enrolled in a DMP.

Effect on Your Credit: If you have a good credit score and adhered to a creditor’s repayment terms in the past, a DMP could have a negative impact on your credit as it indicates that you are experiencing or have experienced difficulty with payments. Also, since a DMP directly impacts payment terms, credit reporting agencies might ping your DMP commitment because it designates a change in payment policies.

3. The Credit Card Shuffle

Transferring a high-rate credit card balance to a card with a lower rate is another way to consolidate. Carrie Rocha, author of Pocket Your Dollars: 5 Attitude Changes That Will Help You Pay Down Debt, and her husband paid off some $60,000 in debt, and taking advantage of low-rate balance transfers was one of the strategies they used to dig out. However, if you decide to go this route, you must be very disciplined in your approach. Otherwise, you may fall into traps such as getting stuck with a balance at a high interest rate after the introductory period ends.

Tip: Read the fine print. Keep your eyes peeled for any “but” or “until.”

Effect on Your Credit: It depends on how you use a transfer. You’ll often see a temporary dip in your credit score when opening any new card. If you use a substantial portion of the available credit (on the card) to consolidate balances from other cards with lower balance-to-available-credit ratios, your credit scores may drop from that as well. Finally, you may also lose points if you open a new card and use a majority of the credit line to consolidate.

However, if a 0% card allows you to save money and pay off your debt faster, you can come out ahead in the long run, both financially and credit score–wise.

The End Goal: Less Debt Equals Stronger Credit

Paying down debt can have a tremendous impact on your credit scores. According to FICO, the company behind most of the credit scores used by lenders, consumers with high credit scores (e.g. 785 and above), tend to keep their balances low. Specifically, two-thirds of consumers with good credit carry less than $8,500 in non-mortgage debt, and they use an average of 7% of their available credit on their credit cards.

That means that paying off debt—whether you use a consolidation loan or just put every penny you can toward your debt—will often improve your credit ratings in the long run. The biggest risk, though, is that it’s easy to run up new balances on the cards you paid off in the consolidation—and that’s definitely not a good move for your credit or your bottom line. As you make progress on paying off your loans, periodically check your free credit report to see where you stand.

Remember, moving debt is a means to your end. The goal is to pay off those balances and free up cash flow as well as to help build strong credit. So whether it’s a consolidation loan, credit card shuffle, or DMP, know your options so you get there just a little faster.

Image: mapodile

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Trapped in Payday Loan Debt? Here’s How You Can Escape.

Trapped in Payday Loan

Nobody likes being in debt, but it’s even worse when it seems like there’s no way out. That’s how the 12 million Americans who take out payday loans each year usually feel. That’s understandable, considering they pay out around nine billion dollars in loan fees. But there is hope—you don’t have to be stuck in the payday loan debt cycle forever.

Why It’s So Easy to Get Buried in Payday Loans

Payday loans are unsecured personal loans targeted at people who need money fast but don’t possess the type of credit or collateral required for a more traditional loan. Usually the only requirements to qualify for a payday loan are an active bank account and a job. Companies like MaxLend, RISE Credit, and CashMax have made an art out of providing high-interest loans to people who feel desperate and out of options.

The very structure of payday loans is set up to keep people on the hook. Here’s a breakdown of what payday loan debt looks like, according to the Pew Charitable Trusts:

  • It’s not short-term. Although payday loans are advertised as quick, short-term loans, the average payday loan borrower is in debt for a full five months each year.
  • Loan fees are huge. Average loan fees are $55 every other week, and the average borrower pays $520 per year for multiple loans of $375.
  • People borrow for the wrong reasons. Most payday loan borrowers—70%—spend the money on everyday expenses, like groceries, gas, and rent, rather than on emergencies.
  • It’s a vicious cycle. To totally pay off a loan, the average borrower would need to fork over $430 the next payday following the loan. Because that’s a big chunk of change, most people end up renewing and extending the loan. In fact, 80% of all payday loans are taken out two weeks after another one was paid in full.

What Happens If I Don’t Pay My Payday Loan?

As with any other loan, if you default on a payday loan, it can result in growing fees, penalties, and possible legal action. Because many payday loans use automatic debit payments to take funds directly out of a bank or prepaid account, you can also end up with overdraft fees on top of everything else. This can leave you without the funds you need to pay for necessities like food, childcare, and utilities. To top it all off, you may also experience a barrage of calls and threats from debt collectors.

This all sounds extremely unpleasant, but there are ways you can get help with payday loans.

How to Get Out of Payday Loan Debt

As we’ve established, it’s crucial to stop the vicious cycle of payday loan debt. There is payday loan help, but it can be hard to know where to start.

The best way out can depend on where you took out the loan. Laws governing payday loans vary from state to state. Some states, like Colorado, are currently working to change the way payday loans are administered in order to make it easier for customers to pay loans back and avoid the snowball effect of constant loan renewal. Other states require payday lenders to offer borrowers an  Extended Payment Plan (EPP), which stops the accrual of fees and interest.

Here’s a closer look at some of the options available to get rid of payday loan debt.

Extended Payment Plans (EPPs): If you borrowed from a lender who is a member of the Community Financial Services Association of America (CFSA), then you may be in luck. CFSA’s Best Practices allow a payday loan customer the option of entering into an EPP.  This means you’ll have more time to repay the loan (usually four extra pay periods) without any additional fees or interest added for that service. Best of all, you won’t be turned over to collections as long as you don’t default on the EPP. Here are the steps to follow if you want to apply for an EPP:

  • Apply on time. You must apply for the EPP no later than the last business day before the loan is due.
  • Sign a new agreement. If you took out your loan through a storefront location, you’ll have to go back to that location to turn in your application. If you took out a loan online, you’ll need to contact your lender for instructions about how to sign your new agreement.

Credit Counseling: If an EPP isn’t an option, you may want to talk with a credit counseling agency. While credit counseling agencies spend their time helping consumers get out of debt, these kinds of loans can present unique challenges. “It’s not a traditional loan with set guidelines in terms of how they work with us,” explains Fox. In spite of those challenges, there are things a credit counseling agency can do to help you get out of payday loan debt:

  • Restructure the payback. Fox says that payday lenders who are members of the CFSA “seem to be more lenient” and are “more apt to try to work with people.” Those lenders will often “restructure to pay back (the balance) over six to twelve months when coming through our program.” But he also adds that this applies in  only about 40–50% of the payday debt situations clients are dealing with.
  • Negotiate a settlement. If restructuring the payback terms isn’t an option, the credit counseling agency will try to work with the lender to determine a settlement amount that will resolve the debt altogether. If you can pay off the loan with a lump-sum payment (this is the time to ask Mom or Dad for help), the agency may be able to settle the debt for a percentage of the outstanding amount.
  • Adjust your budget. If no other options are viable, the agency can work with you to come up with a budget that will help you find the money to get the loan paid off. Sometimes that means reducing payments on other debts, consolidating debts, or reprioritizing other expenses.

Bankruptcy: Nobody wants to resort to this option, but sometimes it’s the only way to get out from under this kind of debt. There is a myth out there that you can’t include payday loans in a bankruptcy. However, that is not the case: “For the most part, payday loans aren’t treated any differently in bankruptcy than any other unsecured loan,” writes attorney Dana Wilkinson on the Bankruptcy Law Network blog.

Another unsubstantiated claim is that you may be charged with fraud or arrested if you can’t pay a payday loan back or if you try to discharge the loan. One of the reasons this fear is so widespread is that payday loan debt collection scammers often make these kinds of threats, despite the fact that these threats are illegal.

What to Do After You Get Rid of Payday Loans

After you get out of payday loan debt, you want to make sure you never go to a payday lender again. Some of the smartest things you can do to start cleaning up your credit include signing up for a free credit report. Regularly checking your credit is the best way to make sure you clear up any mistakes. Plus it’s rewarding to see your credit score improve.

You can also sign up for credit repair or search for a consolidation loan to help you pay off all of your debt. This allows you to start moving in the right direction financially.

Getting out of payday loan debt can seem daunting, but it’s worth the effort and hard work. Taking control of your finances—and actually being able to plan for the future—is a reward worth striving for.

Are you trapped in payday loan debt? Or have you found your way out? Share your story in the comments below.

Image: Ingram Publishing

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Why Do I Have to Pay My Real Estate Agent 6%?

buying-house-afford

When it’s time to sell your house, you may have visions of dollar signs dancing in your head, but the truth is, a lot of those dollars will never make it into your bank account. Instead, they end up in the pockets of real estate agents.

You’ve probably heard that agents, on average, take a 6% commission off of your home’s sale price. On a $300,000 home, that’s a whopping $18,000. Before handing over that chunk of change, it’s important to understand what it pays for—and if there’s anything you can do about it.

How Do Real Estate Agents Get Paid?

First, let’s take a look at the history of realtor fees. Realtor fees are usually paid as a commission, although flat fees apply in rare cases. This commission is taken right off the top of the selling price of the home, so many sellers don’t really feel the impact because they never had the money to begin with.

Since the 1950s, the National Association of Realtors has used a “suggested” commission rate for real estate agents. This rate landed at around 6% of a home’s selling price, which included commission for both the buyer’s and the seller’s agents. In 2016, that rate was closer to 5%, which provides a small amount of relief for home sellers looking to maximize their equity when they sell their home.

What Does a Real Estate Agent’s Commission Pay For?

Even at 5%, real estate agents would take home an average of about $15,000 on the sale of a $300,000 home. The total commission is split between both the listing and the buying agents, minus any fees the agents must pay to their brokerage. So let’s break down what you get for $15,000.

  • Help pricing your home. Expertise is at the top of the list of what a real estate agent brings to the party. This means they should be able to help you price your home competitively and in a manner that helps you reach your goals—whether you’re after a quick sale or a big sale price.
  • Effective marketing. One of an agent’s biggest jobs is to make your home look great and to stir up interest in the property. They may take photos, post online ads, use social media, host open houses, and anything else that puts your home in front of qualified buyers.
  • Screening for qualified buyers. It doesn’t do you any good if the people looking at your home aren’t able to buy it. A real estate agent should do all the footwork required to make sure anyone who’s interested in your house is preapproved for a home loan.
  • Closing expertise. Finally, a real estate agent should be well-versed in the art of closing a home sale. Their job is to get you the best price with the least hassle and walk you through all the steps you need to take to make sure your sale goes smoothly. This applies to showings, appraisals, inspections, and the final paperwork.

Can I Save Money on Real Estate Agent Commission?

The good news is you’re not stuck having to fork over 5% of your home’s selling price. If you don’t relish the idea of waving goodbye to that hefty sum, here are some alternatives.

1. Negotiate the commission rate. Just because 5–6% is common, it doesn’t mean that’s what you have to accept. Ask your real estate agent if they’re willing to take less.

“Offer 4%,” suggests Bob Nettleton, who successfully negotiated the commission when he used a real estate agent to sell his home. Or, he says, offer 2% if you find the buyer on your own and just need the agent to help with the standard process. Nettleton adds that other factors, such as home price and how many services you expect, can also affect how much you negotiate on the commission.

2. Sell your home by yourself. More people are opting to sell their home without a real estate agent. This saves on commission fees, but it means you have to do all the work to market your home and vet potential buyers. People who want to go the FSBO (For Sale by Owner) route can find help through services like Homie and Zillow.

Keep in mind that the buyer may have an agent who will expect a commission, so that’s another factor that will play into negotiation of the final sales price. If you opt for FSBO, you may also need to do additional homework like finding a mortgage lender who can help complete the sale.

Other Financial Considerations When Buying a Home

No matter what, you want to get the most out of selling your home. But real estate agent commission is just one part of the overall financial transaction of buying or selling a home.

Chances are if you’re selling a home, you’re probably also looking to buy another one. Negotiating how much you pay a real estate agent may pale in comparison to the extra money you’ll spend over the lifetime of a mortgage if you get locked into poor interest rates or your credit is less than perfect. Check the mortgage marketplace for interest rates and make sure your credit is in tip-top shape before you start looking for your next house. One factor many sellers overlook is the possible impact that selling their home could have on their credit.

If you’re concerned about your credit score, take advantage of a free credit report. This report lets you keep tabs on your credit, and it includes free updates every 30 days to help you proactively correct mistakes and improve your score. You also don’t need to let bad credit get in the way of refinancing your home.

Take Control of Your Home Sale

Managing big transactions like selling or buying a home can feel overwhelming, but there’s no need to panic. Just keep in mind that, ultimately, you are the one in control over the sale of your home. Weigh out the pros and cons of paying a full commission, and take the steps necessary to get a final profit out of your home that makes you happy.

Image: istock

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3 Things You Must Do Before You Lease a Car

Three Things You Must Do Before You Lease a Car

I tend to drive my cars until they die, and a couple of years ago that’s what happened. In need of a new car, but not sure what I wanted for the long-term, I considered leasing a vehicle. But if buying and financing a car seemed confusing, leasing seemed even more overwhelming. I ended up buying instead.

Turns out, though, that while leasing isn’t for everyone, it can have some advantages. Lower monthly payments and more flexible credit score requirements may be two of them.

If you are thinking about leasing, here are three things you can do to help improve your chances of getting approved.

1. Check Your Credit

Your credit score plays a key role in the lease you get. “There are going to be different tiers of credit that will be evaluated,” said Scot Hall, Executive Vice President of WantALease.com, an online marketplace for new lease deals. “If you have better credit, you will get better rates unless it’s a dealer-subsidized lease.”

Checking your credit reports at least a month before you plan to start shopping is ideal, since that will give you time to dispute and fix mistakes. While you are at it, check your free credit scores as well (you can access two of your scores free on Credit.com). You will get an idea of where you stand and whether there are potential issues with your credit.

What kind of credit scores are required to qualify for a lease? “(If) you do have good credit it really unlocks the door to the best lease deals. You’ll be able to take advantage of some of the lease specials,” said Edmunds.com Consumer Advice Editor Ron Montoya.

In addition, it may be easier to qualify for a lease than a loan on certain vehicles, at least when it comes to your credit scores. The make and model of the vehicle you choose will also affect your options. Experian Automotive found, for example, that the average credit score of someone who took out a loan for a new Jetta in the fourth quarter of 2014 was 716, while the average credit score for someone leasing one was 692. But for someone driving a new Grand Cherokee, the average credit score for a loan borrower was 735, while the average credit score for a lessee was 728.

average credit score

2. Know Your Cash Flow

One of the distinct advantages of leasing is that it may allow you to pay less per month than if you financed the same vehicle. According to Experian Automotive, the average monthly payment for a new lease was $420 in the fourth quarter of 2013, and the majority of leases (66%) were for a 24- to 36-month term.

But your lease payments may be lower than a loan payment for a similar vehicle. For example, the average lease payment for a Jetta was $287 while the average loan payment was $389. And for a Grand Cherokee, the loan payment averaged $611, compared to $470 for the lease payment.

average payment

Keep in mind that these monthly payments don’t take down payment or trade-in into account. And if you lease, you’ll either have to turn in the vehicle or purchase it when the lease term is up. “Consumers need to fully understand any potential cost on the back-end and be sure they can meet the terms of the lease – such as mileage limits and wear and tear,” said Melinda Zabritski, senior director of automotive credit for Experian Automotive.

3. Don’t Just Shop for a Car, Shop for a Lease

Unlike auto loans (which are available from a variety of sources including banks, credit unions, dealers and even online), leases today are largely controlled by the manufacturer. “Nearly all leases are done on a captive basis,” said Hall. For example, “Ford Motor Credit Company does most of the leases for Ford vehicles.”

That means you may be able to get a better deal if you are flexible and willing to consider a vehicle from a different manufacturer.

In addition to credit, the company offering the financing looks at your debt-to-income ratio and the “lease-to-value” ratio – in other words, how much you are financing compared to the value of the vehicle, said Hall. If you are having trouble qualifying, you may need to put additional money down or get a co-signer, he adds.

The good news is most people who apply for a lease qualify for one. Lease approval rates during the month of January were above 70%, according to SwapALease.com. Though that’s down from 73% in December of 2013, it’s up from September 2013 when a little more than 62% of applications were approved.

And there’s still another option: If you’re not ready to commit to a two- or three-year lease, you can consider taking over the remaining term on someone else’s lease. As long as your credit is in the same “tier” or better than the person whose lease you are assuming, you shouldn’t have much trouble qualifying, says Hall. Sites like SwapALease.com and LeaseTrader.com help bring together consumers who want to get out of leases and those who want to assume one and allow you to try out leasing without a longer-term commitment.

Image: Len44ik

This article has been updated. It originally ran on March 20, 2014.

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