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Many experts consider January and February a good time to make a vehicle purchase because consumers have access to the newest models and prices tend to be lower than later in the year. There are other ways to save on this important purchase, such as improving your credit score for better interest rates, saving for a larger down payment, buying a less expensive car than planned, and getting fewer add-ons, features, or options on a vehicle. If you’re thinking about buying a new car, before you head out to a dealership, review these tips and resources to determine if this is the right time for you.
How much should I spend? Creating a budget is one of the best ways to show what funds are available and what is needed to make a car purchase. The cost of the vehicle is just one part; there are additional upfront costs to consider like taxes, title fees, and dealer fees. Then there are costs to protect your new purchase and keep it in working order, such as insurance, gas, tires, annual registration fees, maintenance, and even parking. It is a lot to consider, and seeing all of the costs together will give you a better picture of what is required.
A personal budget is a great tool to capture expenses and help determine how much to spend. Budget templates are available in a variety of formats for smartphones, tablets, and computers.
Credit scores and loan costs It’s a good idea to shop for loans to get the best interest rate and terms. Your credit score also helps determine what kind of auto loans and interest rates are available to you. A higher credit score typically gives you a better interest rate on your loan.
Be sure to review your credit report and dispute any errors that you may find to ensure your credit score is accurate.
Loan Preapproval Getting preapproved for a loan by multiple lenders allows them to compete for your business. This puts you in a stronger negotiating position with your lenders and can help lower your total loan cost. Be sure to compare the financing offered through the dealership with the rate and terms of any preapproval you received from other lenders, and then choose the option that best fits your budget. Regulation Z, which implements the Truth in Lending Act, requires banks to provide consumers with certain information about a loan before you decide to move forward with it. Banks should provide an itemization of the costs to be financed, annual percentage rate (APR), payment schedule, total number of payments, late payment information and fees, and security interest information.
Co-signers Consider whether or not you need a co-signer for your auto loan. A co-signer is a person, such as a parent, family member, or friend who is contractually obligated to pay back the loan if you can’t. If your credit history is limited, needs improvement, or you have a low credit score (or no credit score), a co-signer with good or excellent credit could significantly lower your interest rate. The lender relies on the co-signer’s credit history and score when deciding whether or not to make the loan. You and the potential co-signer should think carefully about this option. If you do not repay your loan, you and your co-signer will be responsible for repayment. The co-signer will be responsible for the loan even though he or she has no right to possession of the vehicle. In addition, any late payments made on the loan would affect both your credit history and scores and your co-signer’s credit history and scores.
Add-ons Some common add-ons are service contracts or warranties, Guaranteed Auto Protection (GAP) Insurance, and Credit Insurance. Often there are optional physical features for the vehicle, such as alarm systems, window tinting, tire and wheel protection, and other products offered by the auto dealer. It’s a good idea to think about optional add-ons ahead of time, so that you are prepared and know what you want on the day you finance your vehicle. If you buy them, it will increase the total cost of your loan. Shopping around for any add-ons that you decide you want can also save you money.
Buying a new car can be exciting, just make sure you are well informed on the costs and financing and have a plan in place before you start shopping.
CREDIT: FDIC Consumer News
The New Year holiday creates a feeling of starting fresh and encourages us to set new goals. While diets come to mind, setting new financial goals should be on the top of our lists. As you reflect on the past year, focus on your experiences – build on what worked and what didn’t – to shape this year’s money habits. Here are some ideas to consider as you set your financial goals for the New Year.
Think about what you want to save for the coming year and commit to opening a savings account to reach that goal, whether it’s creating an emergency fund or setting money aside for your kids’ future college tuition. There are many types of savings accounts available to save for both short term and long term goals.
Small Step: Decide on the type of savings account that will meet your goal and commit to depositing a set amount on a regular basis to get into the habit of saving. For example, if you open a basic savings account, deposit $25 every month and sign up for direct deposit or automatic withdrawals from your checking account to ensure that amount is saved. Once you’re comfortable with saving a small amount consistently, you can increase it.
Confronting your debt and thinking about how to pay it off can be scary and overwhelming. Use the New Year to face your fears. Make a list of your debts, noting the monthly payment, current balance, and interest rate, and make a plan to start paying down the debts. Many experts recommend focusing on either debts with the highest interest rates or debts with the lowest balances to pay off. While you will likely save more money paying off debts with the highest interest rates, it may be faster to pay off the smallest balances first, and seeing this progress may help keep you motivated.
Small Step: Whichever method you choose for paying down debt, start by adding a small amount to one of your current payments. For instance, if you are focusing on paying off a credit card with a minimum monthly payment of $100, add $25 to that amount to start (for a total monthly payment of $125). Once you are comfortable with that new amount, add more when you’re able and stay focused on the goal.
Keeping your finances organized will help you control your money and achieve your financial goals. Some basic tasks to help you get organized include making a budget, tracking your spending, and putting a system in place to ensure you pay your bills on time every month. Be sure to monitor your credit card and bank statements for any unexpected fees or unusual activity too. The sooner you find mistakes or unauthorized transactions, the easier it is to correct those issues.
Small Step: Like dealing with debt, organizing your finances can be daunting, so start small by picking one organizational task and focus on that task for one month before adding another. For example, you might start by making sure your bills are paid on time by setting up automatic bill pay from your bank account, giving yourself one month to learn about it, set it up, and get comfortable using it. Next month, focus on creating a budget, which gives you several weeks to learn about budgeting and working on it.
With so many financial transactions occurring electronically, it’s important to proactively protect your personal information, including your credit card and bank account numbers. Use the New Year to take charge of protecting your money. Never provide your personal information in response to an unsolicited request, whether it is over the phone or over the Internet. Always track your bank and credit card statements and your credit reports for unusual activity. Catching abnormal transactions early will allow you to take steps to prevent more harm if your information has been stolen.
Small Step: One important step to protect yourself from online scams and theft is to change your passwords regularly. If you have been using the same passwords for your financial accounts for a while, create new difficult-to-guess passwords and change them often to keep your money safe.
CREDIT: FDIC Consumer News
Over time, your valuables change, and so do your options to protect them. Here are a few choices.
Think about what should or should not be kept in a bank's safe deposit box. Good candidates include originals of key documents, such as birth certificates, property deeds, car titles and U.S. Savings Bonds that haven't been converted into electronic securities.
You're better off stashing your cash in a bank deposit account, like a savings account or certificate of deposit, than in a home safe or a safe deposit box. Cash that's not in a deposit account isn't protected by FDIC insurance. And unlike money in a savings account, money in a home safe or safe deposit box cannot earn interest.
A home safe isn't a true replacement for a bank's safe deposit box. A burglar could more easily break into your home and open the safe than get inside your safe deposit box at your bank.
No safe deposit box or home safe is completely protected from theft, fire, flood or other loss or damage. Consider taking precautions, such as protecting against water damage by placing items in water-safe plastic storage bags or other plastic containers that can be resealed.
Be mindful of whom you allow to access your safe deposit box. You can jointly rent a safe deposit box with one or more people whom you would like to give unrestricted access. Keep in mind, though, that your bank would likely not be responsible for anything that people you authorize to enter the box remove without your permission. And, who has access to your safe deposit box if you die? That depends on state law.
CREDIT: FDIC Consumer News
Thinking about going on a vacation, paying for a wedding, buying gifts for birthdays and holidays, or perhaps you have another short-term money goal? We often think of savings for long-term purposes like retirement or buying a house, but they are great for short-term objectives too. Money in an account that is low-risk (less likely to lose money), allows for easy access, and provides opportunity for growth, is a great alternative to a piggy bank. Let’s look at some options to help you better meet your goals and keep your money safe.
A traditional bank savings account is a great place to put money aside for special occasions, as they allow you to withdraw funds easily and earn some interest. These accounts do not come with checks and usually limit the number of withdrawals you can make, which helps you avoid the temptation to spend your savings before you’re ready. You can even set up automatic transfers from your checking account to keep your special savings separate. This separation really helps avoid spending your money frivolously.
Some banks offer “holiday club” accounts. These are similar to traditional savings accounts with a focus on meeting a specific savings amount in a certain timeframe. Holiday club accounts automatically withdraw funds from your checking account each month. The total amount saved is transferred back to your checking account when you have met your goal, so that the funds are available for you to spend as planned. These accounts are a convenient way to help you save regularly, but they may have lower interest rates compared to other savings accounts because they are very shortterm. There is also typically a penalty fee if you make an early withdrawal, so be sure to read all about the plan before you start.
Money Market Deposit Accounts (MMDAs) are an attractive option for saving. They offer higher interest rates than traditional checking accounts and more options for accessing your money than traditional savings accounts. You can withdraw money more freely (with a debit card or checks) than from holiday club accounts or CDs, but there are some restrictions on the number of withdrawals you can make on a monthly basis. MMDAs generally require a higher initial deposit and minimum balance than other savings accounts. It’s important to note that these deposit accounts are different from money market mutual funds. Money market mutual funds are securities that incur investment expenses, are subject to more risk, and are not insured by the FDIC.
Certificates of Deposit (CDs) are savings certificates where the money you put into them are invested by a bank for a set period of time – you can typically choose between one month and five years – and the bank gives you the money back with interest. The longer the term the more interest you earn. CDs have higher interest rates than traditional savings accounts, but you cannot withdraw the funds until the end of the specified term. If you need to withdraw the money before that time, you will have to pay a penalty fee. If your institution offers CDs with various maturities of less than one year, you may also consider timing the maturity dates of CDs purchased throughout the year to coincide with the date of an anticipated expense.
Before putting your money into one of these accounts, be sure to compare current interest rates offered, as rates vary by bank and change constantly. The Truth in Savings Act requires financial institutions to provide a common method of disclosing rates of interest earned, known as the Annual Percentage Yield (APY), to allow consumers to effectively compare accounts between banks. You can compare APYs of different products to determine which one offers the best outcome for you (but note that the APY does not compare early withdrawal penalties where those penalties apply). Also make sure that you understand all restrictions associated with the account.
In addition to saving money for shortterm goals, setting money aside on a regular basis into any type of account and watching the savings accumulate can give you a real sense of financial empowerment. No matter what amount or account type, the earlier you start saving the better.
CREDIT: FDIC Consumer News
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