Category: Loans

Time to Move or Time to Improve? Moving Vs. Home Improvement

by Advantage One, posted in Budgeting, Convenience, Home Buying, Lifestyle, Loans, Saving, Tips & Best Practices, Uncategorized

Q: My family is growing out of our current home and we’re desperate for more living space. My house can also use a major face-lift. I’m wondering: should I move to a new house, or make some major improvements to my current home?

A: Choosing to move to a new home or to make improvements to your current home is a big decision. The right answer will depend on your general financial situation and other personal circumstances. Here, we’ve outlined the pros and cons of each choice so you can make the decision that is best for you. 

Moving to a new home

For most people, a home is the largest purchase they will make during their lifetime. It can take years to save up for a down payment on a home, and many months of planning and wise decision-making before a home purchase is finalized. 

Pros of moving:

  • Opportunity for a fresh start. You can choose a new location that better suits your needs, such as a superior school district, proximity to family or work or a more desirable community.
  • More living space. This is especially beneficial if you have a growing family or want to add more amenities to your home, such as a home office, designated playroom or gym.
  • Potential for appreciation. If you buy a home in an area that is experiencing growth, your property value may increase over time, resulting in a return on your investment.
  • No dealing with renovations. If you purchase a home that’s already in move-in condition, you won’t have to deal with the headache of renovations at all. 

Cons of moving:

  • Exorbitant upfront costs. Moving to a new home doesn’t come cheaply. You’ll need to spring for closing costs, a down payment, the actual move and for any new furniture you may need to purchase for your new residence. Selling your current home will also cost you in renovations, agent fees and title insurance.
  • Emotional attachment to your home. Did your son take his first steps in the kitchen of your current home? Did your dog have her puppies in the garage?  If you’ve been living in this home for many years and it holds lots of happy memories, you may be reluctant to leave. 
  • Difficulty finding the perfect home. You may need to settle for a home that is less than perfect in many ways. That may end in more stress and regret.
  • Stress of selling your home. The housing market is unpredictable, and you may not be able to sell your current home for the desired price. Of course, if you don’t own your current home, this does not apply to you.
  • Potentially higher interest rate on your mortgage. If rates have increased since you bought or refinanced your current home, or your credit score has slid, you may end up with a higher interest rate on your new mortgage. That could mean paying much more over the long run.

Questions to ask before deciding to move

Before you go ahead with the decision to move to a new home, ask yourself these questions: 

  • What are the market conditions like in my current neighborhood? Will I be able to get my asking price on my home within a short amount of time?
  • What are the market conditions like in my desired neighborhood, and how are they trending? Will I be able to find a home that suits my needs and is within my price range?
  • Do I have enough money saved up to pay for the move? Will I need to wait until I sell my home or take out a bridge loan to cover the gap?
  • Is this a good time for my family to move?

Improving your current home

Now, let’s take a look at the option of improving your current home with a Home Equity Line of Credit (HELOC). A HELOC gives you quick access to cash by using your home as collateral. You can withdraw the funds, as needed, over a period of time known as the draw period. When this time is over, you’ll no longer be able to advance funds and will repay the loan, with interest, over the repayment period.

You can also take out a Home Equity Loan (HEL), which will provide you with one lump sum, generally at a fixed rate and payment, and you start paying back immediately. 

Pros of improving your home:

  • Completely customize to fit your needs. When you design your own home, you can have it customized to perfectly suit your family’s needs and your own tastes. Think trampoline floors in the playroom and built-in bookshelves in the family room.
  • No stress of relocating. When you renovate your home, you can continue to enjoy the same home and neighborhood you’ve lived in for years. 
  • Increase the value of your home. Home improvement projects increase your home’s value, increasing your net profit when you do decide to sell in the future. 
  • Save on moving costs. Why pay thousands of dollars in closing and moving costs when you can have a beautiful new living room for the same price?

Cons of improving your home:

  • Stress of renovations. Dealing with a home improvement project can be super-stressful. There are loads of decisions to make, an endless mess and workers in your home at all hours of the day. 
  • Risk of foreclosure. Taking out a HELOC or HEL puts your home at risk of foreclosure if you are unable to make the payments. This can have long-term consequences on your credit score and financial stability.
  • Additional debt. A HELOC or HEL adds another debt to pay each month, which can be a burden on your budget. 

Questions to ask before deciding to improve your home

Before you go ahead with the decision to improve your current home, ask yourself these questions: 

  • Can I afford the monthly payments on a HELOC?
  • How much will a home improvement project cost me?
  • Will I be able to handle living in a construction zone?
  • Do I want to continue living in this neighborhood?

Your Turn: Have you chosen to move or to improve? Tell us what drove your choice in the comments. 

All You Need to Know About Buying a Home in 2023

by Advantage One, posted in Home Buying, Lifestyle, Loans, Tips & Best Practices

If you’re planning to buy a home this year, you likely know you won’t be dealing with typical circumstances. The real estate market has been completely upended by the pandemic along with its ensuing financial fallout, and it has yet to recover. While the extreme market conditions that characterized the last two years are beginning to settle down, the market is still far from stable.

Here’s what to expect when buying a home this year, and how to make the most out of the current market conditions.

Flattening home prices

Home prices shot up by 18.2% year-over-year in 2021, and then a generous 9.6% in 2022. The National Association of Realtors (NAR) predicts median existing home prices will inch up just 0.3%, and new homes will rise by 1.3% in 2023. This is fabulous news for buyers who were looking at inflated prices on homes these last two years. 

Stabilizing mortgage rates

Mortgage rates more than doubled in 2022, from approximately 3% to more than 6%, further driving up the price of buying and owning a home. In contrast, the 30-year fixed mortgage is expected to average between 5.2% and 6.8% in 2023, according to recent predictions by

Fannie Mae, Freddie Mac, the Mortgage Bankers Association and the NAR. While the Federal Reserve still plans to raise rates, it’s slowed its pace, with the most recent increase in December being just 0.50%, as opposed to previous 0.75% hikes. Lenders will likely slow down their interest rate increases as well.

More negotiating room for buyers

In recent years, the home-buying process was characterized by fierce bidding wars, which left little to no room for buyers to negotiate. That’s about to change. With the supply of available houses on the market creeping closer to matching the demand, buyers will have more negotiating power and will be able to stand firm on their personal preferences, like home inspections and a lower price. 

Tips for buying a house in 2023

If you plan to buy a new house this year, here’s how to prepare for and ensure a smooth and successful process. 

  • Get your finances in order. It’s a good idea to verify you can afford to buy a new home before you start your search. If it’s possible, take a good look at your finances for at least half a year before you plan to start looking for a new home. How much money do you have saved up for a down payment? How much can you afford to spend on a monthly mortgage payment? Ask these questions before getting started to avoid disappointment later on in the game. 
  • Boost your credit score. You’ll need a minimum credit score of 670 to qualify for a home loan from most lenders, so make sure your score is up to par before you hit the market. Work on paying down debt, paying your bills on time or early and lowering your credit utilization in the months leading up to your search. You’ll also want to avoid opening new cards at this time. 
  • Understand your mortgage options. Depending on your personal circumstances, you may benefit from a mortgage backed by the Federal Housing Administration (FHA), which only requires a 3.5% down payment, or a VA mortgage, which requires no down payment. Similarly, a 30-year fixed-rate mortgage may be in your best interest, or consider going with a 15-year adjustable-rate mortgage (ARM). Make sure you know your options well so you can make an informed choice. 
  • Shop around for a mortgage lender. Do your research before choosing a lender. Look for a lender that offers the kind of mortgage you need, and ask for referrals from recent clients. You’ll also want to compare the loan estimates you get from different lenders, looking at the rates, fees, estimated closing costs and anticipated monthly mortgage payment. 
  • Get your pre-approval before you start your search. This way, you’ll know exactly how much house you can afford, and sellers will regard you as a serious buyer.
  • Move quickly when you’ve found a possible yes. The market may be cooling down, but it’s still competitive. If you want to buy a home this year and have your finances worked out before you start shopping, it’s a good idea to make an immediate offer on the home you like.

If you plan to buy a home in 2023, you’ll be dealing with a market that’s slowly settling down, but is still far from stable. Use this guide to learn what kind of market conditions you’ll be facing and how to prepare for the process.

Your Turn: Do you plan to buy a home in 2023? Share your best tips in the comments. 

What is a Personal Line of Credit?

by Advantage One, posted in Budgeting, Convenience, Credit, Loans, Tips & Best Practices

Q: I need access to an indefinite amount of funds for expenses, so I’m thinking of taking out a personal line of credit. What is the difference between this product and a personal loan or a credit card?

A: Personal lines of credit can be a great way to access necessary funds for covering various expenses, with minimal hassle and easy payback terms. Let’s take a look at how this loan product differs from traditional personal loans and credit cards, as well as why it can be a fantastic option. 

What’s a personal line of credit?

A personal line of credit (PLOC) is a form of revolving credit up to a specified amount that works much like a credit card. The borrower can use the money as needed until the maximum allowable credit line (aka “limit”) is used. As the borrower makes monthly payments toward the balance, the available credit is updated to reflect the principal balance that has been repaid.

A PLOC has two phases: the draw period and the repayment period. During the draw period, which typically lasts two years, the borrower can take out as much money as needed from the available credit line. Once the formal repayment period begins, the borrower can no longer take out cash from the credit line. It should be noted that the borrower does not have to wait for the repayment period to commence; they can typically begin repaying the used line as soon as they start drawing.                                                                                          

How is a personal line of credit different from a personal loan?

Unlike a PLOC, a personal loan provides the borrower with a lump sum of money that is generally used immediately for a specific purpose. Personal loans usually feature a fixed interest rate and a fixed payment amount throughout the term. You’ll make consistent payments toward the loan’s interest and principal throughout the life of the loan.

How is a personal line of credit different from a credit card?

As a form of revolving credit, a PLOC is similar to a credit card. Both are unsecured and can feature high interest rates, which will probably be adjustable rather than fixed. However, a PLOC generally has a lower interest rate than a consumer credit card. It also has a limited draw term, unlike a credit card, which can be open for years.  

When is it a good idea to choose a personal line of credit? 

While a personal loan can provide the freedom to use the money you borrow as needed and a fixed repayment plan, a PLOC can be a great flexible borrowing option in many circumstances, such as a home improvement project or any other ongoing purpose for which the borrower does not know exact costs. It can also be a good way for a borrower with fluctuating income to get through the tighter months. Finally, it can be used to pay for a major life event, such as a wedding or adoption, for which the borrower does not have an exact price tag, but for which they will be planning over the course of many months.  

A PLOC offers the borrower many benefits, including:

  • Flexible borrowing of funds spread out over many months
  • Instant access to funds when needed
  • No repayments unless the funds are used

Before you take out a PLOC

Before going ahead with your application for a PLOC, make sure you understand the exact terms and conditions associated with your line of credit. You should be clear on when your draw period ends and you’ll no longer be able to access your funds, whether there is a cap on your interest rate and the maximum amount of funds you’ll be able to use from your line of credit.

A PLOC can be an excellent way to access a large amount of funds with manageable payback terms. To learn more about this loan product, call, click or stop by Advantage One Credit Union today.

Your Turn: Have you taken out a PLOC? Tell us what you love about this loan product in the comments.

Don’t Get Caught in a Pre-approval Scam

by Advantage One, posted in Credit, Lifestyle, Loans, security, Tips & Best Practices, Uncategorized

You’ve got mail! But beware, because this particular missive telling you that you’ve been preapproved for a large loan – maybe even a mortgage – may not be as it seems! The exciting news may be accompanied by a check that’s made out to you and even for the full loan amount! It’s a dream come true. Until, of course, it all turns into a living nightmare. 

Here’s what you need to know about preapproval scams and how to stay safe.

How the scams play out

In a preapproval scam, a target receives a letter in the mail, an email or a text message informing them they’re preapproved, or “prescreened,” for a large loan. The letter is often accompanied by a live check, or an unsolicited check that can be cashed in by the named recipient – which is you. The letter may also be highly relevant to your life. For example, if you’re in the market for a new home, the offer may feature an alleged preapproved mortgage loan. If you’re looking for a new set of wheels, the letter will likely offer a bogus auto loan. More commonly, though, will be the offer of a personal, or unsecured loan, through a live check. 

When you go ahead and cash that check, you may be playing right into the hands of a scammer. 

The authentic-looking check cannot be cashed unless the recipient shares their personal information. Of course, this means providing a scammer, or a scam ring, with all the info they need to empty your accounts, commit identity theft or worse. In addition, the check may appear to clear but then bounce a few days later, leaving you to pick up the tab for any of the money you’ve spent. Finally, if you really do need to take out a large loan, the bogus offer can set you back significantly by hurting your credit score.  

Checklist for legitimate preapproval offers

If you have a credit history, you’ve likely received these preapproval offers at least several times. Some of them are actually legitimate offers to cover a loan for a large amount. How, then, can you tell which of these offers are legitimate or scam?

First, it’s important to know that, while some of these offers may be legit, that doesn’t mean they’re good for your financial health. If you cash that check and/or accept that loan offer, you’ll be bound by the loan terms, which you may not be truly aware of until the first repayment bill becomes due. Most of these preapproval offers will have exorbitant interest rates and may demand full repayment quicker than typical loans obtained from a bank or credit union. 

Now, let’s take a look at how you can determine whether one of these preapproval offers is legit. If you receive an offer as described, look for this information to verify the authenticity of the offer: 

  • A disclosure of the loan fees
  • The annual percentage rate (APR), which is the annual cost of the loan 
  • The payment schedule
  • The loan agreement
  • A privacy notice about the sharing of your personal information
  • An opt-out notice for future offers
  • Contact information for the sender, which includes a number and street address

If any of this info is missing from the preapproval offer, you’re likely looking at a scam. 

If you’ve been targeted

If you’ve been targeted by a preapproval scam or a legitimate but shady offer, there are steps you can take to protect yourself from further harm and to stop the annoying letters from landing in your mailbox. 

First, let the Federal Trade Commission (FTC) know about the circulating scam. Next, it’s important to note that, under the Fair Credit Reporting Act, you have the right to opt-out of future loan offers for five years, or permanently. To opt-out for the next five years, call 1-888-5-OPTOUT (1-888-567-8688) or visit OptOutPrescreen. To opt-out forever, visit OptOutPreScreen to request a Permanent Opt-Out Election form. Return the signed form and you should be off the list of all preapproval offers. Finally, keep your online interactions safe from scams by using the strongest and most up-to-date security settings across your devices and being careful about the information you share online.

Preapproval scams can be super-annoying and destructive, but you can outsmart them. Stay safe!

Your Turn: Have you been targeted by a preapproval scam? Tell us about it in the comments. 

What is the Homestead Exemption?

by Advantage One, posted in Home Buying, Loans, Tips & Best Practices, Uncategorized

Q: What is the homestead exemption and how do I know if I qualify? 

A: The homestead exemption can help you save a significant amount on your taxes and offer other legal provisions. Read on for all your questions on the homestead exemption, answered. 

What is the homestead exemption?

The homestead exemption is a legal provision in a state’s tax laws that reduces the property tax on a home, can protect a home from bankruptcy and provides specific rights to surviving spouses. 

A homestead refers to a dwelling that is inhabited by the homeowner. It can be a manufactured home, a condo or a three-story colonial, though the exact criteria will vary by state.

The “homestead exemption” generally refers to the exemption the homeowner can claim when filing taxes to lower the taxable value of their home by a specific dollar amount. However, a homestead exemption can also provide additional legal protections, such as preventing the homeowner from having to sell the home after declaring bankruptcy. The homestead exemption also includes a feature of probate law, wherein the homestead does not have to be included during probate and can allocate an allowance for a surviving spouse or children.

What are the qualifying factors for a homestead exemption?

Eligibility requirements for the homestead exemption are different in each state. However, the principal qualifying factor in most states is that the homestead is the primary place of residence for the homeowner. Generally, the homeowner must be able to prove they have lived in the homestead on Jan. 1 of the taxable year to be eligible for an exemption. 

Some states make a general homestead exemption available to all homeowners who reside in the home. In other states, only senior citizens, surviving spouses of veterans and former military members and people with a disability can qualify for the exemption. There may be income limits for the exemption, as well. Other states establish qualifying criteria around the homestead alone. Still others, such as New Jersey and Pennsylvania, don’t offer the homestead exemption for tax filers at all. [In XXX, the homestead exemption is available for…]

How much money can I save with a homestead exemption? 

The homestead tax exemption can lower a property tax bill by a substantial amount. The dollar amount of your exemption can be directly deducted from the total taxable value of the home. For example, if you qualify for a $30,000 exemption on a $250,000 home, your taxable home value will only be $220,000. 

As mentioned, criteria for the homestead exemption can vary tremendously by state, and this is true of the exemption amounts as well. Most states have established a maximum amount for the exemption, which starts at just $5,000 and goes all the way up to $500,000 in states like Massachusetts and Rhode Island. In Florida, the homestead exemption can be as high as $50,000, Texans can write off $25,000 in a homestead exemption for school district taxes, and Californian homeowners can deduct $7,000 off their taxable home value. 

The average homestead exemption amount in the U.S. is approximately $30,000 to $50,000.

In addition to the dollar savings on your taxes, a homestead exemption can also freeze your home’s assessed value or limit how much the future assessed value can increase. 

How can the homestead exemption shield me from unsecured creditors?

The homestead exemption offers a limited amount of protection from unsecured credit lenders, which includes credit cards, personal loans and lines of credit. This means these types of creditors cannot force the homeowner to sell the home if they are owed money. The amount of financial protection offered for unsecured credit varies by state, with some states, including Florida, Iowa, Kansas and Texas, providing unlimited financial protection to qualifying homeowners against unsecured creditors.

It’s important to note that protection limits are relevant for the equity of the home and not for the value of the property. Consequently, if the equity of your home is less than the limit, the law prevents creditors from selling your property. However, if the equity of the home exceeds the state limit, creditors can force the sale of the home in question but will need to share a portion of the proceeds with the homeowner. 

Secured credit, however, like mortgage loans, cannot be protected by the homestead exemption. That means a homeowner can, therefore, lose their home to a mortgage lender if they are not up-to-date on their mortgage payments, even if they qualify for a homestead exemption. 

How can the homestead exemption help a surviving spouse?

Homestead exemptions are part of the probate code to help a surviving spouse. After someone dies, their surviving spouse and family may be granted the right to continue living in the homestead as their residence, even if the title of the house transfers to someone else. The right to live in the homestead may continue until the surviving spouse passes or the youngest child turns 18 years old.

In addition, some states preclude a property with a homestead exemption from probate proceedings. This can significantly lower the amount of estate tax owed to the state after the death of a loved one. 

Finally, homestead allowances can provide a surviving spouse with a specific amount of money, which is also protected from creditor claims. It’s important to speak with an estate attorney to find out exactly what you’d qualify for as a surviving spouse under the homestead exemption. 

How do I file for a homestead exemption?

To receive a homestead tax exemption, you’ll typically need to make a homestead declaration by filling out an application. The deadline is usually toward the beginning of the year, before the first quarter’s property taxes are due. The exact deadline will vary by state, so be sure to verify your state’s deadline and file the application in time. You’ll likely need documents to show proof of residency when filing an application for a homestead exemption. Depending on your eligibility criteria, you may also need additional documentation. 

Your Turn: Do you qualify for a homestead exemption? Tell us about it in the comments. 

Don’t Forget to Follow Up on Your Home Inspection!

by Advantage One, posted in Budgeting, Convenience, Home Buying, Lifestyle, Loans, Tips & Best Practices, Uncategorized

If you’re under contract for a new home, you’ve likely had an inspection conducted on your new home. This inspection is an important part of the home-buying process, and is generally required by the mortgage company. It can help you find any major defects in the home, such as a faulty roof or dying HVAC system, which may prompt you to walk away from the deal. Alternatively, the seller can choose to repair any areas needing major work before the closing. 

In addition, a home inspection often reveals other, smaller recommendations the seller is not required to fix. This can include a long list of items that need minor repairs or replacements, such as a leaky faucet, overstuffed gutter, or an insecure stair railing. Often, in the rush to close on the home and all the tasks that must be tended to before the big move, these repairs are forgotten about and never get fixed. 

Some homeowners mistakenly assume that it’s no big deal to leave some repairs on their newly purchased home unfixed. Unfortunately, though, nothing will fix itself. Instead, the longer you wait to make a repair, the more likely it is that you will need to make more extensive and expensive repairs or replace the faulty system, appliance or part. Consequently, it’s best to make any necessary repairs on your home as quickly as possible. 

Here’s what you need to know about following up on a home inspection.

Hold onto the list of recommendations

Most inspectors will leave the potential buyer with a list of items that need repairs. While some will require urgent attention, the less-important items on the list can be forgotten about and never tended to at all. You may not have the time or resources to fix everything on the inspector’s list before you move, but it’s a good idea to hold onto that list for future reference. File the list in a safe place so it won’t get lost during the move. You can also snap a photo and upload it to a digital storage space so you can always find it if the original document is misplaced. 

Categorize repairs according to urgency

Once the dust has settled after your move and you’re ready to tackle the household repairs you haven’t yet gotten to, dig out your list and categorize repairs by urgency. Look for repairs that can cause extensive damage if left unfixed, such as a leaky pipe, faulty exterior drainage or the presence of mold or mildew. These should be tended to as soon as possible. Cosmetic repairs, on the other hand, can be delayed without major consequences. Create a new list with all the repairs written in order from most to least urgent. 

Identify what you can do on your own

It’s almost always cheaper to do home repair projects on your own. However, there are some areas that are best left to the experts. In addition, if you will need to spend a lot of money on supplies you will use just for this one-time repair, it can actually be cheaper to call in the experts. Keeping these two factors in mind, look through your list carefully to see what you can realistically do yourself.

Start working through your list

Now that you’ve sorted your list according to urgency and you’ve identified which repairs you can do on your own, you’re ready to start tackling the repairs. Start with the most urgent repairs, and set aside time on weekends for the repairs you plan to do on your own. When hiring professionals, be sure to do your research carefully and to ask for references of past clients. 

Uphold general household maintenance

It may be a while before your entire list of repairs is complete. To help prevent further damage, and to keep your home in the best condition at all times, follow these tips for general upkeep and maintenance:

  • Make sure faucets and showerheads are completely turned off when not in use.
  • Keep the air clean by vacuuming and dusting regularly.
  • Look for discolored spots on ceilings and walls, which can indicate an internal leak.
  • Keep your home heated in very cold weather, even when you’re not home, to prevent freezing pipes. 
  • Drain your outdoor sprinklers completely before turning off for the winter.
  • Keep all trees and shrubs near your home well-trimmed. 
  • Control moisture levels with a dehumidifier or humidifier, as necessary.
  • Clean your dryer vent and all heating vents regularly.

A home inspection is an important part of the home-buying process. Don’t forget to follow up on the list of recommended repairs!

Your Turn: Have you followed up on your home inspection recommendations? Tell us about it in the comments.

5 Steps to Take When Applying for a Business Loan

by Advantage One, posted in Budgeting, Career, Checking, Credit, Loans, Tips & Best Practices, Uncategorized

If your business can use a shot of cash to help it grow, fund a move or to get through its slowest season, a business loan can be the right answer. 

Here’s what you need to know about applying for a business loan.

  1. Check your credit

Before you apply, check your personal and business credit health. 

Personal credit scores range from 300-850. A score in a range of 580-669 is fair, 670-739 is good, 740-799 is very good and 800-850 is exceptional. In general, the higher your score, the easier it will be for you to qualify for a loan and the lower the interest rate you’ll have on your loan when approved.

Business credit scores are measured differently. Experian uses Intelliscore Plus as its credit scoring model, with scores ranging from 1 to 100. Equifax assigns each business a payment index score, which ranges from 0 to 100; a credit risk score ranging from 100 to 992 and a business failure score ranging from 1,000 to 1,880. The D&B score, assigned by the Dun & Bradstreet Corporation, ranges from 0 to 100. Finally, the FICO Small Business Scoring Service score ranges from 0 to 300. 

If your personal and/or business credit scores are low, work on improving your credit before applying for a loan. Be timely or early with your bill payments, work on getting rid of debt and check your monthly credit statements for any erroneous charges.

  1. Update your business plan

Most lenders will ask to see a current business plan before approving a loan. It’s a good idea to review and update yours so it’s ready to show a potential lender. The plan should include information about the loan, such as how the company plans to use the funds. 

Be sure to have a comprehensive business plan to show a prospective lender. The plan should include details about how the company intends to use the funds, the anticipated increase in revenue and plans for repaying the loan. 

3. Organize your personal and business documents

You’ll need the following documents and identifying paperwork when applying for a business loan:

  • Photo ID
  • Accurate monthly financial statements from the past two years
  • Business license
  • Any commercial leases
  • Business insurance plans
  • Payroll records
  • Incorporation documents
  • Current financial obligations
  • 3 months of bank statements
  • Personal and business tax returns
  • Collateral

4. Research potential lenders

A business loan is a big deal, and it’s best not to jump into the decision too quickly. Take the time to research potential lenders carefully, being sure to check each lender’s eligibility criteria, the average size of the loans they offer, their current interest rate average and more. 

Consider applying for a business loan through a credit union. A credit union will offer you personalized service, looser qualifying criteria and a competitive interest rate. [Call, click, or stop by Advantage One Credit Union today to discuss your options.] 

5. Submit your application

You’re ready to apply for a loan! With luck, you’ll soon have the funds you need to take your business to the next level. 

Your Turn: What are your best tips for taking out a business loan? Tell us about it in the comments. 

Should I Buy an Electric Car?

by Advantage One, posted in Budgeting, Convenience, Lifestyle, Loans, Reviews, Saving, Tips & Best Practices, Uncategorized

Q: With gas prices soaring and expected to continue climbing into the foreseeable future, I’m wondering if this is a good time to consider purchasing an electric car. Should I buy an electric vehicle now?

A: Thousands of drivers are grappling with this question as gas prices peak. While an electric vehicle (EV) might be the right choice for many, there are lots of variables to consider before making this decision. Here’s what to know about electric cars before going this route:

What are some pros of owning an electric car?

The most obvious and prominent advantage of owning an electric vehicle is saving on fuel costs. Driving a car that runs on electricity instead of gasoline means saving money on a large expense category of your budget, month after month. Of course, the higher the cost of gas, the more you save. Right now, with most drivers experiencing pain at the pump, going electric is more popular than ever. Another budgeting bonus to consider is the fact that electricity costs tend to be far more stable than gasoline prices..

Another well-known advantage of driving an electric-powered car is the environmental benefits. Lower fuel emissions means a smaller carbon footprint on the environment, which is always a good thing.

Yet another advantage to EVs is their superior efficiency. EVs can convert more than 77% of their electric energy to power their wheels. In contrast, gas-powered cars can only convert 12-30% of the fuel stored in their gas tanks into driving power. 

What are some disadvantages of owning an electric vehicle?

There are several disadvantages to owning an EV to be aware of before making a purchase.

First, it’s important to note that the battery of every EV may need replacement sometime down the line. Federal regulations require automakers to cover the battery of their vehicles for a minimum of eight years or 100,000 miles, whichever comes first. Some automakers also cover battery degradation, which is when a full charge powers fewer miles than it should. However, if the battery dies after the warranty expires, the cost of replacing it, which can run from $5,000 and $16,000, will need to be covered by the owner. The good news is that, as EVs become increasingly more popular, they are also becoming less expensive to manufacture and the prices of their parts are decreasing as well. In addition, automakers are working to manufacture EVs with batteries that last longer than most drivers will own the vehicle. 

Another disadvantage to owning an EV is being limited in the number of miles you can drive before you will need to recharge your vehicle. The number of miles you can drive on a full charge, also known as the vehicle’s range, will vary with each car. Most EVs will average 250 miles of range. While this will cover most people’s daily commute, road-tripping in an EV will take some planning. Luckily, as electric cars become more commonplace, finding a charging station on a major highway is becoming a non-issue. However, if you plan to take many road trips with your EV, you may want to purchase a car that is capable of fast charging so you don’t have to spend hours at a charging station every few hundred miles on your trips. 

Can I charge my electric vehicle at home? 

Yes, you can charge your EV at home. Plug it in at night, and it’ll be ready to go in the morning. How’s that for convenience? 

However, before ordering a Tesla, it’s good to be aware that the standard 110-volt wall outlet (Level 1 charging) is relatively slow, adding approximately four miles of range per hour. If you depleted a full 250 miles of range, it can take several days to fully recharge your vehicle. If you’ll be charging your car outside, be sure to verify your charging cord is designed for outdoor use. 

Most EV owners hire an electrician to install a 240-volt outlet in their garage. This allows for Level 2 charging, which can add 25 miles of range per charging hour. Be sure to get a reliable quote to know the cost of such work. 

How much does electricity cost?

Electricity, though much cheaper than gas, typically isn’t free. The exact price will vary by state, so check how much electricity will cost in your own home state before purchasing an EV. 

To save more on charging your EV, consider these points: Charging an EV at home is typically less expensive than charging it at a public charging station – unless, of course, you find one of those rare cost-free public charging stations. In addition, charging your EV overnight, or on the weekend will cost less than charging it at peak times, such as weekday afternoons and evenings. You may want to reach out to your utility company to learn exactly what it’ll cost you to charge your vehicle. Some companies offer special plans for EV owners, so be sure to inquire about that as well. 

What kind of maintenance will my electric vehicle need?

A big bonus of owning an EV is having lower maintenance costs. Electric motors have fewer moving parts than gasoline engines. This makes EVs far easier to maintain than their gas-powered counterparts. In addition, many car parts, which generally need replacing after a while – like spark plugs, filters and oil – are irrelevant to EVs. This means fewer trips to the mechanic and significantly lower maintenance costs. 

How much will an electric vehicle cost?

All the convenience and long-term savings of an EV comes at a high price, and most of them have a higher starting cost than gas-powered cars. Of course, there’s a large range, starting with the Nissan Leaf at just $27,400 and going all the way up to the Tesla Model 3 at $58,990.

Fortunately, there are many government-sponsored incentives for purchasing an electric car. These incentives are offered on the federal, state and local government levels, so be sure to see what’s available before completing your purchase. It’s important to note, though, that many of these incentives are not open to every buyer and every kind of EV. For example, the most well-known incentive, the Federal Qualified PEV Tax Credit, which offers up to $7,500 off the MSRP of qualified EVs, is only available for the first 100,000 EVs an automaker manufacturers and is no longer available for the purchase of any Teslas. 

Your Turn: Have you recently purchased an electric car, or made the decision to hold onto your gasoline-powered vehicle? Tell us what drove your decision in the comments. 

Should I Buy Out My Lease?

by Advantage One, posted in Announcements, Budgeting, Convenience, Credit, Debit, Lifestyle, Loans, News & Events, Reviews, Saving, Tips & Best Practices, Uncategorized

Q: My lease agreement is nearing its end, and I’m getting many offers to buy out my lease due to the current state of the economy. Should I ignore the hype, or is it really a good idea to buy out my lease?

A: With cars in hot demand, and selling at all-time high prices, many lease customers are looking at trade-in values for their vehicles with the intention of buying out their lease. While this can be a smart choice for many consumers, it’s important to consider all relevant factors before making a decision. Here’s what you need to know about buying out your lease.

What is a lease buyout?

Many drivers are confused by the offers they’re getting and the promotions they’ve seen for buying out leases. How is it possible to buy a lease when a leased vehicle, by definition, is essentially a rented car?

First, buying out a lease involves paying the car’s “buyout price” as specified in the lease contract, which makes you the car’s new owner. Second, it’s important to establish that buying out a lease generally makes the most sense when you are nearing the end of your lease term.   Finally, this may necessitate taking out an auto loan to afford the buyout price, just like you might do when purchasing a new or used car at a dealership.  

How can I determine my car’s buyout price?

To estimate how much you’d need to pay to buy your leased car, look for the term “residual value” in your lease contract. This tells you what your leased vehicle is expected to be worth at the end of the term, which may be months or years away. To reach your vehicle’s buyout price, add the residual value to any remaining payments. For example, if your car’s residual value is $25,000 and you owe another 10 payments of $500, the car’s buyout price is $30,000. Of course, the more time left on your lease, the higher price you can expect to pay to buyout.

Will I need to pay any fees in addition to the buyout price?

Depending on your home state, your vehicle’s buyout price may be subject to an auto sales tax. Your lender may also charge additional fees, such as a ‘purchase option fee’. It’s important to know about any additional fees you may need to pay in addition to the buyout price and to 

estimate the total you’ll be paying before deciding to purchase a leased car.

The good news is that you won’t be accountable for the typical lease-end fees, which can include the costs of reconditioning the vehicle for resale, fixing any damage the car may have incurred during your term, and an over-mileage penalty for every mile you may have driven over the official limit.  

What are the advantages of buying out a lease?

Many drivers are opting to buy their leased vehicles now due to the current state of the auto industry. Supply is low and both new and used cars are in high demand. A driver nearing the end of their lease agreement may find it challenging to purchase or lease another car. Buying a car you already lease will give you first dibs at a hot commodity.  

Some drivers are choosing to capitalize on the high demand for used cars by buying out their leases and then flipping the car to a dealership or selling it privately to a new owner. They assume they will earn enough from the sale to help offset the price of a new car. While this may be true, it’s important to remember that it may be difficult to find a new car in a desired model and at an affordable price.

Before taking out a loan to buy out a lease, find out what your car is actually worth. Due to the state of the market, it’s likely worth more than you’ll pay. However, if it’s worth less than the buyout price, you’ll be upside-down on your loan, which is never a good idea. In addition, you may find it difficult to qualify for a loan in an amount that is higher than the value of the asset.  

How do I buy out my lease?

If you decide to go ahead and buy out your lease, you’ll first need to run the numbers as described above to be sure it’s a financially responsible decision. When you have the total buyout price, your next step is to work on financing. You can choose to take out an auto loan or a personal loan to help cover the costs. 

Next, you’ll contact the company behind your lease and complete the purchase. The sale process will be similar to the sale of any car. Finally, be sure to notify your insurance company about the change in ownership of your vehicle. Leases generally require plans with low deductibles and high premiums, so you may want to choose a new plan with higher deductibles and lower monthly premiums.

If you’re looking to finance an auto loan for a lease buyout car, look no further than Advantage One Credit Union! Our auto loans offer low interest rates [see for current rates], easy payback terms and a quick approval process. Call, click or stop by to get started or discuss available options!

Your Turn: Have you bought your leased car? Tell us about your experience in the comments. 

How does a Rising Interest Rate Environment Affect the Economy?

by Advantage One, posted in Budgeting, Credit, Home Buying, Lifestyle, Loans, News & Events, Tips & Best Practices

Q: I’ve heard that the Fed plans to raise the interest rate this year. How will this impact the economy and the current inflation rates? 

A: The rising inflation rate, once determined to be a transitory and natural consequence of pandemic lockdowns, now appears to be here to stay, given that headlines announced a 7% increase in the consumer price index (CPI) in the beginning of 2022. To help control prices, the Federal Reserve will likely increase interest rates this year, possibly up to four times in total. 

Let’s take a deeper look at what the current economic circumstances mean for the average consumer as well as steps you can take to protect your investments and manage your money in the most optimal manner. 

What is the Fed and what purpose does it serve?

The Federal Reserve, also known as the Fed, is the central bank of the United States. Its purpose is to keep the U.S. economy operating at optimal efficiency. The Fed primarily focuses on employment and inflation. To prevent the Fed from gaining too much power, it has a system of checks in place, including the following: 

  • A Board of Governors that is independent of the federal government
  • Twelve semi-independent Federal Reserve Banks, each of which represent a particular geographic area of the U.S. and are the operating arms of the Fed
  • The Federal Open Market Committee (FOMC), consisting of 12 people

To help the country maintain maximum employment levels and stability in prices, the FOMC votes on whether their current target range for the monetary policy rate is appropriate for the contemporary economic climate. This target rate, also known as the Federal Funds rate, is the rate at which financial institutions, like banks and credit unions, lend money to each other. As a general rule, if inflation is rising, the Fed will raise its interest rates to contain it. On the flip side, if the economy is heading toward a recession, the Fed will lower the interest rate to help promote lending and economic activity. 

What happens when the Fed raises interest rates?  

When the Fed increases interest rates, as it plans to do this year, financial institutions raise their rates as well. Consequently, the cost of borrowing money becomes higher and consumers are more hesitant to take out large loans. This may discourage people from buying homes, cars and launching new businesses. Conversely, it encourages more people to save as the savings rates offered by banks and credit unions will typically increase, too. These factors mean less money is circulating in the economy, which will hopefully reduce the level of inflation. 

How does a rising rates environment impact the stock market?

Unfortunately, there’s no way to predict how the stock market will react to an increase in interest rates. The market’s volatile nature means there’s no direct correlation between its performance and the Fed’s rate. In general, though, rising interest rates is not good news to stock investors since it means companies will be hesitant to borrow the capital they need to grow their businesses. This will likely result in lower revenues and smaller returns for investors. However, certain sectors, like financial institutions, may benefit from an increased interest rate. 

How does a rising rates environment affect the value of bonds?

The price of bonds is inversely related to interest rates. This means an increase in interest rates will cause an equivalent drop in the price of bonds. The price drop is caused by newer bonds on the market, which offer higher coupon rates, or the ratio between the interest the bond pays and its price, to reflect the recently increased interest rates. 

How do I manage my finances in a rising rates environment?

The average consumer has been hit hard by the increased prices of everything from gas to groceries over the past year. There’s good news ahead for the struggling consumer, as the anticipated increases in interest rates are expected to help tame inflation. However, there are other steps you may want to take to protect your investments and manage your money as rates increase:

  • Stay calm and ignore the news. Alarming headlines get the most clicks, but stock market news nearly always sounds more distressing than it actually is. It’s rarely a good idea to liquidate a stock based on headlines alone. In addition, long-term growth can usually make temporary losses obsolete. 
  • Plan ahead. As always, it’s best to have savings set aside for any economic circumstance. If you don’t already have one, build an emergency fund of at least 3-6 months’ worth of living expenses to prepare for any economic reality. As a bonus, beefing up your savings when interest rates are rising means giving your money a better chance at growth. 
  • When in doubt, seek professional advice. If market news takes an especially disturbing turn, you may want to seek the counsel of a financial advisor for the best steps to take with your investments. Rebalancing your portfolio with a new asset allocation can help your investments maintain peak performance levels even during a rising rates environment. 

Interest rates will likely be going up soon as the Fed tries to control rampant inflation. Use the tips outlined here and consider the steps you may want to take with your finances. 

Your Turn: How are you preparing financially for the expected interest hike? Tell us about it in the comments.