What Happens When You Pay Off Your Car Loan?

July 20, 2020 &• 5 min read by Julia Eddington Comments 1 Comment

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According to the Consumer Financial Protection Bureau, around 2.3 million car loans originate every year. Car loans can take years to pay off. So when you finally pay it off, you might be wondering—now what?

What happens when you pay off your car? What should you do with the money you were previously putting towards your monthly payments? We’ve got a few ideas, but keep in mind that everyone’s finances are different. So while our suggestions might work for some people, they probably won’t work for everyone.

What to Do When You Pay Off Your Car

Firstly, paying off your car loan is a huge accomplishment. So congratulations! Paying off any loan isn’t always easy. And now you finally own your car, which is a pretty big deal.

Luckily for you, the hard part is over. But there are still a few steps you should take after you pay off your car.

1. Get Your Car Title

You usually don’t have to take action for this step. In most states, your lender notifies the Department of Motor Vehicles—or BMV or other equivalent entity in your state—of the title change. Once the paperwork clears, the title is mailed to you.

There’s not much for you to do except keep an eye on the mail. If you don’t get your title a few weeks after paying off your loan, call your lender. You’ll need the title if you ever want to sell your car or use it for collateral when applying for credit.

2. Reconsider Your Finances

If you’re paying off a vehicle and not planning to buy another with a new loan, you’ll have a little more extra room in your budget. In 2019, new car buyers committed to an average monthly payment of around $550. So when you pay off your car loan, there’s a good chance you’ll have an extra $300 (or more) per month.

You might be tempted to splurge on fun stuff or to make large purchases you’ve been putting off. But unless your transportation situation is radically changing soon, you’ll always need a car. And that means you’ll eventually need to pay for the next one.

Plus, owning a car is expensive—even if you’ve completely paid it off. You’ll have to your oil changed, new tires and much more. And that’s just regular maintenance. If you get in even a minor accident, you could have a major repair expense on your hands.

That’s why it’s a good idea to put that some of that extra money in savings. If you end up getting a new car eventually, you can pay for all or part of your next vehicle with cash. That reduces how much you have to finance, which can significantly reduce the total cost of your next vehicle. Another option is to use the money to continue to pay down other debt to put yourself in a better financial situation in the future.

It’s also worth putting part of that cash in your short-term savings. You could easily dip into those funds if you need to get any work done on your car. But whatever you plan to do with the money, take the time to look at your personal budget. That gives you a chance to see exactly where this extra money might make the most difference.

3. Notify Your Car Insurance Company

Notify your car insurance company when you’ve paid off your loan so you can remove the lien holder from your policy. You don’t need to wait until you have the title in your hand to make the call.

This step is important because if your financed vehicle were totaled in a wreck, the insurance payment would go to the lender. Once you’ve paid off the car and own it outright, the payment goes to you.

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4. Consider Any New Insurance Options

Most states have requirements for what type of coverage you must carry on your car. At minimum in most states, you need bodily injury and property damage liability that will cover the losses of other people if it’s caused in a wreck that is deemed your fault. There are some exceptions to those requirements, though.

But your lender will likely require additional insurance coverage until you pay off the loan. Many lenders require you to also carry comp and collision coverage. This is the part of your insurance policy that pays for damage to yourvehicle if you get into an accident that is deemed your fault.

Lenders require this extra coverage to protect their investment. They want to know that if your car is totaled, they can recover the value that you owe them. Once you pay off the loan, whether or not you carry this level of coverage might be your choice.

Talk to your insurance agent to find out what your options are and if you can save money by changing your insurance coverage. Just remember that if you drop this coverage and get into an accident, you may have to cover the costs of repairs or a new vehicle on your own.

You can also check rates for auto insurance online. In addition to saving money on your monthly vehicle payment, you may be able to save a lot on your insurance coverage.

Does Paying Off Your Car Loan Early Hurt Your Credit?

To get out of debt or change your current car, you might decide to pay off your car loan early. Your credit isn’t penalized by making early payments on debt. However, paying off an entire account can cause a small dip in your credit score temporarily. That’s because open accounts with a positive payment history impact your score more than closed accounts with positive payment histories.

Your wallet might also take a small hit depending on how your loan is structured. Find out if your loan includes any penalties for paying off the principle early before you make a decision to go this route.


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Better Investing for Beginners

November 11, 2020 &• 10 min read by Credit.com Comments 0 Comments

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Are you new to investing? Not sure where to start? Investing for beginners can be overwhelming. There are so many moving parts. With that said, we hope the process we’ll show you today will make it easier for you to get started.

What follows are ten steps you can take to become a successful investor. Let’s get started.

1. Work from a Budget

I put your budget first for a reason. It should be obvious. If you don’t know where your money is going, it will be challenging to save and invest consistently. I’m not suggesting you need to be inflexible with your budget—quite the contrary.

However, you need to know where your money is going every month to know to analyze areas where you might reduce expenses and increase the amount available to save and invest.

You’ll need to know how much you have left after paying all the bills, funding your emergency fund, and taking care of things like food, clothing, cars, school supplies, and any other expenses you might incur.

What’s left after taking care of all of these things is your discretionary income. That’s where you’ll get the money to invest. That’s where you can determine how much you can put toward funding your various investment objectives (See #2 below).

Tip: You can boost your discretionary income with money making apps and cash back sites like Swagbucks, Honey, and Rakuten.

2. Know Your Why

Before starting any investing, you must know why you’re investing. How will the money invested eventually be spent? When? Will it be withdrawn in a lump sum? Over a period of time?

If you are investing for retirement, what are the best accounts to use? 401(k)? Traditional  or Roth IRA?

If you’re a beginner, perhaps you’re saving to buy your first home. If that’s the case, you shouldn’t invest that money in the same way you’re investing your retirement dollars.

Maybe you’re saving for your kids’ college education. Once again, that money will be invested differently than money for a house or retirement.

Before you put any money to work in investments, know how and when the money will eventually be used.

3. Build Your Emergency Fund

Before you start investing, make sure you have built up an emergency fund. The money you put into your emergency fund should be a part of your budget until you get it to the desired amount.

Like many things in personal finances, how much one should keep in an emergency fund is subjective. At a minimum, you should have three to six months of your monthly expenses set aside in this fund.

If you’re a more conservative person, you might be more comfortable with a one-year cushion in your fund. I know others who have as much as three years set aside in their fund. Managing your monthly expenses by reducing or eliminating unnecessary expenses means you can have a smaller emergency fund.

The reason is simple: if your fund’s size is based on a multiple of your monthly expenses, the smaller your expenses, the smaller your fund. Another way to look at it—if you lower your monthly expenses, whatever amount you have in your emergency fund will last longer.

Either way, be sure to think about how many months you want to be covered and keep that amount or more in this fund.

One last thing on this. Do not invest your emergency fund money in anything that has a risk of loss. Look for an FDIC-insured interest-bearing savings or money market account.

4. Have a Plan

Once you’ve decided why you’re investing your money, it’s time to develop a plan to invest it.

For example, let’s say one of your goals is to invest for retirement. I brought up some questions above about what type of retirement accounts would be best. Here are some other basic questions to answer:

  • When do I want to retire?
  • How much income do I want in today’s dollars?
  • What will my expenses be?
  • What sources of income will I have (Social Security, pension, inheritance, etc.)?
  • How long will the money need to last, or how long do I expect to live?

Once you have that last number, you can work backward to calculate how much you need to save each year based on a given growth rate. If you have 30 years until retirement, need $1 million, and earn 5% on your investments each year, you’d need to save roughly $15,000 every year. Viewed monthly, you’d set aside $1,250. Use a compound interest calculator to figure out what you need for your plan.

If you have a company retirement plan, the bulk of that investment might go into that account. Remember, most employer plans have a matching contribution. Many companies will match your contributions 100% up to 3%, 5%, or more. That’s free money and reduces the amount you need to contribute to reach your $1 million goals.

Use this same calculation method for each goal you’re trying to achieve.

5. Follow Your Plan

I know it seems unnecessary to say this, but many people seem to get distracted, discouraged, or convinced that there is a better way.

If you’ve done the work to calculate how much money you need to fund your goals, how much you need to save, and the kind of return that will get you there, that’s really all that matters. Don’t worry about what others are doing. That’s not to say you shouldn’t listen to others. However, just because someone is doing well for themselves doesn’t mean how they’re doing it is good for you.

Stay focused on the plan you’ve created for yourself. If your circumstances change (job loss, income reduction, health issue, etc.), see how that affects your plan. If need be, make adjustments along the way.

Be sure to calculate how these changes affect your goals and adjust accordingly. Doing this will help keep you on track.

6. Invest Wisely

There are many differing opinions on how to invest your money. There will always be someone who tells you they’re getting a much better return on their investments than you are. Don’t be swayed. No one wants to appear to be stupid. Some need to toot their own horn to make themselves feel better.

It doesn’t matter what someone else is earning on their money at the end of the day. It has nothing to do with what you’re trying to do with your money.

You’ll also hear a lot of noise from the financial and mainstream media. Ignore it for the same reason.

Figure out how much you need to earn to have the amount of money you need when you plan to use it. Apply a conservative return percentage to calculate the annual investment needed. Keep in mind that investment returns are not fixed or linear. They will fluctuate, sometimes pretty dramatically.

Here’s an article that will introduce you to some of the investment options available in 2020 and beyond to help you choose.

7. Be Flexible

We covered this briefly in the section on following your plan. Being flexible means being open to adjusting your plans. Any change in life circumstances should be the reason for any changes you make.

Being flexible doesn’t mean popping in and out of investment funds to chase returns. Chasing returns or timing the market doesn’t work over the long term. Once in a while, people get lucky. But I know of no one, individual, professional, or otherwise, who has had long-term success trading or timing the market.

If your returns lag what you calculated, you can adjust by doing one of two things:

  1. Increase the amount of money you’re contributing to your investments.
  2. Move more of your money into riskier investments with higher expected returns.

There are some caveats to discuss with option #2. No one should take more investment risk than they are willing, able, and need to. Any increase in risk should be incremental. For example, if you have 50% of your money in stocks, adding another 5%­–10% more in stocks may offer the additional return needed without substantially increasing your risk.

That brings us to the next important step in the process.

8. Invest for the Long Term

When we say have a plan, follow a plan, and invest wisely, we are talking about doing that for the long term. Investment success comes over time. 

If you’ve made your plan, determined how much you need to save and invest, and determined how much you need to earn to get there, you’ve done the bulk of the work. Markets reward investors over the long term.

Develop your portfolio based on all of these things, be sure it’s diversified across many asset classes, and stay with it until you reach your goals. It really is that simple.

I said simple, not easy. There will be many distractions along the way that may make you think you need to change your plans or portfolio. Be very careful!

If you’ve done your homework and know what you need to get where you want to go, stick with the plan and tune out all the noise.

9. Monitor Your Investments

Monitoring your investments does not mean changing them all the time. Nor does it mean looking at them every day, week, or month and fretting over what the market is doing. Markets over the short term are very volatile.

Any changes you make should be incremental. Let’s say you want 50% in stocks and 50% in bonds. If you look at your portfolio at the end of the year and see you now have 60% in stocks and 40% in bonds, consider making some adjustments.

Called rebalancing, this means you would sell 10% of your stocks and invest that money into your bonds to keep your allocation at 50/50 stocks/bonds. After all, that’s how you determined you needed to invest your money to accomplish your goals.

Rebalancing keeps you on track. You needn’t rebalance more than once, maybe twice, a year. Market fluctuations often help rebalance the portfolio back to where you need it to be. In other words, the market swings both up and down pretty regularly. When people sell stocks, they often buy bonds. These fluctuations can bring your portfolio back into the balance you want.

10. Have Patience

Patience is one of the hardest principles to keep when investing. That is especially true in volatile times. We’ve had days in 2020 when the market dropped 9% in one day, only to bounce back over the next day or two to erase that one-day drop.

It can be unnerving and make you want to get out of the market. Resist the temptation. Investors who sold out of the market in the financial crises of 2000–2002 and 2008 damaged themselves badly. If they had stayed invested and, better yet, invested more in the market, they likely would have been way ahead.

Rebalance. These market drops are a great way to take advantage of lower prices in either stocks or bonds. If you are not comfortable with these kinds of price swings, you probably shouldn’t be invested in the markets.

The markets reward long-term investors and, more often than not, punish short-term investors. Hang in there. Be patient. Don’t listen to the advice of well-meaning friends, family, neighbors, or coworkers. Turn off the news.

Final Thoughts

I don’t know about you, but I tend to overcomplicate many things. It’s not a good idea when it comes to investing. Please keep it simple. Follow a process, whether it’s these ten steps or something else. Stick with it. Be patient, and do your best to ignore the noise.

People who appear smarter than you often aren’t. Don’t sell yourself short. The plan you set is yours, not anyone else’s. Remember that when other well-meaning people tell you how well they’re doing and how much better you should be doing.

Play the long game. Don’t follow the crowd. They are often wrong. Turn off the noise. That’s a recipe for both investment success and success in life.


Michael Dinich is a personal finance expert, podcaster, YouTuber, and journalist. Michael is the founder of Your Money Geek, a rapidly growing personal finance and pop culture website. Michael has appeared as a guest on numerous personal finance podcasts and blogs. He is passionate about helping others, side hustles, and all things geeky.  

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Should I Buy or Lease My Next Car?

Shopping for the best auto loans? Whether you are looking for the best car loan rates for a new or used vehicle, or you want to refinance an auto loan, we can help. Today’s auto loan rates are displayed in our helpful car loan calculator. Get the lowest rate when you compare rates from multiple lenders, even if your credit isn’t perfect.

With a lower interest rate, you’ll save money and pay off your car loan faster. It pays to shop for the best car loan rate! *

The single most important thing you can do to save money on an auto loan is to shop for the best auto loan rate before you set foot in a dealership. By knowing what kind of rate you qualify for before you try to buy a vehicle, you accomplish three things:

  1. You’ll know what kind of car payment you can qualify for
  2. You can focus your negotiations with the dealer on the vehicle price rather than on the financing
  3. You won’t end up getting stuck in a higher cost loan than you can qualify for

As you shop around for financing on a new or used vehicle, keep in mind the following factors that will affect your payment:

Length of loan:

Many buyers are opting for car loans that are five years or longer. Experian notes that in the last quarter of 2012, the average car loan length was 65 months. That’s almost five and a half years! The advantage of a longer car loan is that your payments will be lower. The disadvantage is that you may be “upside down,” – you owe more than the vehicle is worth – for a longer period of time.

Downpayment:

A larger down payment will reduce the amount you borrow and may make it easier to qualify for a better car loan rate. If you haven’t saved much for a down payment, you may be able to sell your current vehicle and use that money toward the down payment, or trade in your current vehicle to reduce the price of the car or truck you are buying. But if you are short on cash, don’t panic. Not all lenders will require a down payment.

Credit score:

Your credit score will be used to help determine the interest rate you’ll pay. But just because you have less than perfect credit, that doesn’t mean you can’t get a decent rate. The credit score that an auto lender uses may be somewhat different than the score you see if you get your own credit so don’t get too hung on up the number.

Refinance Auto Loans

Is your current auto loan rate higher than the rates you see in the loan rate comparison table above? If so, you may want to refinance your car loan. If you can get a lower rate, you’ll save money and you may be able to pay off your loan faster, too. Another option is to extend your loan term to make your payments more affordable. It’s easy. Just choose refinance from the options above and apply to see if you qualify for an auto loan refinance.

Bad Credit Auto Loans

If you have credit problems and need to buy a car or truck, you may be tempted to just use a Buy Here Pay Here (BHPH) car dealer that advertises it makes bad credit car loans. With one of these arrangements, the dealership arranges the financing and usually you make your payments to the dealer rather than a third-party lender like a bank or credit union.

Before you go this route, make sure you try to get preapproved for a car loan online or with a local financial institution. If you can get financing elsewhere then you’ll have more freedom to shop for the best deal on your car from a variety of sources, rather than limiting yourself to the cars available at that dealership. And when you do find a car or truck you like, you’ll be able to try to get the price down, rather than taking whatever they offer you.

Keep in mind that even if you are offered a high-rate auto loan online or through your bank or credit union, you can always ask the dealer to beat that rate – after you have negotiated the price for the vehicle you want.

Protect Your Credit When Auto Loan Shopping

Every time a lender checks your credit or requests your credit score, that fact will be noted on one or more of your credit reports as an “inquiry.” Your credit score can drop as a result. The good news is that most credit scoring models will ignore recent auto-related inquiries, and will count multiple inquiries from auto loan applications in a short period of time as one. To protect your credit, it’s best to shop for an auto loan in a focused period of time: two weeks or less is best to be safe.

You can check your credit score for free using Credit.com’s free Credit Report Card. Requesting your own credit score through this service will not affect your credit score.

Car Title Loans

If you are desperate to borrow money but you have bad credit, you may be tempted to get a car title loan. These loans require you to pledge your vehicle as collateral for the loan. They are not legal in all states, but where they are, they usually lend up to 25% of the value of the car or truck you own free and clear.

Watch out! Interest rates on auto title loans are very high; often 25% per month – or about 300% per year – according to the Center for Responsible Lending. According to the CRL report, the average car-title borrower renews a loan eight times, paying $2,142 in interest for $951 of credit. If possible, you should try instead to get a personal loan or, if you can’t, see whether a non-profit credit counseling agency can help you find another solution to your financial difficulties.

-APR = Annual Percentage Rate. Rates based on credit worthiness and are subject to change without notice. Your actual rate and monthly payment may vary. Must be 18 years of age or older to apply. Loans subject to credit approval and could be subject to credit union membership.

* IMPORTANT NOTE FROM CREDIT.COM: Credit.com is not a lender. The above offers are provided by third-parties from whom Credit.com receives compensation. Credit.com will not call you about any loan application resulting from the above offers, and will not ask you over the phone, via email or otherwise for financial information or other sensitive personal data.

REMEMBER never to share any financial information or other sensitive personal data over the phone or via email without independently confirming the identity of the company calling first!

† Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom Credit.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). It is this compensation that enables Credit.com to provide you with services like free access to your credit scores at no charge. Credit.com strives to provide a wide array of offers for our members, but our offers do not represent all financial services companies or products.

Source: credit.com

What to Do Before You Lease a Car

October 20, 2020 &• 6 min read by Gerri Detweiler Comments 18 Comments

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Disclaimer

Getting a new car is a big decision, and you should choose your next vehicle carefully. But if you think finding the right car is difficult, deciding whether to lease or buy can be even more overwhelming. Start the process right by understanding the minimum credit score to lease a car and determining whether this is the best decision for you.

1. Check Your Credit

According to Experian, companies that lease automobiles typically like to see a credit score of 700 or higher, though you might be able to get approved for some leases with a score that falls below that. In some cases, it’s easier to qualify for a lease for certain vehicles, such as those that come with a lower price tag.

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Before you apply for a lease, you should check your credit report, giving yourself plenty of time to dispute and fix any negative mistakes to enhance your chance of getting approved for a lease. You can get a copy of your credit report from AnnualCreditReport.com. Usually you get one copy per year from each of the three major bureaus, but due to COVID-19, you can get one copy every week through April 2021.

You should also check your credit score to check if you have the right credit score to lease a car. This lets you know if you fall below the potential requirements for most lease companies. Sign up for ExtraCredit and get 28 of your FICO Scores plus your credit reports from all three credit bureaus so you’re armed with the right information.

2. Make Sure a Lease Is Right for You

Leases offer some advantages over buying. The down payment and fixed monthly payments for a lease are typically lower than the cost of financing. You get to drive a newer car, and many repair costs may be covered by the manufacturer’s warranty or the lease agreement.

However, leases also come with many limitations and the potential for additional costs. If you exceed a lease’s mileage limit, you’ll pay a fee for every additional mile. You’ll also be charged for extra wear and tear, and you aren’t allowed to modify the vehicle. If you decide the car isn’t right for you, you could pay a steep penalty for terminating your lease early.

Despite the lower monthly payment, the lifetime cost of leasing is generally much higher than buying, especially considering you don’t own your car at the end of the lease. Before you decide if a lease is right for you, make sure to understand the pros and cons of leasing.

3. Know What You Can Afford

One of the biggest advantages of leasing is that you might get a lower monthly payment compared to a car loan on the same vehicle. Leases are cheaper because you’re only paying for the depreciation of the car’s value plus interest, taxes, and fees. With a loan, you’re also paying off the entire purchase price of the vehicle.

However, these monthly costs don’t take down payments or trade-in values into account. While leases typically have lower down payments, you’ll have to turn in or buy your car when the lease is up. And you’ll have no ownership in the car to show for the few years of payments you already made. It’s important to consider whether you can afford the monthly payment now and the cost of buying or leasing a new vehicle in a few years.

4. Shop Around for a Car and a Lease

Auto loans can be found at banks, credit unions, car dealers, and online. Leases, on the other hand, are largely controlled by the manufacturer. You may be able to get a better deal if you consider vehicles from different manufacturers instead of sticking to one make and model.

The manufacturer will consider your credit score to lease a car, your debt-to-income ratio, and the “lease-to-value” ratio. That’s how much you are financing compared to the vehicle’s value. If you are having trouble qualifying, you may need to put down additional money or get a cosigner for your lease.

Just as with auto loans, you can negotiate the cost of a leased car. So if you aren’t getting the deal you want, make a counter-offer or keep looking.

Not Ready to Lease?

If you aren’t ready to commit to a lease term of two to three years, you can potentially take 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’ll likely qualify to take over their lease. Sites like SwapALease.com and LeaseTrader.com help connect consumers who want to get out of leases and consumers who want to assume one.

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If you’d rather buy a car than lease one, we’ve got some tips on how to finance a car. We can also help you find a lender to apply for a car loan.


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10 Things You Need to Know before Buying a Car

According to Kelley Blue Book, the average price for a light vehicle in the United States was almost $38,000 in March 2020. Of course, the sticker price will depend on whether you want a small economy car, a luxury midsize sedan, an SUV or something in between. But the total you pay for a vehicle also depends on a number of other factors if you’re taking out a car loan.

Get the 4-1-1 on financing a car so you can make the best decision for your next vehicle purchase.

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Decide Whether to Finance a Car

Whether or not you should finance your next vehicle purchase is a personal decision. Most people finance because they don’t have an extra $20,000 to $50,000 they want to part with. But if you have the cash, paying for the car outright is the most economical way to purchase it.

For most people, deciding whether to finance a car comes down to a few considerations:

  • Do you need the vehicle enough to warrant making a monthly payment on it for several years?
  • Does the monthly payment work within your personal budget?
  • Is the deal, including the interest rate, appropriate?

Factors to Consider When Financing a Car

Obviously, the first thing to consider is whether you can afford the vehicle. But to understand that, you need to consider a few factors.

  • Total purchase price. Total purchase price is the biggest impact on how much you’ll pay for the car. It includes the price of the car plus any add-ons that you’re financing. Depending on the state and your own preferences, that might include extra options on the vehicle, taxes and other fees and warranty coverage.
  • Interest rate, or APR. The interest rate is typically the second biggest factor in how much you’ll pay overall for a car you finance. APR sounds complex, but the most important thing is that the higher it is, the more you pay over time. Consider a $30,000 car loan for five years with an interest rate of 6%—you pay a total of $34,799 for the vehicle. That same loan with a rate of 9% means you pay $37,365 for the car.
  • The terms. A loan term refers to the length of time you have to pay off the loan. The longer you extend terms, the less your monthly payment is. But the faster you pay off the loan, the less interest you pay overall. Edmunds notes that the current average for car loans is 72 months, or six years, but it recommends no more than five years for those who can make the payments work.

It’s important to consider the practical side of your vehicle purchase. If you take out a car loan for eight years, is your car going to still be in good working order by the time you get to the last few years? If you’re not careful, you could be making a large monthly payment while you’re also paying for car repairs on an older car.

Buying a Car with No Credit

You can buy a car anytime if you have the cash for the purchase. If you have no credit or bad credit, your options for financing a car might be limited. But that doesn’t mean it’s impossible to get a car loan without credit.

Many banks and lenders are willing to work with people with limited credit histories. Your interest rate will likely be higher than someone with excellent credit can command, though. And you might be limited on how much you can borrow, so you probably shouldn’t start looking at luxury SUVs. One tip for increasing your chances is to put as much cash down as you can when you buy the car.

If you can’t get a car loan on your own, you might consider a cosigner. There are pros and cons to asking someone else to sign on your loan, but it can get you into the credit game when the door is otherwise barred.

Personal Loans v. Car Loans: Which One Is Better?

Many people wonder if they should use a personal loan to buy a car or if there is really any difference between these types of financing. While technically a car loan is a loan you take out personally, it’s not the same thing as a personal loan.

Personal loans are usually unsecured loans offered over relatively short-term periods. The funds you get from a personal loan can typically be used for a variety of purposes and, in some cases, that might include buying a car. There are some great reasons to use a personal loan to buy a car:

  • If you’re buying a car from a private seller, a personal loan can hasten the process.
  • Traditional auto loans typically require full coverage insurance for the vehicle. A personal loan and liability insurance may be less expensive.
  • Lenders typically aren’t interested in financing cars that aren’t in driving shape, so if you’re buying a project car to work on in your garage during your downtime, a personal loan may be the better option.

But personal loans aren’t necessarily tied to the car like an auto loan is. That means the lender doesn’t necessarily have the ability to repossess the car if you stop paying the loan. Since that increases the risk for the lender, they may charge a higher interest rate on the loan than you’d find with a traditional auto loan. Personal loans typically have shorter terms and lower limits than auto loans as well, potentially making it more difficult for you to afford a car using a personal loan.

Steps You Should Follow When Financing a Car

Before you jump in and apply for that car loan, review these six steps you should take first.

1. Check your credit to understand whether you are likely to be approved for a loan. Your credit also plays a huge role in your interest rate. If your credit is too low and your interest rate would be prohibitively high, it might be better to wait until you can build or repair your credit before you get an auto loan. Sign up for ExtraCredit to see 28 of your FICO scores from all three credit bureaus.

2. Research auto loan options to find the ones that are right for you. Avoid applying too many times, as these hard inquiries can drag your credit score down with hard inquiries. The average auto loan interest rate is 27% on 60-month loans (as of April 13, 2020).

3. Get your trade-in appraised. The dealership might give you money toward your trade-in. That reduces the price of the car you purchase, which reduces how much you need to borrow. A few thousand dollars can mean a more affordable loan or even the difference between being approved or not.

4. Get prequalified for a loan online. While most dealers will help you apply for a loan, you’re in a better buying position if you walk into the dealership with funding ready to go. Plus, if you’re prequalified, you have a good idea what you can get approved for, so there are fewer surprises.

5. Buy from a trusted dealer. Unfortunately, there are dealerships and other sellers that prey on people who need a car badly. They may charge high interest or sell you a car that’s not worth the money you pay. No matter your financial situation, always try to work with a dealership that you can trust.

6. Talk to your car insurance company. Different cars will carry different car insurance premiums. Make a call to your insurance company prior to the sale to discuss potential rate changes so you’re not surprised by a higher premium after the fact.

Next to buying a home, buying a car is one of the biggest financial decisions you’ll make in your life, and you’ll likely do it more than once. Make sure you understand the ins and outs of financing a car before you start the process.

Source: credit.com

FAFSA Simplification: 8 Changes to Expect

Long-awaited changes to the Free Application for Federal Student Aid form aim to make completing the form easier, unlocking aid to pay for college. The simplification effort also expands eligibility for many types of student aid.

Changes include a much shorter form where the number of questions is based on your family’s financial situation.

The FAFSA Simplification Act was bundled into the Consolidated Appropriations Act of 2021, which included the second coronavirus relief bill. The changes to the FAFSA are effective as of July 1, 2023, for the 2023-2024 academic year and afterward.

Here’s what’s in store for the new FAFSA and other updates to financial aid:

1. The FAFSA will have fewer questions

There are currently 108 questions on the FAFSA.

On the new FAFSA form, the total number of questions you answer will depend on your financial situation, but the maximum will be 36. Some questions have multiple parts.

2. Two roadblock questions will be removed

Students no longer must register for the Selective Service in order to complete the FAFSA, and the question will be removed from the application.

Drug-related convictions alone will no longer disqualify applicants, and the question won’t be included on the FAFSA.

3. The application will be translated into more languages

The current FAFSA is in only English and Spanish. FAFSA simplification aims to make the application easier for more students and their parents who don’t speak those languages.

The new form will be available in at least 11 languages.

4. It will be clearer if you need to include assets

Currently, aid applicants have to include their own or their parents’ assets when applying for federal student aid to provide a full picture of their financial situation. Otherwise, applicants must answer a series of questions about taxable income to apply without consideration of assets (called the Simplified Needs Test).

The act exempts applicants from having to disclose assets if they meet any of the following requirements (tax information will be imported to the application directly from the IRS):

  • They’re a non-tax filer.

  • They qualify for an automatic zero or negative Student Aid Index (and subsequently are set to receive the maximum Pell Grant award).

  • They (for independent students) or their parents (for dependent students) have an adjusted gross income of less than $60,000 (and do not file a tax return with lettered schedules A-H or file a Schedule C with net business income over $10,000 loss or gain).

  • They received a means-tested benefit, such as the Supplemental Nutrition Assistance Program, or SNAP.

5. More factors added to cost of attendance

The amount of financial aid you’re eligible for is calculated by subtracting your Expected Family Contribution (soon to be Student Aid Index) from the school’s cost of attendance.

The FAFSA simplification effort adjusts cost of attendance to include more factors and rules:

  • Colleges can no longer set the housing allowance to zero for students living at home with their parents.

  • Meal plans must assume students are receiving three meals a day.

  • Colleges must include the cost of obtaining a professional license, certification or other professional credential.

  • Private student loans are no longer included in the allowance for loan fees (however, private loans often don’t charge fees as federal loans do).

6. Student Aid Index replaces the EFC

The Expected Family Contribution, or EFC, is getting a new name: Student Aid Index, or SAI.

The SAI, like the EFC, is used to calculate most financial aid (all except Pell Grants). Your need will be calculated as cost of attendance minus Student Aid Index and other financial assistance.

The makeover is meant to correct the assumption that the calculation equals the amount your family can contribute, as the name suggests. Most families pay more than the EFC amount after taking loans to fill aid gaps. In reality, the EFC (soon to be SAI) is an index number used by college financial aid offices to determine your need for aid.

The information you include on the FAFSA determines your SAI; it equals the sum of your parents’ available income, your income and your assets.

7. Receiving a Pell Grant award will get easier

Pell Grant eligibility will be simplified. Maximum annual grants, for example, will go to students — or, if dependent, their parent or parents — who fall below the income thresholds for tax filing. Maximum grants will also go to those with adjusted gross incomes below 225% (single) or 175% (married) of the poverty line.

The act also extends Pell Grant eligibility for students who previously received a Pell Grant if they were unable to complete their studies due to the closing of their school or if their loans were discharged under borrower defense to repayment. It also restores Pell Grant eligibility to incarcerated students.

8. Applicants may get more need-based aid

Applicants will see their Student Aid Index set to zero automatically if they’re eligible for the maximum federal Pell Grant. The new formula would also allow an SAI of less than zero (negative $1,500). Both changes will allow applicants to receive more need-based aid.

Source: nerdwallet.com

Fast Personal Loans: 6 Best Lenders for Quick Cash

Financial emergencies can happen at any time, and when they do, you need to respond quickly. But this can be challenging if you don’t have the funds available in savings. When this happens, taking out a personal loan can be a good way to cover the shortfall.

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You may think that the process of applying and getting approved for a personal loan would be tedious and time-consuming, but it’s not. Many online lenders will give you access to the funds within the same day or by the next business day.

6 Lenders That Provide Quick Cash Loans

Listed below are six online lenders that provide quick access to personal loans.

1. Upstart

Upstart helps borrowers that have strong financial futures but are still in the process of building their credit. The company will consider a variety of factors, including your degree and your job history. You do need to have a credit score of at least 620 to qualify.

The approval and funding process is quick with Upstart, and you could receive the money within one business day. Upstart does charge origination fees and late fees.

  • Loan amount: $1,000 to $50,000
  • APR range: 5.67% to 35.99%
  • Repayment terms: 3 to 5 years

2. Best Egg

Best Egg caters to creditworthy borrowers that are looking for ways to consolidate their debt. You’ll need to have good to excellent credit to qualify, and you can receive the funds as soon as the next business day.

However, Best Egg isn’t going to be the best option for borrowers with bad credit. And the company does charge origination and late fees.

  • Loan amount: $2,000 to $35,000
  • APR range: 5.99% to 29.99%
  • Repayment terms: 3 to 5 years

3. Avant

Avant is a great option for less creditworthy borrowers who are looking to take out a quick loan. The company offers same-day funding, flexible repayment terms, and refinancing options.

And the company is very transparent about its fees and gives borrowers the option to prequalify for a loan. However, you won’t have the option to apply with a co-signer.

  • Loan amount: $2,000 to $35,000
  • APR range: 9.95% to 35.99%
  • Repayment terms: 2 to 5 years

4. Discover Loans

Discover Loans are a great option for borrowers with stellar credit that are looking for a low interest rate and fast funding. You can receive the funds within the next business day, and the company doesn’t charge any origination fees.

However, Discover does put some limitations on what borrowers can do with a personal loan. You can take out a personal loan to consolidate debt or fund a large home improvement project. These cash loans are not designed to pay for college expenses or pay down the balance on a Discover credit card.

  • Loan amount: $2,500 to $35,000
  • APR range: 6.99% to 24.99%
  • Repayment terms: 3 to 7 years

5. Lending Club

Lending Club was one of the first peer-to-peer (P2P) lenders and is one of the best lenders for borrowers looking for fast, convenient online cash loans. You’ll apply on Lending Club’s website, and the company will match you with investors that are willing to fund the loan.

If you’re approved for a loan the funds will be deposited in your bank account within a week. You should expect to pay an origination fee between 1% and 6% of the total loan amount.

Lending Club is ideal for borrowers with good credit history and a low debt-to-income ratio.

  • Loan amount: $1,000 to $40,000
  • APR range: 6.95% to 35.89%
  • Repayment terms: 3 to 5 years

6. OneMain Financial

OneMain Financial is another lender that is willing to work with borrowers that have bad credit. The company doesn’t have any minimum credit score requirements, and it offers same-day funding on cash loans.

However, you will pay for this kind of convenience. The company charges higher interest rates than others, and you’ll have to pay an origination fee.

  • Loan amount: $1,500 to $20,000
  • APR range: 18.00% to 25.99%
  • Repayment terms: 2 to 5 years

Things to Keep in Mind

Keep in mind that when we say you can receive the funds within the same day or by the next business day, it’s not guaranteed. There are a variety of factors that will influence how quickly you receive the cash loan. These factors include things like the rules of your bank, the loan amount, and when you apply.

If you’re not sure if your credit scores are high enough to qualify with any of these lenders, then you might consider a lending marketplace. With a lending marketplace, you’ll apply, and the company will match you with multiple lenders that are willing to work with you. This lets you compare interest rates from multiple lenders without further damaging your credit.

And finally, when you’re feeling a financial pinch, it can be tempting to settle for the easiest option. But don’t make the mistake of turning to predatory payday lenders that charge insanely high interest rates.

Choosing the wrong lender will only hurt your financial situation over the long haul. If you’re this desperate for cash, consider asking friends or family to loan you the money. Or you can look for creative ways to earn some extra money.

Summary

If you’re looking for a fast cash advance loan, any of the lenders on this list will make an excellent choice. The application process is fast, and if you’re approved, you can receive the funds with the same day or by the next business day.

Make sure you understand the terms and conditions of that loan before agreeing to anything. And start taking steps to save an emergency fund so you won’t find yourself in this situation again.

Source: crediful.com

What is a Conventional Loan?

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This year you’re finally ready to buy your home. But where to start? Where it’s your first time or you’re an experience home buyer, all the mortgage options out there can be overwhelming. 

If you’re on the hunt for a mortgage, you might want to consider a conventional loan. But there are a ton of different types of conventional loans, so which is the right one for you? We’re here to break down conventional loans so you can decide if it’s the right choice for you.

What Is a Conventional Loan?

A conventional loan—also called a conventional mortgage—is one that’s not guaranteed in part or fully by the government. Conventional loans are offered by private lenders and may be secured by Freddie Mac or Fannie Mac. And while those might sound like government entities, they’re actually government-sponsored entities. We know it’s confusing—but stick with us. We’ll break it down for you.

Conventional Loan vs. FHA Loan

Now that you know what a conventional loan is, you might be wondering about FHA loans. And what’s the differencebetween the two? An FHA loan is backed by the government. So if you don’t make your payments, the lender can recoup some of its losses. Because of that, FHA loans come with less rigorous credit requirements than most conventional loans do.

Types of Conventional Loans

Conventional loans come in a wide range of types. Here are the more common ones:

  • Conforming mortgage loans. These are loans that meet the standards of Freddie Mac or Fannie May. One of the major requirements is that the loan isn’t more than a certain amount. The agencies announce conforming loan limits annually. In most locations, it’s $510,400 for 2020, with allowances for up to $765,600 in high-cost areas.
  • Jumbo mortgage loans. These are mortgages that exceed conforming loan limits. Typically, you need higher credit scores and income to be approved for these bigger loans.
  • Subprime conventional loans. These mortgages may be available for those who don’t quite meet credit and financial requirements for a conforming mortgage loan. To make up for the greater risk, lenders may charge higher interest or fees.

Within every category of loan there are options, including fixed or variable interest and terms. You will need to decide, for example, if you want to pay your mortgage off over 15 years or 30 years. The former comes with cost savings related to interest while the latter offers a lower monthly payment.

Advantages of Conventional Loans

If you have good credit, conventional loans may offer you the best deal depending on what current interest rates are. This is especially true if you can afford to put 20% down—then you can avoid paying for private mortgage insurance in many cases.

Conventional loans can be more flexible than FHA or other government-backed loans. Lenders who offer these loans don’t have to follow specific government guidelines, which means they may be able to work with borrowers who don’t fit those requirements. They can also provide mortgages for properties that are more expensive.

Disadvantages of Conventional Loans

Conventional loans generally come with a higher bar for approval. That’s because they’re not guaranteed, and the lender is taking on all of the risk. You may need a higher credit score and stronger debt-to-income ratio to qualify for these loans.

While you can get a conventional loan with a relatively low down payment, you usually won’t get the best interest rate and will have to pay private mortgage insurance (PMI). Conventional loans typically work better for those who can put a decent amount down.

Conventional Loan Requirements

Requirements for conventional loans vary by lender, but you typically need to demonstrate credit-worthiness and the ability to make your payment every month. Here are some things that conventional mortgage loan lenders might look at:

  • Your credit score. In many cases, the bottom cut-off for conventional loan approvals is a credit score of 620. Though depending on other factors, such as the amount of the mortgage and your income, you may need a higher score to qualify.
  • Your credit history. Mortgage lenders may look more in-depth at your credit than other lenders, and you may be asked to clear up old accounts or negative items before final approval.
  • Your income and debt. The lender wants to ensure that you’re able to pay the required monthly amount. They’ll look at how much you make, as well as how much debt you already have—the ratio of your debt to your income. If your debt is already taking up a large chunk of your income every month, you’re less likely to be able to pay a mortgage and less likely to get approved.
  • The value of the home. Typically, banks won’t approve a loan that’s for more than the value of the home in question. You usually have to get a property appraised before a mortgage can be finalized for this reason.

Shop for a Conventional Mortgage Loan Online

Start your mortgage journey by ensuring your credit is in order. You can get your credit report free at AnnualCreditReport.com. If you want to see some of the same credit scores mortgage companies are likely to check, consider signing up for ExtraCredit, which provides access to 28 of your FICO®Scores from different models.

Next, you may want to get pre-approved for a mortgage. This can help you understand what your buying power might be and what type of interest rate you might qualify for. It’ll also show sellers that you’re a serious buyer.

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How to Get a Loan Without a Cosigner

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Getting credit when your score is low or you don’t have a strong credit history can be challenging. One way many people solve this problem on their first loan is by getting a cosigner. But this isn’t always an option for everyone. Find out more about this process, as well as how to get a loan without a cosigner, below.

What Is a Cosigner, and Why Would You Want One?

A cosigner is a person who agrees to be responsible for a debt if you can’t or don’t pay it. Typically, you get a cosigner when you don’t have sufficient creditworthiness on your own to qualify for the loan you need. The cosigner’s credit score and history are considered when approving the loan.

Some reasons you might want a cosigner include:

  • You’re young and haven’t had time to build a credit history yet, so you don’t qualify on your own for the loan you want.
  • You need better credit to qualify for more favorable terms.
  • You have credit history, but some financial mistakes in the past have left it lackluster and you want assistance getting new credit so you can rebuild your credit history.

Reasons You Might Not Have a Cosigner

Not everyone in the above listed scenarios needs has a cosigner, though. Here are some reasons why you might not have a cosigner even if having one could help you get a loan.

You Don’t Have Access to a Cosigner

First, you simply might not have access to someone who can act as cosigner. Cosigners must have better credit than you to do much good, and they also have to be willing to put that good credit on the line to help you.

If you don’t make the payments on your loan, the cosigner’s credit is also hurt. They might also end up on the hook for the payments. This risk can limit who is willing to act as a cosigner.

You Want to Take Full Responsibility for the Loan

In some cases, you might have access to cosigners but want to avoid using them. Perhaps you want to avoid tying up a family member’s credit with your own loan. In other cases, you may simply want to avoid having loved ones be that involved in your financial affairs.

This is obviously a personal decision, and you have to decide what would be best for you and your relationships.

Tips for Getting a Personal Loan With No Cosigner

Whether you decide against a cosigner or don’t have access to one, you do still have options. Check out these tips for how to get a loan without a cosigner.

Shop Around

Some lenders are more flexible than others. Credit unions—especially ones in which you belong to already—tend to have more flexible requirements than larger banks. And online lenders can often afford to be more flexible because they aren’t covering the costs of physical locations.

Just remember not to apply for every loan you see. Each loan application can result in a hard inquiry on your credit, which can damage your score a little each time. Instead, read through all the requirements and talk to the lender if possible to determine whether you are likely to qualify for a loan before you apply.

Improve Your Credit Score

If the loan isn’t an immediate pressing concern, take some time to improve your credit score and creditworthiness to boost your chances at approval. Some steps to take include:

  • Requesting your credit reports from all three major bureaus and reviewing them for any errors. If you find inaccurate negative items, you can dispute them by sending a communication such as an email or letter to the credit bureau in question.
  • Making good choices for your credit now, including making all your payments on time and paying down any open credit card balances you might have as much as possible.
  • Improving your debt-to-income ratio. This is how much debt you have compared to how much you make. You can improve it by paying down some of your debt, finding ways to make more reportable income or both.

Modify Your Loan Request

Try to get a loan for less money. The smaller the loan, the smaller the risk for the lender, and many might be willing to give you a chance for a lower amount than you originally wanted.

Get a Secured Loan

A secured loan is one that you back with collateral, typically in the form of a physical asset, like a car or a house. If you ever fail to pay back the loan, the lender can put a lien on the collateral. The benefits of this type of loan are that they can be fairly easy to get and typically designed to help you improve your credit, which means the lender probably reports to all three major credit bureaus.

There are a couple of downsides to this option. First, you pay interest, so the loan does cost you money. Second, you risk losing ownership of a physical asset, which could cause you even more problems in the long run if you can’t make your payments.

Additional Tips for Getting a Student Loan with No Cosigner

All of the above listed tips can apply when you’re trying to get a student loan as well—particularly a private student loan. But here are a few more tips that are specific to student loans.

Apply for Federal Loans

The Free Application for Federal Student Aid process doesn’t take credit into account when considering students for financial aid. You can potentially get direct subsidized loans, direct unsubsidized loans, direct PLUS loans or parent PLUS loans via this process, all without a credit check.

Build Your Credit Profile in Other Ways

If you don’t qualify for federal loans and want to see private student loan options, find ways to build your credit profile before you apply if possible. For example, you can:

  • Apply for a secure credit card or no-credit credit card and use the account responsibly. Make sure the credit card you get reports to all major credit bureaus.
  • Get added as an approved user on someone else’s credit card. Make sure the card in question reports credit information for approved users and that the person who adds you to their account uses their credit cards responsibly.
  • Consider signing up for a product that allows your rent and utility payments to be reported to the credit bureaus to help you build positive payment history. RentReporters and Experian RentBureau are just two options.

Find the Best Loan for You

Many loan options exist, and many lenders specialize in credit for people who are building or rebuilding their credit histories. There’s a good chance you can find something that suits your needs by following the steps above. Alternatively, you can get a cosigner now and refinance the loan in the future when your credit is stronger.

Some loans also come with options for having the cosigner released after a sufficient period of timely payments and responsible account management. No matter your financial standing, it’s a good idea to start by looking at your credit report whenever you plan to apply for a loan.

If you find questionable information that could hamper your chances at approval, consider working with Lexington Law for professional credit repair.


Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

4 Practical Ways to Leave College Debt-Free

January 12, 2021 &• 6 min read by Credit.com Comments 0 Comments

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The following is a guest post by Lisa Bigelow, a content writer for Bold.

When it comes to paying for college, the anxiety about how to leave college debt-free starts early. And for thousands of grads who are buckling under the weight of monthly student loan payments that can cost as much as a mortgage, that worry can last for as long as 25 years.

According to EducationData.org and The College Board, the cost of a private school undergraduate education can exceed $200,000 over four years. Think you can avoid a $100k+ price tag by staying in-state? Think again—many public flagships can cost over $100,000 for residents seeking an undergraduate degree, including room and board. And with financial aid calculators returning eye-poppingly low awards, you’d better not get a second topping on your pizza.

In fact, you’d better hope that you can graduate on time.

The good news is that you can maintain financial health and get a great education at the same time. You won’t have to enroll as a full-time student and work 40 hours a week, either—each of the methods suggested are attainable for anyone who makes it a priority to leave college debt-free.

Here are four practical ways you can leave college debt-free (and still get that second pizza topping).

1. Cut the upfront sticker price

Don’t visit schools until you are certain you can afford them. Instead, prioritize the cost of attendance and how much you can afford to pay. Staying in-state is one easy way to do this. But if you have wanderlust and want to explore colleges outside state lines, an often-overlooked method of cutting the upfront cost is the regional tuition discount. Many US states participate in some form of tuition reciprocity or exchange programs. You can explore the full list of options at the National Association for Student Financial Aid Administrators website.

Let’s explore how this works. As a resident of a New England state, for example, you can study at another New England state’s public university at a greatly reduced cost if your home state’s public schools don’t offer the degree you want. So, for example, if you live in Maine but want to go to film school, you can attend the University of Rhode Island and major in film using the regional tuition discount.

Some universities offer different types of regional discounts and scholarships that appear somewhat arbitrary. The University of Louisville (in Kentucky) includes Connecticut in its regional scholars program. And at the University of Nebraska, out-of-state admitted applicants are eligible for several thousand dollars in renewable scholarship money if they meet modest academic standards.

If you already have your heart set on an expensive school and you’re not likely to qualify for reciprocity, financial help, or merit aid, live at home and complete your first two years at your local community college.

Here’s another fun fact: in some places, graduating from community college with a minimum GPA gives you automatic acceptance to the state flagship university.

2. Leverage dual enrollment and “testing out”

When you enroll in a four-year college it’s pretty likely that you’ll spend the first two years completing general education requirements and taking electives. Why not further reduce the cost of your education by completing some of those credits at your local community college, or by testing out?

Community college per-credit tuition is usually much cheaper than at four-year colleges, so take advantage of the lower rate in high school and over the summer after you’re enrolled in your four-year college.

But beware: you’ll probably need at least a C to transfer the credits, so read your institution’s rules first. Also, plan to take general education and low-level elective classes, because you’ll want to take courses in your major at your four-year school.

If you’ve been given the opportunity to take Advanced Placement courses, study hard for your year-end exams. Many colleges will accept a score of 3 or higher for credit, although some require at least a 4 (and others none at all). Take four or five AP classes in high school, score well on the exams, and guess what? You’ve just saved yourself a semester of tuition.

3. Take advantage of financial aid opportunities

After taking steps one and two, you probably have a good idea of what the leftover expense will be if you want to leave college debt-free. Your next job is to figure out how to cut that total even more by using financial aid. There are four types to consider.

The first is called need-based aid. This is what you’ll apply for when you complete your Free Application for Federal Student Aid. Known as the FAFSA, this is where you’ll enter detailed financial information, and you’ll need at least an hour the first time you complete this form. Hint: apply for aid as soon as the form opens in the fall. It is not a bottomless pot of money.

There is also medical-based financial aid. If you have a condition that could make employment difficult after graduating from college, you may be eligible, and qualifying is separate and apart from financial need and academic considerations.

The third type of aid relates to merit and is offered directly by colleges. Some schools automatically consider all accepted applicants for merit scholarships, which could relate to academics or community service or, in the case of recruited athletes, athletics. At other universities, you’ll need to submit a separate scholarship application after you’ve been admitted. Some merit awards are renewable for four years and others are only for one year.

If you didn’t get need-based or merit-based aid then you still may qualify for a private scholarship. Some require essays, some don’t, and some are offered by local community organizations such as rotary clubs, women’s organizations, and the like. Don’t turn your nose up at small-dollar awards, either, because they add up quickly and can cover budget-busting expenses such as travel and books.

4. Find easy money

Small-dollar awards really add up when you make finding easy money a priority. Consider using the following resources to help leave college debt-free:

  • Returns from micro-investing apps like Acorns
  • Tax return refunds
  • Browser add-ons that give you cashback for shopping online
  • Rewards credit cards (apply for a travel rewards credit card if you’re studying out of state)
  • Asking for money at the holidays and on your birthday
  • Working part-time by capitalizing on a special talent, such as tutoring, photography, or freelance writing

Leave College Debt-Free

Finally, if you have to take out a student loan, you may be able to have it forgiven if you agree to serve your community after graduation. The Peace Corps is one such way to serve, but if you have a specialized degree such as nursing, you can work in an underserved community and reap the rewards of loan forgiveness.


Lisa Bigelow writes for Bold and is an award-winning content creator, personal finance expert, and mom of three fantastic almost-adults. In addition to Credit.com, Lisa has contributed to The Tokenist, OnEntrepreneur, College Money Tips, Finovate, Finance Buzz, Life and Money by Citi, MagnifyMoney, Well + Good, Smarter With Gartner, and Popular Science. She lives with her family in Connecticut.



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Source: credit.com