Things to know when applying for a car loan

Getting a car loan is a major step when buying your used or new car. Most American buy their cars by using some debt tool either as a loan or as a lease. There are a few things you should know when applying for a car loan and that can help you can a better loan faster.

Here are a few considerations when applying for a car loan. The first thing to decide is if you are going to get the car loan through the dealer or independently from a bank or another lender. Getting a car loan through the dealer is the easiest and sometimes dealer through more goodies at you if taking the loan with them making it a better deal than going to an independent lender. However knowing what the market interest rates are can help you negotiate the dealer loan terms down. Even if you decide to get the loan from the dealer do some homework first and check what the market has to offer.

How fast will the loan be processed is another important factor. Dealers can process it on the spot since they have the incentive to sell the car. Other lenders might take anything from immediate processing to a few days. Part of the loan application process involves the lender running a credit check on you. Don’t apply to many lenders since for example having multiple credit checks at the same time can hurt your credit score. It is important to align the time when you estimate you will need the money for the car to the period it takes lenders to approve the loan. If for example you plan to go and buy a car in a week make sure you apply for lenders on time so that when you go and get the car you have an approved loan in your hand that you can either use for cash or use for negotiating the dealer down.

Something to know that makes a lot of sense is simply what is the lender threshold for approving a loan? After all if you know for example that your credit score is 600 and a specific lender has a strict policy of only approving loans for applicants with credit scores higher than 650 why apply at all? You will just waste time and energy and at the end of the process be denied. Make sure that you confirm to the lender known requirements before applying.

How much do you need to loan and how much can you afford? At the end of the day lenders want to make sure that you can pay back the car loan. Applying for more money that you need or can afford to pay back will just result in your car loan application denied. Budget your income and find out how much you can allocate for the monthly car loan payment. Be honest with yourself because lenders are thorough and if you apply for payments you can not afford they will most likely figure it out and deny your application. After figuring out the monthly allocation you can in turn calculate the total loan amount that such a payment can support.

Know the terms. There are professional terms that the lender is going to use. It is good to know those in advance. Search online or buy a book about car loans and leases. For example you should know what the following terms mean: interest rate, APR, money factor, prepayment penalty and so on.

Another important feature of car loans is a prepayment penalty. Some loans include provisions for prepayment penalties. In other words if you will end up paying off the loan before its predefined term ends you will have to pay a certain fine. In most cases such loans are cheaper but you should only get them if you are certain you will not end up paying them off early for example if you plan to receive some money and use it in the future to pay off the loan or if you plan to sell the car before the loan term ends.

By : blane.house1380
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What makes a good savings

Savings accounts are a good way to do what their name suggests, save money. Growing a habit of putting a set amount of money from every paycheck is a good way to save. Saving money a small amount at a time can add up. Here are some things you should know when opening your savings account.

The most important feature of a savings account is the interest rate the bank pays on your savings. After all the goal of a savings account is to save money and while your money is sitting in the bank account it should also grow through the accumulation of interest paid on it by the bank. If the bank would not pay any interest on that money you would actually be losing money due to inflation.

Another thing to consider is the minimum deposit needed to open a savings account. You should make sure that you do have enough money to top that amount. This is usually not a problem though since many banks let you open a savings account with just a dollar deposited while some other require larger sums but still manageable in the tens of dollars.

Having your savings account with the same bank where you keep your checking account and maybe other business is a good idea but it is not necessary. Although convenient if it results in getting a lower interest rate than it might not be worth it. If your bank where your checking account is managed offers a lower interest rate on savings account than you can find somewhere else try to negotiate with your bank to raise their interest rate. You will be surprised at home often that can work and if not just walk away and go to the highest one. Make sure though that the bank you are going to save your money at is FDIC insured otherwise you are risking your money and the extra interest rate you might get from a non FDIC bank might cost you much more if things go bad for that bank.

Having easy access to your savings account is important too. If depositing money is hard you might end up not doing so. Make sure that you can easily deposit funds. Most banks today provide online access and will let you deposit money online directly from your checking account sometimes linking to checking accounts at other banks. If not you should be able to write a check and mail it for deposit.

Set an achievable target. Try not to withdraw money from your savings account even though it is the easiest solution for a temporary cash need.

Some banks would provide you with a debit card linked to your savings account. It is better to refuse that card as it will just serve as temptation for using the money in your savings account instead of saving it.

Savings account are a great way to save small amounts of money. If you accumulate larger sums you should look at other savings instruments like certificate deposits (CDs), mutual funds and more. You can get higher interest rate with CDs for larger sums of money that you can put lock aside for a predetermined period of time and you can get even more if you are willing to take a risk and invest some of your money in mutual funds and stocks.

By : blane.house1380
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Basic things to know if incorporating your business

There are a few options when deciding to start a new company. Deciding on the right entity type to incorporate your business as is an important step and can have long term tax and liability consequences. If you are new to incorporation entities here are a few basic terms to know.

LLC is a simple entity very common with small businesses. An LLC can be owned by a single member or by multiple members. For tax purposes an LLC is a transparent entity. In other words the LLC does not change the way you are paying taxes. The LLC income is funneled and added to its members personal income. The reason to establish an LLC is liability. LLC does provide liability protection to its members but it is not as strong as the protection corporations provide and it depends on the type of business, number of members and the way the LLC is managed.

S-Corp is a simple version of a full blown C-Corp company. S-Corps are not separate entities for tax purposes. In other words the S-Corp income is also funneled and added to the owners personal income. This allows saving employment tax on that income but there is one caveat. You can not transfer all of the S-Corp income as personal income. You must first pay a reasonable wage to the S-Corp offices and workers and only the amounts on top of that reasonable income can be directly transferred as personal income. Those wages will be subject to employment tax, medicare, social security and so on. As such if the projected income from the business is low S-Corp does not provide a tax benefit.

C-Corp is a separate taxable entity. Any income is first taxed at the corporation level and only then can be disbursed to the shareholders and added to their personal income fr further taxation. This can be used to your advantage though in what is know tax splitting. For example if the C-Corp is paying a wage to the owners than that wage is a deductible expense and the C-Corp is not taxed for it. Slitting income means that some income is taxed personally and some is left in the company and paid by the company. In this method more dollars can benefit lower tax bracket. There is a limit though to how much money can be split this way as the IRS set a limit to the wage an owner can take from a C-Corp and still enjoy the full deductible expense. The biggest tax disadvantage of a C-Corp is that if you accumulate money in it and wants to distribute it as dividends that money will be taxed twice first at the C-Corp level and then at the personal level as dividend income.

Before choosing the right entity for your business sit down with your attorney and accountant and think it through. You will need to project things like how many owners will the business have, what is your relationships with them, what is the projected income in the next few years, what is the liability exposure of that type of business and so on.

By : blane.house1380
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Can you afford the loan you are applying for?

The latest credit crunch and mortgage crisis is the best proof for how wrong the assumption that if a lender approves a loan it means that the borrower can really afford the loan and pay it back in full including all interest and other payments. For many reasons bank and lenders approve borrowers that are not really loan worthy for the loan they are applying for. The reason vary from greed to simply making mistakes or using wrong judgments or tools. As much as lenders try they can not know the borrower as well as the borrower knows himself. Some loans are approved because of lack of such intimate knowledge and because further diligent by the lender is too expensive making taking the risk of lending the money more economical than actually applying more diligence.

Our first suggestion is to sit down and try to estimate if you can afford a loan that you are applying for before receiving the reply from the lenders or better before applying at all. There are two main reasons for that. First if your diligence proves that you can not afford the loan then applying for it is simply a waste of time not to mention the implications to your credit report as any application will involve credit report checks which having to many of can decrease your credit history score.

The second reason is more psychological. If you get approved by a lender and then sit down to check if you can afford the loan you might end up not being honest to yourself of cut corners since the approval might be a good enough justification for you to go ahead with the loan. This is not intentional but just the wait we tend to behave. To prevent that possibility it is best that you first make your decision as to the loan affordability before a third party lender pushes you to the wrong conclusion.

So how can you tell if a loan is affordable by you or not? To make a complete financial accurate assessment would take a long time. It is best to focus on some simple rules and considerations. For example estimate the monthly payment on the loan and compare it to the residual income that is available now. It is not enough for the payment to be less than the current residual income. You should try to write down a list of bad things that can happen and see if in those cases you have a way out from the loan or enough slack to continue making payments until the bad things are remedies.

For example you should have enough savings to pay for at least 6 months of payments in case you lost your job with the assumption that in 6 months you should be able to find a new job. You should make sure that after making payments you will still have some residual income to continue saving and for unexpected expenses. Another consideration is the total amount of the loan and the collateral that you take against it. Never risk your life savings or 401K or other pension tools to borrow money. Borrowing to buy a home or a car should use the home or the car as collateral. Taking a loan to buy luxury or leisure products should never be done against savings or other money that is for use in the future.

By : blane.house1380
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