Life can feel overwhelming when youâre saddled with loads of debt from different creditors. Maybe you carry multiple credit card balances on top of having a high-interest personal loan. Or maybe you have a loan…
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A payday loan is a short-term loan with a high annual percentage rate. Also known as cash advance and check advance loans, payday loans are designed to cover you until payday and there are very few issues if you repay the loan in full before the payment date. Fail to do so, however, and you could be hit with severe penalties.
Lenders may ask the borrower to write a postdated check for the date of their next paycheck, only to hit them with rollover fees if that check bounces or they request an extension. Itâs this rollover that causes so many issues for borrowers and itâs the reason there have been some huge changes in this industry over the last decade or so.Â
How Do Payday Loans Work?
Payday lending seems like a simple, easy, and problem free process, but thatâs what the payday lender relies on.Â
The idea is quite simple. Imagine, for instance, that your car suddenly breaks down, payday is 10 days away, and you donât have a single cent to your name. The mechanic quotes you $300 for the fix, and because youâre already drowning in debt and have already sold everything valuable, your only option is payday lending.
The payday lender offers you the $300 for a small fee. They remind you that if you repay this small short-term cash sum on payday, you wonât incur many fees or any real issues. But a lot can happen in 10 days.Â
More bills can land in your mailbox, more expenses can arrive out of nowhere, and before you know it, all of your paycheck has been allocated for other expenses. The payday lender offers to rollover your loan for another month (another âpaydayâ) and because you donât have much choice, you agree.
But in doing so, youâve just been hit with more high fees, more compounding interest, and a sum that just seems to keep on growing. By the time your next payday arrives, youâre only able to afford a small repayment, and from that moment on youâre locked into a debt that doesnât seem to go anywhere.
Payday loans have been criticized for being predatory and itâs easy to see why. Banks and credit unions profit more from high-income individuals as they borrow and invest more money. A single high-income consumer can be worth more than a dozen consumers straddling the poverty line.
Payday lenders, however, target their services at low-income individuals. They offer small-dollar loans and seem to profit the most when payment dates are missed and interest rates compound, something that is infinitely more probable with low-income consumers.
Low-income consumers are also more likely to need a small cash boost every now and then and less likely to have the collateral needed for a low-interest title loan. According to official statistics, during the heyday of payday loans, most lenders were divorced renters struggling to make ends meet.
Nearly a tenth of consumers earning less than $15.000 have used payday loans, compared to fewer than 1% for those earning more than $100,000. Close to 70% of all payday loans are used for recurring expenses, such as utility bills and other debts, while 16% are used for emergency purchases.
Pros and Cons of Taking Out a Payday Loan
Regardless of what the lender or the commercial tells you, all forms of credit carry risk, and payday loans are no exception. In fact, it is one of the riskiest forms of credit available, dragging you into a cycle of debt that you may struggle to escape from. Issues aside, however, there are some benefits to these loans, and we need to look at the cons as well as the pros.
Pros: You Donât Need Good Credit
Payday loans donât require impeccable credit scores and many lenders wonât even check an applicantâs credit report. They can afford to do this because they charge high interest and fees, and this allows them to offset many of the costs associated with the increased liability and risk.
If youâre struggling to cover your bills and have just been hit with an unexpected expense, this can be a godsendâitâs a last resort option that could buy you some time until payday.
Pros: Itâs Quick
Payday loans give you money when you need it, something that many other loans and credit offers simply canât provide. If you need money right now, a payday lender can help; whereas another lender may require a few days to transfer that money or provide you with a suitable line of credit.
Some lenders provide 24/7 access to money, with online applications offering instant decisions and promising a money transfer within 24 hours.
Pro: They Require Very Little
A payday loan lender has a very short list of criteria for its applicants to meet. A traditional lender may request your Social Security Number, proof of ID, and a credit check, but the average payday lender will ask for none of these things.
Generally, you will be asked to prove that you are in employment, have a bank account, and are at least 18 years oldâthatâs it. You may also be required to submit proof that you are a US citizen.
Cons: High Risk of Defaulting
A study by the Center for Responsible Lending found that nearly half of all payday loans go into default within just 2 years. Thatâs a staggering statistic when you consider that the average default rate for personal loans and credit cards is between 1% and 4%.
It proves the point that many payday lender critics have been making for years: Payday loans are predatory and high-risk. The average credit or loan account is only provided after the applicant has undergone a strict underwriting process. The lender takes its time to check that the applicant is suitable, looking at their credit history, credit score, and more, and only giving them the credit/loan when they are confident it will be repaid.
This may seem like an unnecessary and frustrating process, but as the above statistics prove, itâs not just for the benefit of the lender as it also protects the consumer from a disastrous default.
Con: High Fees
High interest rates arenât the only reason payday lenders are considered predatory. Like all lenders, they charge fees for late payments. But unlike other lenders, these fees are astronomical and if youâre late by several weeks or months, those fees can be worth more than the initial balance.
A few years ago, a survey on payday lending discovered that the average borrower had accumulated $458 worth of fees, even though the median loan was nearly half that amount.
Cons: There are Better Options
If you have a respectable credit history or any kind of collateral, there are better options available. A bank or credit union can provide you with small short-term loans you can repay over many months without accumulating astronomical sums of interest.Â
The interest rates are much lower, the fees are more manageable, and unless your credit score is really poor, you should be offered more favorable terms than what you can get from a payday lender.
Even a credit card can offer you better terms. Generally speaking, a credit card has some of the highest interest rates of any unsecured debt, but it canât compare to a payday loan. It also has very little impact on your credit score and many credit card providers offer 0% on purchases for the first-few months.
Whatâs more, if things go wrong with a credit card, you have more options than you have with a payday loan, including a balance transfer credit card or a debt settlement program.
Why Do Payday Loans Charge So Much Interest?
If we were to take a cynical view, we could say that payday loans charge a lot simply because the lender can get away with charging a lot. After all, a payday loan lender targets the lowest-income individuals, the ones who need money the most and find themselves in desperate situations.
However, this doesnât paint a complete picture. In actual fact, it all comes down to risk and reward. A lender increases its interest rate when an applicant is at a greater risk of default.Â
The reason you can get low rates when you have a great credit score and high rates when you donât, is because the former group is more likely to pay on time and in full, whereas the latter group is more likely to default.
Lending is all about balancing the probabilities, and because a short-term loan is at serious risk of defaulting, the costs are very high.
Payday Loans and Your Credit Score
Your credit will only be affected if the lender reports to the credit bureaus. This is something that many consumers overlook, incorrectly assuming that every payment will result in a positive report and every missed payment in a negative one.Â
If the lender doesnât report to the main credit bureaus, there will be no changes to your report and the account will not even show. This is how many payday lenders operate. They rarely run credit checks, so your report wonât be hit with an inquiry, and they tend not to report on-time payments.
However, itâs a different story if you miss those payments. A lender can report missed payments and defaults and may also sell your account to a debt collector, at which point your credit score will take a hit.Â
If youâre concerned about how an application will impact your credit score, speak with the lender or read the terms and conditions before applying. And remember to always meet your payments on time to avoid any negative marks on your credit report and, more importantly, to ensure youâre not hit with additional fees.
Payday Loans vs Personal Loans
A personal loan is generally a much better option than a payday loan. These loans are designed to help you cover emergency expenses, pay for home improvements, launch businesses, and, in the case of debt consolidation loans, to clear your debt.Â
The interest rates are around 6% to 10% for lenders with respectable credit scores, and while they often charge an origination fee and late fees, they are generally much cheaper options. You can repay the loan at a time that suits you and tailor the payments to fit your monthly expenses, ensuring that they donât leave you short at the end of the month.
You can get a personal loan from a bank or a credit union; whenever you need the money, just compare, apply, and then wait for it to hit your account. The money paid by these loans is generally much higher than that offered by payday loans and you can stretch it out over a few years if needed.
What is an Unsecured Loan?
Personal and payday loans are both classed as unsecured loans, as the lender doesnât secure them against money or assets. Secured loans are typically secured against your home (mortgage, home equity loan) or your car (auto loan, title loan). They can also be secured against a cash deposit, as is the case with secured credit cards.
Although this may seem like a negative, considering a lender can repossess your asset if you fail to meet the payment terms, it actually provides many positives. For instance, a secured loan gives the lender more recourse if anything goes wrong, which means the underwriters donât need to account for a lot of risk. As a result, the lender is more likely to offer you a low interest rate.Â
Where cash advance loans and other small loans are concerned, there is generally no option for securing the loan. The lender wonât be interested, and neither should youâwhatâs the point of securing a $30,000 car against a $1,000 loan!?
New Payday Loan Regulations
Payday lenders are subject to very strict rules and regulations and this industry has undergone some serious changes in recent years. In some states, limits are imposed to prevent high interest rates; in others, payday lenders are banned from operating altogether.Â
The golden age of payday lending has passed, thereâs no doubt about that. In fact, many lenders left the US markets and took their business to countries like the UK, only for the UK authorities to impose many of the same restrictions after a few years of pandemonium. In the US, the industry thrived during the end of the 2000s and the beginning of the 2010s, but it has since been losing ground and the practice is illegal or highly restricted in many states.
Are Payday Loans Still Legal?
Payday loans are legal in 27 states, but many states have imposed strict rules and regulations governing everything from loan amounts to fees. The states where payday lenders are not allowed to operate are:
- New Jersey
- New York
- North Carolina
- West Virginia
It is still possible to apply for personal loans and title loans in these states, but high-interest, cash advance loans are out of the question, for the time being at least.
Debt Rollover Rules for Payday Lenders
One of the things that regulations cover is something known as Debt Rollover, whereby a consumer rolls their debt over into the next billing period, accruing fees and continuing to pay interest. The more rollovers there are, the greater the risk and the higher the detriment to the borrower.
Debt rollovers are at fault for many of the issues concerning payday loans. They create a cycle of persistent debt, as the borrower is forced to acquire additional debt to repay the payday loan debt.Â
In the following states, payday loans are legal but restricted to between 0 and 1 rollovers:
- New Hampshire
- New Mexico
- North Dakota
- Rhode Island
- South Carolina
- Washington D.C.
Other states tend to limit debt rollovers to 2, but there are some notable exceptions. In South Dakota and Delaware, as many as 4 are allowed, while the state of Missouri allows for 6. However, the borrower must reduce the principal of the loan by at least 5% during each successive rollover.
Are These Changes for the Best?
If youâre a payday lender, the aforementioned rules and regulations are definitely not a good thing. Payday lenders rely on persistent debt. They make money from the poorest percentage of the population as they are the ones most likely to get trapped in that cycle.
For responsible borrowers, however, they turn something potentially disastrous into something that could serve a purpose. Payday loans still carry a huge risk, especially if there is any chance that you wonât repay the loan in time, but the limits imposed on interest rates and rollovers reduces the astronomical costs.
In that sense, they are definitely for the best, but there are still risks and potential pitfalls, so be sure to keep these in mind before you apply for any short-term loans.
What is a Payday Loan? is a post from Pocket Your Dollars.
Need a car loan soon? Whether you’re about to buy a car soon or just thinking about it, chances are you will likely finance it (unless, of course, you have the cash to buy it right away). So why not learn a few steps along the way to help you get a car loan. A little knowledge about the process can go a long way; so far as saving you thousands of dollars in the long run!
Ready to start comparing car loan already? Start now… it’s Free.
Step One: Review your credit file
You may need to get a free credit report and make sure you have a good credit score before applying for a car loan. The better your credit score, the higher your chance to get approved and save on interest.
Step Two: Compare interest rates
You should shop around, compare auto rates and fees before you apply for a car loan. The worst thing you can do to yourself is to apply for multiple loans at the same time, as this can affect your credit score.
So, look at multiple rates at one place so you can make the best decision. Also, remember you can choose a fixed rate or variable rate on a car loan.
Whichever you choose depends on what you’re comfortable with. Remember that a fixed rate will stay the same for all of the term of the loan. That means, your repayment will be predictable and you’ll be able to budget for a lot easier than with a variable rate.
Click here to compare car loan rates through LendingTree.
Step Three: Dealer Finance or Car loan?
You should always compare bank/independent loan to dealer finance.
Granted dealer financing may get you a auto loan with a very low rate, but that does not mean you get the best deal. Sometimes dealer financing can be more expensive in the long run. So you may want to compare rates from 2-3 lenders with a dealer finance rate to make sure you get the best rate possible.
Step Four: Get pre-approved
Before you commit to a car you should get pre-approved first. Plus, walking into the car dealership with a pre-approval letter in your hand, gives you greater negotiating power.
Step Five: Gather your documents and go car shopping
Once you decide on an auto loan that you’re happy with, it’s time to go car shopping! So gather your financial documents such as your pay stubs, bank statements, tax returns, and W2s.
Want to explore your car loan options? Visit LendingTree to compare the best car loan rates.
Related: How to save money for a car
Speak With The Right Financial Advisor
You can talk to aÂ financial advisorÂ who can review your finances and help you reach your goals. Find one who meets your needs withÂ SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals,Â get started now.
The post How To Get A Car Loan in 5 Easy Steps appeared first on GrowthRapidly.
Hi, Money Girl. I’m interested in refinancing and getting a lower interest rate on my mortgage; however, I may need to sell my home and relocate in a year or so. In that case, does a refinance still make sense? If so, what factors should I consider?
Jason, thanks for your question! It’s a perfect time for homeowners to consider refinancing because interest rates are at historic lows.
If you’re a homeowner, your mortgage payment is probably your largest monthly expense, so it’s wise to stay alert for opportunities to reduce it by refinancing. Plus, your financial circumstances and needs today may be very different than they were when you originally got your mortgage.
It’s a perfect time for homeowners to consider refinancing because interest rates are at historic lows.
I'll answer Jason’s question by reviewing what a mortgage refinance is, explaining common reasons to consider doing one, and covering five ways to know if it’s a good idea for your situation.
What is a mortgage refinance?
Refinancing is when you apply for a new loan to pay off an existing loan balance. The new loan could be with your same institution or with a different lender. The idea is to swap out a higher-interest loan for a lower-interest one, which decreases the amount of interest you have to pay and may also reduce your monthly payments.
When you take out a mortgage to buy a home, various factors determine the interest rate you get offered. While your credit, down payment, and income history are critical, lenders base mortgages on the prevailing interest rates.
An interest rate is simply the cost of money for borrowers. Rates in the U.S. fluctuate according to the monetary policy of the Federal Reserve or Fed, which is our central bank.
A good rule of thumb is to consider refinancing when the current rate dips at least one percentage point below what you’re paying for your mortgage.
When interest rates are low, it’s like money’s on sale, as strange as that sounds! Banks should display a big banner on their front door or website that reads “bargain basement prices on dollars” or “we sell money cheap” because that’s what happens when interest rates go down. Low rates are great for borrowers, but not so good for lenders.
The Freddie Mac website shows historical data for interest rates on 30-year mortgages since 1971. In August 2020, the average for a fixed-rate, 30-year mortgage was 2.94%. A year earlier, the same loan was 3.62%, and ten years before, it was 4.43%.
Since interest rates change periodically, the rate you’re currently paying on a mortgage may be significantly different than the going rate. A good rule of thumb is to consider refinancing when the current rate dips at least one percentage point below what you’re paying for your mortgage.
What’s the cost to refinance a mortgage?
You need at least one percentage point between the going rate and yours because there’s a cost to do a refinance. Closing a loan means you must pay fees to various companies, including your lender or mortgage broker, property appraiser, closing agent or attorney, and surveyor. Plus, there are fees required by the local government for recording the mortgage, and maybe more costs, depending on where you live.
The total upfront cost of a refinance depends on the lender and property location. It could be as high as 3% to 6% of your outstanding loan balance. The trick to knowing if it’s worth it is to figure out when you’d break even on those costs. In other words, when do you go from the red to black on the deal?
If you pay for a refinance but don’t keep your home long enough to recoup the cost, you’ll lose money. But if you do keep the property beyond the financial break-even point (BEP), you’ll feel like a genius because you saved money in the long run!
If you pay for a refinance but don’t keep your home long enough to recoup the cost, you’ll lose money.
You may be able to roll closing costs for a refinance into the new loan, which means you would have nothing or little to pay out-of-pocket. But adding them increases the amount you borrow and may also increase the interest rate you pay for the life of the loan. For that reason, it’s essential to ask the lender for a side-by-side comparison of all the terms for each loan option so you can carefully evaluate them.
So, how do you figure the BEP to know if doing a refinance is wise? Here’s a simple BEP formula: Refinance break-even point = Total closing costs / Monthly savings.
For instance, if your closing costs are $5,000 and you save $150 a month on your mortgage payment by refinancing, it would take 34 months or almost three years to recoup the cost. The calculation is $5,000 total costs / $150 savings per month = 33.3 months to break even.
For help crunching your numbers, check out the Refinance Breakeven Calculator at dinkytown.com.
Since how long you own your home after a refinance is critical for making it worthwhile, I’m glad that Jason brought it up in his question. For instance, if he finds out that he’d need to own his home for five years to break-even, but he only plans on staying in it for two years, that should be a deal-breaker.
How to get approved for a mortgage refinance
If you believe that doing a refinance could be wise, you’ll also need to consider if you qualify. Lenders have different underwriting requirements, but most require you to have a minimum amount of equity in your property.
Equity is the difference between your home’s market value today and what you owe on it. A critical ratio for refinancing is known as the loan-to-value or LTV.
For example, if your home value is $300,000 and you have a $150,000 mortgage outstanding, you have $150,000 in equity, an LTV ratio of 50%. But if you owed $250,000, that would be an LTV of 83%.
You typically need an LTV less than 80% to qualify for a mortgage refinance.
You typically need an LTV less than 80% to qualify for a mortgage refinance. So, Jason should do some quick math to make sure he doesn’t owe more for his home than this threshold based on the current market value. Lenders may still work with you if you have a high LTV and good credit, but they may charge a higher interest rate.
If you have an existing FHA or VA mortgage, you may qualify for a “streamlined” refinance program that requires less paperwork and less equity than a conventional refinance. Check out the FHA Refinance program and the VA Refinance program to learn more.
Reasons to consider refinancing your mortgage
There are a variety of reasons why it may make sense for you to refinance a mortgage. Here are some situations when doing a refinance may be a good solution.
- Rate-and-term refinance. This is when you get a new loan with a lower interest rate, a different term (length of the loan), or both. It’s probably the most common reason why homeowners refinance their mortgages.
Example: If you have a 30-year, fixed-rate mortgage at 5%, you could refinance with a 30-year mortgage at 3%. That would reduce your monthly payments and the amount of interest you pay over the life of the loan.
- Cash-out refinance. This is when you get a larger loan than your existing mortgage, so you walk away from the closing with cash.
Example: Let’s say your home’s market value is $200,000, and your mortgage balance is $100,000. If you need $25,000 to pay for college or renovate your home, you could do a cash-out refinance for $125,000. After paying off the original mortgage of $100,000, you’d have $25,000 left over to spend any way you like.
- Cash-in refinance. This is when you pay cash at the closing to pay off an existing mortgage balance. That could be necessary if you don’t have enough equity to qualify for a refinance, or you owe more than your home is worth.
Example: You might do a cash-in refinance if having a lower LTV qualifies you for a lower mortgage rate or allows you to get rid of private mortgage insurance (PMI) payments. Read or listen to How to Avoid PMI on Your Home Loan for more information.
You may also need to refinance a mortgage if you want to remove a co-borrower, such as an ex-spouse, from your loan. But if one spouse doesn’t have sufficient income and credit to qualify for a refinance on his or her own, your best option may be to sell the property instead of refinancing the mortgage.
5 ways to know if it’s the right time to refinance
Here are five ways to know if doing a rate-and-term refinance is a good idea.
1. You have an adjustable-rate mortgage (ARM)
Buying a home with an adjustable-rate mortgage comes with lots of advantages like a lower rate, a lower monthly payment, and being able to qualify for a larger loan compared to a fixed-rate mortgage. With an ARM, when interest rates go down, your monthly payments get smaller.
Instead of worrying about how high your adjustable-rate payment could go, you might refinance to a fixed-rate loan.
But when ARM rates go up, you can feel panicked as your mortgage payment increases month after month. There are caps on annual increases, but your rate could double within just a few years if rates have a significant spike.
Instead of worrying about how high your adjustable-rate payment could go, you might refinance to a fixed-rate loan. That move would lock in a reasonable rate that will never change and make it easier to manage money and stick to a spending plan.
2. You could get a lower interest rate
If you bought a home when mortgage rates were higher than they are now, you’re in a great position to consider refinancing. As I mentioned, you need to do your homework to understand the cost and BEP fully.
I recommend shopping for a refinance with the lender who holds your current mortgage, plus one or two different companies. Let your mortgage company know that you’re shopping for the best offer. They may be willing to waive specific fees if some of the necessary work, such as a title search, survey, or appraisal, is still current for your home.
3. You don’t plan on moving for several years
Once you know what a refinance will cost, make sure you’ll own your home long enough to pass the BEP, or you’ll end up losing money. For most homeowners, it typically takes owning your home for at least three years after a refinance to make it worthwhile.
4. You have enough home equity
As I mentioned, you typically need at least 20% equity to qualify for a refinance. If you have less, you may still find lenders that will work with you. However, unless your credit is excellent, you’ll typically pay a higher interest rate when you have low equity.
Also, if you don’t have 20% equity, lenders charge PMI. Adding that to your new loan could cut your savings and give you a much longer break-even point.
5. Your finances are in good shape.
The higher your income and credit, and the lower your debt, the better your refinancing terms will be. If you’re unemployed or your credit took a dive due to a hardship, wait until your overall financial situation has improved before making a mortgage application. Good credit can save thousands in mortgage interest.
Good credit can save thousands in mortgage interest.
If you investigate doing a refinance and decide that it’s not worth the cost, another strategy to save money is to ask your lender for a mortgage modification on your existing loan. You may be able to negotiate modified terms, such as a lower interest rate, without having to pay for a full-blown refinance.
If you’re unsure how much home equity you have or know that you have very little, don’t let that stop you from inquiring about your refinancing options and saving money. Getting advice and refinancing quotes from your lender is free and will help you understand your range of financial options.
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.
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.
Get Started Now
If youâd rather buy a car than lease one, weâve got some tips on how to finance a car. We can also help you find a lender to apply for a car loan.
The post What to Do Before You Lease a Car appeared first on Credit.com.