Is it a Good Idea to Open a HELOC Now?

If you’re looking for a large sum of money to use for a home improvement project, or the economic devastation of COVID-19 has left you in desperate need of cash, consider tapping into your home’s equity. One great way to do this is by opening a home equity line of credit, or a HELOC. Let’s take a closer look at HELOCs and why they can be an excellent option for cash-strapped homeowners in today’s financial climate.

What is a HELOC?
A HELOC is a revolving credit line allowing homeowners to borrow money against the equity of their home. The HELOC is like a second mortgage on a home; if the borrower owns the entire home, the HELOC is a primary mortgage.

Given that a HELOC is a line of credit and not a fixed loan, borrowers can withdraw money from the HELOC as needed rather than borrowing one lump sum. This allows for more freedom than a loan and is especially beneficial for borrowers who don’t know exactly how much money they’ll ultimately need to fund their venture.

Borrowers withdraw funds (aka “draws” or “advances”) from the HELOC during a set amount of time that is known as the “draw period,” which generally lasts 10 years. Some lenders place restrictions on HELOCs and require borrowers to withdraw a minimum amount of money each time they make a draw, regardless of need. Other restrictions include the requirements to keep a fixed amount of money outstanding, or to withdraw a specific sum when the HELOC is first established. [At Advantage One Credit Union, we allow borrowers to ….]

How do I repay my HELOC?
Repayment of HELOCs varies, but is usually very flexible.
Many lenders collect interest-only payments during the draw period, with principal payments being strictly optional. Others require ongoing monthly payment toward both principal and interest.

When the draw period ends, some lenders will allow borrowers to renew the credit line and continue withdrawing money. Other lenders require borrowers to pay back the entire balance due, also known as a “balloon payment.” Still others allow borrowers to pay back the loan in monthly installments over another set amount of time, known as the “repayment period.” Repayment periods are generous, lasting as long as 20 years.

How can borrowers spend the money?
While home improvement projects are popular uses for HELOCs, borrowers are free to spend the money however they please. Some other uses for HELOCs include debt consolidation, funding a wedding, adoption, dream vacation or the launch of a new business.

Is everyone eligible for a HELOC?
Like every loan and line of credit, HELOCs have eligibility requirements, which help lenders determine the applicant’s financial wellness and responsibility. Most notably, the borrower must have a minimal amount of equity in the home.

Lender requirements vary, but most homeowners will be eligible for a HELOC with a debt-to-income ratio that is 40% or less, a credit score of 620 or higher and a home assessment that stands at a minimum of 15% more than what is owed.
How much can I borrow with a HELOC?

HELOC amounts vary along with three criteria: the value of your home, the percentage of that value the lender allows you to borrow against and the outstanding amount on an existing mortgage.

To illustrate, if you have a $300,000 home with a mortgage balance of $175,000 and your lender allows you to borrow against 85% of your home’s value, multiply your home’s value by 85%, or 0.85. This will give you $255,000. Subtract the amount you still owe on your mortgage ($175,000), and you’ll have the maximum amount you can borrow using a HELOC, which is $80,000.

What are the disadvantages of a HELOC?
A HELOC is secured by your home’s equity, which places your home at risk of foreclosure if the HELOC is not repaid. Before opening a HELOC, it’s a good idea to run the numbers to get an idea of what your monthly payments will look like and whether you can easily afford to meet them.

Also, many lenders require the full payment of the HELOC after the draw period is over. This can prove to be challenging for many borrowers.
Finally, if you don’t plan to stay in your home for long, a HELOC may not be the right choice for you. When you sell your home, you’ll need to pay off the full balance of the HELOC. You may also need to pay a cancellation fee to the lender.

A HELOC can be a great option now
HELOCs have variable interest rates, which means the interest on the loan can fluctuate over the life of the loan, sometimes dramatically. This variable is based on a publicly available index, such as the U.S. Treasury Bill rate, and will rise or fall along with this index, though lenders will also add a margin of a few percentage points of their own.
The fallout of COVID-19 may impact the economy for months, or years, to come; however, there is a silver lining among the rising unemployment rates and bankrupt businesses: historically low interest rates. The average APR for fixed 30-year mortgages has hovered at the low 3% for months now, and experts predict it will continue falling. The low rates make it an excellent time to take out a HELOC with manageable payback terms.

The economic uncertainty the pandemic has generated also makes it a prime time to have extra cash available for any need that may arise.

Are you looking to tap into your home’s equity with a HELOC? Call or click today to get started. Our favorable rates, generous eligibility requirements, and easy terms, make a Advantage One Credit Union HELOC a great choice.

Your Turn:
How are you using your HELOC? Tell us about it in the comments.

Learn More:
www.huffpost.com
nerdwallet.com
thepennyhoarder.com
bankrate.com

All You Need to Know About Student Loan Changes During COVID-19

Female College student with class supplies in arms smiles as she is walking on campusWith unemployment levels rising and many employers cutting work hours, lots of college grads are now struggling to meet their student loan payments. Thankfully, the federal government has passed legislation to ease this burden. Unfortunately, though, many borrowers are confused about the terms and conditions of these changes.

Here’s all you need to know about the changes to student loan debt during the coronavirus pandemic.

All federal student loan payments are automatically suspended for six months
As part of The Coronavirus Aid, Relief and Economic Security Act (the CARES Act) signed into law on March 27 all federal student loan payments are suspended, interest-free, through Sept. 30, 2020. If borrowers continue making payments, the full amount will be applied to the principal of the loan. The suspension applies to all federal student loans owned by the Department of Education as well as some Federal Family Education Loans (FFEL) and some Perkins loans. Students do not have to take any action or pay any fees for the suspension to take effect.

Additionally, during the suspension period, the CARES Act does not allow student loan servicers to report to the credit bureaus borrower nonpayments as missed payments. Therefore, the suspension should not have a negative effect on borrowers’ credit scores.
If you’re not sure whether your student loan is federally owned, you can look it up on the Federal Student Aid (FSA) website. Be sure to have your FSA ID handy so you can sign in and look up your loans. You can also call your loan servicer directly to clear up any confusion.

Here is the contact information for federal student loan servicers:

Suspended payments count toward Public Service Loan Forgiveness and loan rehabilitation.
Public Service Loan Forgiveness (PSLF) is a federal program allowing borrowers to have their student loans forgiven, tax-free, with the stipulation that they work in the public sector and make 120 qualifying monthly payments. A disruption of these 120 payments can disqualify a borrower from the program.

According to the CARES Act, suspended payments will be treated as regular payments toward PSLF. This ensures that borrowers who have been working toward these programs will not lose the progress they’ve made toward loan forgiveness.

The same rule applies to individuals participating in student loan rehabilitation, during which borrowers with defaulted student loans must make nine out of 10 consecutive monthly payments to pull their loans out of default. The U.S. Department of Education will consider the six-month suspension on payments as if regular payments were made toward rehabilitation.

Some states and private lenders are offering student loan aid for struggling borrowers.
If your student loan is not federally owned and you are struggling to meet your payments, there may still be options available, such as loan deferment or forbearance. If you are in need of such assistance, contact your lender directly to discuss your options. Consider an income-driven repayment plan.

If you have an FFEL that is ineligible for suspension, you can lower your monthly payments by enrolling in an income-based repayment plan, which adjusts your monthly student loan payment amount according to your discretionary income. Other lenders offer similar plans, often referred to as income-driven repayment plans. If your salary was cut as a result of COVID-19, or you are currently unemployed, these plans can provide relief by making your monthly payments more manageable.

Employers can contribute toward employees’ student loan debt for temporary tax relief
The federal government offered temporary tax relief for employers contributing up to $5,350 toward their employees’ student loan payments. This benefit is in effect until Jan. 1, 2021 and it can be used for any kind of student debt, whether federal or private.

If you don’t qualify for the student loan payment suspension, you can try speaking with the human resources department at your workplace to find out how they can help you with your student loan debt at this time.

Your Turn:
Have you taken advantage of student loan debt relief offered during the coronavirus pandemic? Tell us about it in the comments.

Learn More:

Getting Ahead on Your Student Loan Before You Graduate

young woman working at a laptop in an officeAs you prepare for graduation and begin scouting different employment opportunities, be sure to look at the larger picture before you accept a position.

Hopefully, you’ve chosen a career path that will bring you joy and gratification. Equally important, though, is a job that can support your lifestyle choices. While the positions you consider for your first post-college job will likely offer the opportunity for growth, you’ll still need to pay your bills—and make your student loan payments—as soon as you graduate. A job that brings you satisfaction and a pleasant working environment will not last long if the salary it offers causes you to sink into debt.

How do you determine what kind of salary will be large enough to support your desired lifestyle?

To get this information, you’ll need to create a mock monthly budget for your post-college self.

Using a spreadsheet or paper and pen, create two columns, one for expenses and one for actual dollar amounts. In the expense column, list your typical monthly expenses, including housing costs, transportation costs, health insurance, groceries, entertainment costs, clothing costs, dining out, savings, etc. In the dollar column, list the amount of money you expect to pay every month for each expense.

Your budget should look something like this:

ExpenseMonthly Cost
Housing$1,200
Transportation$300
Health Insurance$250
Groceries$350
Student Loan Payments$350

It will take some research and some hard, honest thinking to come up with these numbers. For housing costs, take a moment to think about where you see yourself settling down after college. You don’t have to know the exact neighborhood you’ll live in, but it’s good to know the city that will work best for you in terms of lifestyle, career path, and family plans. You can narrow this down to a few choices so long as you keep it reasonable. Once you’ve chosen your desired location, research the median rental prices in the area on real estate sites like Zillow and Redfin.

Next, work on transportation costs. If you already own a car, you’ll have an idea of what it costs you each month. Otherwise, spend some time thinking about what kind of car you want to drive. You can find listings on Carfax.com. Include costs like auto insurance, gas, and upkeep, in this category.

Or, if you plan on living somewhere with reliable public transportation, you might choose this route instead. Make a calculation of how much you’ll spend on bus and/or train rides, along with the occasional cab or ride-share ride.

Complete your budget using your best estimates for each category. Once you’ve filled out each expense amount, add up your total and multiply it by 12 to give you the amount of money you’ll need each year for supporting the lifestyle of your choice. (This number will increase with inflation, but since current salaries will likely increase along with the inflation rate, this exercise can still give you an idea of the annual salary you’ll need.)
Now that you have these numbers, you’re ready to go ahead with your job search. When considering possible positions, you don’t have to choose the one that pays the highest salary if there are other things about the job you don’t love. However, it’s best to pursue positions that can actually support you.

Your Turn:
Are you choosing your first job for the salary or for other factors? Share your take with us in the comments.

Learn More:
knsfinancial.com
usnews.com
usnews.com
brazen.com

4 Ways To Finance A Home Renovation

family renovating their houseHome Equity Line of Credit
A Home Equity Line of Credit (HELOC) is an open credit line that is secured by your home’s value. HELOCs offer flexible terms and lower upfront costs than most other loans.

Home Equity Loan
A Home Equity Loan (HE) allows you to borrow a fixed amount of cash, which you receive in one lump sum. However, upfront fees can be high.

Credit cards
Credit cards can work for minor touch-ups, but funding bigger projects this way can leave you with steep interest payments and end up costing much more than planned.

Personal loans
Personal loans are short-term loans that sometimes have high interest rates and upfront fees.

Do your research and talk with us at Advantage One to help find the best option for your needs.

Your Turn:
How did you fund your home renovation? Share your choice with us in the comments!

Mortgage Rates Are Dropping; Should I Refinance?

a young couple refinances their house at the credit unionQ: I’ve heard that mortgage rates have dropped dramatically since the start of 2019. Should I refinance my mortgage loan to take advantage of these lower rates?

A: Refinancing a mortgage is essentially paying off the remaining balance on an existing home loan and then taking out a new mortgage loan, often at a lower interest rate. It may sound like a no-brainer, but there are many factors to consider before moving forward with a refinance.

Is it a good time to refinance?
Mortgage rates have been falling steadily over the last few months. During the last week of March this year, rates took their biggest one-week nosedive in more than a decade, and mortgage applications rose 39%, as thousands of homeowners sought out their lenders for a refinance.

However, the downward trend has already reversed as of the beginning of April, when rates hit 4.29%. That’s up from 4.17% just one week prior. If you’re thinking of refinancing in the near future, it’s best to do move quickly so you can lock in the lowest possible rate. You may be able to save hundreds of dollars a month if you refinance a loan that currently has a relatively high interest rate.

Is a refinance right for you?
While this is definitely an excellent time to take out a new mortgage, that doesn’t mean a refinance is the right fit for everyone.

Here are two reasons a refinance might be a good fit for you:

  • Your credit is strong and you’d like to lower your monthly payments
    The first, and most obvious, reason homeowners refinance their mortgage is to take advantage of a lower interest rate. The drive behind this reason might be a change in finances, personal life or simply the desire to save money. As mentioned, the current mortgage rates make this an excellent time to refinance into a lower interest rate.

    Don’t try a refinance unless your credit is in good shape, though. Taking out another mortgage with a less-than-desirable credit score can mean getting hit with a high interest rate, even if national rates are dropping.

    Aside from reducing your monthly payments, a lower interest rate can also help you build more equity in your home sooner.

  • You’d like to shorten the life of your loan.
    People sometimes choose to refinance their mortgage because they want to finish paying off their loan sooner. If you have a mortgage that has a really high interest rate but you can easily meet these payments, consider refinancing into a shorter-term option. You may be able to pay off your loan in half the time without changing your monthly payment much at all

When refinancing your mortgage is a bad idea
In the following three circumstances, refinancing your mortgage may not make sense.

  • You’re in debt.
    If you’re looking for the extra stash of cash each month to pull you out of debt, you probably shouldn’t be refinancing. Most people who refinance for this reason end up spending all the money they save, and then some. Without making any real changes to your spending habits, giving yourself extra money is only enabling more debt. While the intention is rooted in sound logic, unless you make an equally sound change in your spending habits, you’ll be right back to your present situation in very little time.
  • A refinance will greatly lengthen the loan’s terms.
    If you’ve only got 10 years left on your mortgage and you want to refinance to stretch out those payments over 30 years, you won’t come out ahead. Any money you save on lower payments will be lost in the cost of the refinance and the extra 20 years of interest you’ll be paying on your mortgage.
  • You don’t plan on living in your home much longer.
    If you plan on moving within the next few years, the money you save might not even come close to the costs of a refinance.

How much will it cost?
Homeowners are often eager to get started on a refinance until they see what it will cost them.

Remember all those fees and closing costs you paid when you first bought your house? Prepare to pay most of them again. Broker fees will vary, but a typical refinance will cost anywhere between 3-6% of the loan’s principal.

Before proceeding with your refinance, make sure you’ll actually be saving money. You can do this by procuring a good faith estimate from several lenders. This will get you your projected interest rate and the anticipated loan price. Next, divide this price by the amount you’ll save each month with your anticipated new rate. This will give you the number of months that will have to pass before you break even on the new loan. If you don’t plan on staying in your home for that long, or you can’t afford to wait until then to recoup your losses, refinancing may not make sense for you.

Rates are still low, and if your finances are in good shape, a refinance can be a great way to put an extra few hundred dollars into your pocket each month. [If you’re ready to talk to a home loan expert about refinancing, call, click or stop by Advantage One today to ask about getting started on your refinance. We’re always happy to help you save money!]

Your Turn:
Have you refinanced? What drove your decision? Was it the right decision for you? Let us know in the comments!

SOURCES:

https://www.myfinance.com/5-reasons-to-refinance/?utm_source=Millennial+Money&utm_campaign=millennialmoneycru&utm_medium=mfCRU

https://www.consumersadvocate.org/mortgage-refinance/a/best-mortgage-refinance?matchtype=e&keyword=should%20i%20refinance&adpos=1t2&gclid=CjwKCAjww6XXBRByEiwAM-ZUILOeJrx3aTigcckJXeQcxYZ5KC-gPj1HDcbQYQlprrg3zX08LqGaohoCL14QAvD_BwE

https://www.investopedia.com/mortgage/refinance/when-and-when-not-to-refinance-mortgage/

https://www.investopedia.com/mortgage/refinance/7-bad-reasons-to-refinance-mortgage/

https://www.bankrate.com/mortgages/analysis/

https://www.wkbn.com/news/local-news/with-mortgage-rate-drop-many-buyers-consider-refinancing/1897961701

5 Ways To Pay Off A Loan Early

Young couple plans out payments at kitchen tableIf you’re like most Americans, you owe money toward a large loan. Whether that means carrying thousands of dollars in credit card debt, having a hefty mortgage in your name or making car loan payments each month, loan debt is part of your life. This means you’re looking at hundreds of dollars in interest payments over the life of the loan(s). There’s also the mental load of knowing you owe perhaps tens of thousands of dollars and that you’ll be paying back the loan for years to come.

It can all get kind of depressing—but it doesn’t have to be that way.

Did you know there are simple, but brilliant, tricks you can employ to lighten the load? With a carefully applied technique, you can pay off your mortgage, auto loan, credit card debt and any other debt you’re carrying quicker than you thought possible. These tricks won’t hurt your finances in any dramatic way, but they can make a big difference to the total interest you’ll pay over the life of the loan and help you become debt-free faster.

You can free up more of your money each month, use your hard-earned cash for the things you want instead of forking it over in interest and live completely debt-free sooner than you’d dreamed. It’s all possible!

A note of caution before we explore these tricks: Check with your lender before employing any approach, as some loan types have penalties for making extra or early payments.

1. Make bi-weekly payments
Instead of making monthly payments toward your loan, submit half-payments every two weeks.

The benefits to this approach are two-fold:

  • Your payments will be applied more often, so less interest can accrue.
  • You’ll make 26 half-payments each year, which translates into an extra full payment on the year, thereby shortening the life of the loan by several months or even years. If you choose this method with a 30-year mortgage, you can shorten it to 26 years!

2. Round up your monthly payments
Round up your monthly payments to the nearest $50 for an effortless way to shorten your loan. For example, if your auto loan costs you $220 each month, bring that number up to $250. The difference is too small to make a tangible dent in your budget, but large enough to knock a few months off the life of your loan and save you a significant amount in interest.

For a potentially even bigger impact, consider bumping up your payments to the nearest $100.

3. Make one extra payment each year
If the thought of bi-weekly payments seems daunting but you like the idea of making an additional payment each year, you can accomplish the same goal by committing to just one extra payment a year. This way, you’ll only feel the squeeze once a year and you’ll still shorten the life of your loan by several months, or even years. Use a work bonus, tax refund, or another windfall to make that once-a-year payment.

Another easy way to make that extra payment is to spread it out throughout the year. Divide your monthly payment by 12 and then add that cost to your monthly payments all year long. You’ll be making a full extra payment over the course of the year while hardly feeling the pinch.

4. Refinance
One of the best ways to pay off your loan early is to refinance. If interest rates have dropped since you took out your loan or your credit has improved dramatically, this can be a smart choice for you. Contact [credit union] to ask about refinancing. We can help even if your loan is currently with us.

It’s important to note that refinancing makes the most sense if it can help you pay down the loan sooner. You can accomplish this by shortening the life of the loan, an option you may be able to afford easily with your lower interest rate. Another means to the same goal is keeping the life of your loan unchanged and with your lower monthly payments, employing one of the methods mentioned above to shorten the overall life of your loan.

5. Boost your income and put all extra money toward the loan
A great way to cut the life of your loan is to work on earning more money with the intention of making extra payments on your loan. Consider selling stuff on Amazon or eBay, cutting your impulse purchases and putting saved money toward your loan, or taking on a side hustle on weekends or holidays for extra cash. Even a job that nets you an extra $200 a month can make a big difference in your loan.

Triumph over your loans by using one or more of these tricks to make them shorter and pay less interest. You deserve to keep more of your money!

Your Turn:
Have you used any of these methods or a different approach for paying off a loan early? Tell us about it in the comments.

SOURCES:
https://www.thebalance.com/how-to-pay-off-debt-early-315571

https://www.google.com/amp/s/www.huffpost.com/entry/top-6-ways-to-pay-off-any-loan-faster_b_1624242/amp

https://www.payoff.com/life/money/6-ways-to-pay-off-your-car-loan-early/

4 Reasons To Get Preapproved For A Loan

key fob with tiny car laying on top of auto loan paperwork with "Approved" stamped in large red lettersAre you in the market for a large loan-dependent purchase like a new home or a new set of wheels? Don’t forget to get your pre-approval first!

Here’s why
1. You’ll know what you can afford.
A pre-approval will tell you exactly how much house or car you can afford, simplifying and quickening your search.

2. You won’t get taken for a ride.
When you’re unsure how much you can spend on a car, the dealer may try to sell you one that costs more than you can really handle.

3. You’ll be taken seriously.
A car dealer or realtor will take you more seriously when you wave that pre-approval in their face.

4. Secure the rate and financing terms you desire.
When you’re making the deal for your purchase, there are bound to be some confusing moments as things come together. Some dealers use this as an opportune time to upsell warranties, insurances and other add-ons. While these things require consideration, it’s too easy to tack the costs onto a loan without considering how it will impact payment and overall cost.

Your Turn:
Based on your own experiences, why do you think it’s important to get pre-approved for a loan? Share your thoughts with us in the comments!

How to Know if You Need a Cosigner

A look into what a cosigner is, why you might need one and the risks serving as one presents

close-up of a person's hand as they are signing a legal documentLoans are an economic staple in most people’s lives; they can help pay for education, transportation or living arrangements. Of course, getting a good loan from the bank or some other financial institution can be quite difficult for some people. This is especially true for buyers who are just starting out and don’t yet have a sound credit score.

For these individuals, seeking out a cosigner might just be the way to go. A cosigner allows people to receive a loan or transaction they otherwise wouldn’t have access to. Being a cosigner can be quite risky financially, so it’s important to know exactly when you need to ask somebody to serve as one on your behalf.

What is a cosigner?
Investopedia defines cosigning as “the act of signing for another person’s debt which involves a legal obligation made by the cosigner to make payment on the other person’s debt should that person default.” While the person requiring the cosigner isn’t always in debt, a payment due is always involved.

In summary, a cosigner is someone who agrees to make payments on a loan if the primary recipient of said loan is unable to do so. Oftentimes, the person who takes out the loan is more than able to pay it back, but is unable to receive the original loan without someone else backing them.

By having someone serve as a cosigner, individuals can gain access to much larger loans than they would have been able to by themselves. However, the Consumer Financial Protection Bureau notes that interest rates are usually much higher for individuals with a cosigner.

When do you need a cosigner?
Justin Pritchard of The Balance explains that the most common reason people require a cosigner to receive a loan is due to their credit score. If the individual has a poor credit score and history, they will be unable to receive stronger loans without the guarantee that someone with a better credit score is backing them.

Several different transactions often necessitate the need of a cosigner. Some of the most common are purchasing a car and renting or buying a house.

A cosigner is not necessary for just any transaction, though. Consigners should be found for important financial endeavors that are required to meet basic needs, like the aforementioned lodging or transportation.

Who can serve as your cosigner?
The individual who signs up to be a cosigner is required to have a strong credit history more often than not. They should have enough money saved up and have a strong enough credit score that signing up to cosign shouldn’t negatively affect them. Nevertheless, simply by serving as a cosigner, they do run the risk of hurting that credit score. For this reason most cosigners are people close to the person applying for the loan. The Consumer Financial Protection Bureau notes that most cosigners are family members and most often parents.

Your lender does not designate who must be your cosigner, but will accept anyone who meets their credit standard and guidelines.

What are the risks of serving as a cosigner?
Signing up to be a cosigner is a decision that requires a lot of forethought. If something goes wrong with payments, it will be the cosigner’s responsibility to cover those payments. Cosigners are held to an equal amount of responsibility for paying the loan as the original person who applied for it. Despite this, Kristy Welsh noted in USA Today that lenders will often take legal action against the cosigner first if payments are not made, knowing that the cosigner probably has a larger, more reliable amount of money.

Your lender will provide your cosigner with a disclosure that summarizes their obligations.

Before you consider seeking out a cosigner, it’s important to consider whether the loan you are looking to sign up for is for something that’s absolutely necessary. Settling for a smaller loan might mean settling for a smaller home or car, but it often means that neither you nor your potential cosigner will suffer serious financial burdens down the road.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

What You’ll Need for an Auto Loan

Make sure you have these things before you go into an office for a car loan

Car keys, calculator, and loan paperwork on a deskWhen buying a new car, getting a loan to cover the cost is an increasingly popular option chosen by new drivers. In fact, data from the Federal Reserve Bank of New York and reported by CNN Money shows that a record 107 million Americans currently have auto loan debt, a number which has been growing rapidly over the past 5 years.

If you plan to take out your own loan for your next vehicle, you are definitely in good company. However, first-time buyers may be surprised that getting an auto loan requires bringing along a certain number of items.

Proof of income
According to CarsDirect, proof of income is the first document that the lender will want to see, and the reasoning for it is fairly self-explanatory: whether the lender is a bank or an automaker, it wants to know that you are employed and therefore capable of paying back the loan. CarsDirect adds that proof of income generally would take the form of your last two pay stubs, or your direct deposit receipts if your employer prefers that payment method.

These pay stubs offer a good deal of information about your employment history, including how much money you have made to date, how much you pay in taxes, how long you have been with this employer and whether you have any wage garnishments.

If you are self-employed, you will need to provide at least a year’s tax returns, although it’s a good idea to bring more just in case.

Credit and banking history
According to LendingTree, the next thing a lender will want to see is your credit history. This may include mortgage or lease agreements, statements from credit cards or banks and records from any alimony or child support payments.

This also means that a lender will be looking at your credit score. This three-digit number encompasses the above information, plus other factors, to show how much risk would be involved in giving you a loan. As such, a good credit score would show a potential lender that you are trustworthy, and you’ll have a better chance of securing a loan and setting better terms for that loan.

Since holding a good credit score is so important to this process, the U.S. Consumer Financial Protection Bureau (CFPB) offers a few rules for doing so.

First, pay your bills and loans on time and take care of any missed payments as quickly as possible to stay current. Then make sure you’re not too close to your credit limits, since credit scoring models check to see if you are close to maxing out. On a related note, you should only apply for credit that you need. Many credit applications in a short amount of time signal that you are in dire economic straits and may not be able to pay back a loan.

In general, the CFPB adds, a long, consistent credit history is the end goal to achieving a strong credit score. The longer you continue paying on time (and catching any mistakes), the better the effect will be.

Proof of residence
According to CarsDirect, proof of residence confirms to the lender that you live where you say you do. This information is needed so you can be contacted by mail or, in a worst case scenario, so your vehicle can be located for repossession. This document can be a bill or driver’s license, showing both your name and the address given on the loan application.

Vehicle information
This refers to the vehicle you want to buy, not any trade-in that may be involved. For a new car, LendingTree says that you will need the dealer’s sheet or buyer’s order for the vehicle, including purchase price and vehicle identification number, as well as its year, make and model. If buying a used car, you will need the same information from the seller, along with the mileage, original title and disclosures of any loans currently on the car, called liens.

Proof of insurance
According to CarsDirect, you need to prove that the vehicle has current, valid insurance. This should take the form of a document showing the specific vehicle is insured, and not simply proof that you have insurance with a particular company.

With these documents (and a good credit score) in hand, securing an auto loan can be turned into a streamlined and easy process. However, LendingTree explains that all lenders are different, so it pays to call ahead to see what specific information they want you to bring to help speed up the process.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Four Mistakes People Make With Student Loans

Stay smart with a student loan strategy
Going to college is a life-changing experience that can open doors to new careers and increase your lifetime earning potential. If you are looking for a new student loan or are trying to make the best out of the repayment period, make sure you are avoiding these common student loan mistakes.

Not considering private loans
Many would-be-students shy away from private loans because they have heard that they lack the protections and benefits that come with federal loans. While it’s true that federal loans offer a fixed interest rate in contrast to most private loans, it is often possible for a student to get a lower interest rate with a private loan, particularly if a parent cosigns. If you are able to obtain a much lower rate with a private loan, then it’s worth seriously considering whether the security of a fixed rate with a federal loan is worth it.

Ignoring retirement savings
It is understandable, and even laudable, to want to repay student loans as quickly as possible, but undertaking an ambitious repayment plan at the expense of completely ignoring retirement savings isn’t wise.

“A recent report from Morningstar Inc. subsidiary HelloWallet found that someone with a starting salary of $50,000 who pays off a $20,000 student loan ahead of schedule but skimps on retirement savings—by contributing only enough to an employer-sponsored 401(k) plan to receive half the employer’s 3% matching contribution—will wind up with a net worth at age 65 that’s $150,000 below where it would have been had he or she contributed enough to receive the full match and repaid the loan over a longer period, by making the minimum required payment,” states The Wall Street Journal Reporter Anne Tergesen in an article from Sep. 2016.

Not making automatic payments
One of the best steps you can take to make sure the student loan repayment process goes as smoothly as possible is to set up automatic payments. Some people delay setting up automatic payments because they have ambitious goals of paying more than the minimum each month, and want to wait to see what their bank account balance is before determining the payment amount. While it’s great to pay more when you can (as long as you aren’t sacrificing retirement savings), it’s not worth the risk of making a late payment or missing a payment all together. Setting up automatic payments that you can afford each month is the safest bet, and if you find you have extra money after the payment is made, you can always make a supplemental payment.

Paying for assistance
If you are having trouble affording your payments, you may have been tempted by ads that offer to help you figure out your options for paying on a different schedule or seeking loan forgiveness on your federal loan.

“If someone asks you to pay for these services, you are not dealing with the U.S. Department of Education or our loan servicers,” according to Nicole Callahan, a Digital Engagement Strategist at Federal Student Aid in an article for HomeRoom, the official blog of the U.S. Department of Education. “We don’t charge application or maintenance fees. If you’re asked to pay, walk away (or hang up).”

The cost of an education that can help you start a profitable career or get a better job in your current field is money well spent, and you can make sure you are getting the best return on your investment by avoiding these four common student loan mistakes.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.