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An extended car warranty: Is it worth it?

An extended car warranty may help cover the cost of certain repairs to your vehicle when the manufacturer’s warranty expires.

While it may sound like a good idea in theory, extended warranties often come with a high price tag and don’t necessarily cover everything that could go wrong.

Plus, many people who buy extended warranties never use them. In that case, an extended warranty becomes a cost with no financial return. According to a Consumer Reports survey, 55% of respondents who bought an extended warranty didn’t use it and only a quarter of survey participants said they’d buy one again.

And the cost for repairs among respondents who used their warranty was typically less than the cost of the warranty.

Instead of purchasing an extended warranty, it may make more sense to set aside the money you’d spend on it — and use the funds instead for repairs, if needed. But before you decide whether an extended warranty is right for you, there are some things you should know — like how an extended car warranty works, how much it costs, and the pros and cons of getting one. And while we’ll refer to this as an extended warranty as it’s a commonly used term, this is not a warranty as defined by federal law and doesn’t accompany the consumer protections that other warranties do.

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What is an extended car warranty?

An extended warranty — also known as a vehicle service contract — is an optional plan you can buy to help you pay for the cost of certain repairs your vehicle may need while you own it. It usually begins when the manufacturer’s warranty expires, but sometimes the two overlap.

But an extended warranty doesn’t cover everything.

“Most warranties you purchase do not cover the same amount of parts that the original factory warranty [covers], so you have to be careful as to … the level of coverage it provides,” says Steve Roberts, auto buying concierge at Ardent Credit Union.

Extended warranties usually don’t cover routine maintenance, either — things like oil changes, new tires, new brakes and more. Roadside assistance is typically a separate purchase as well.

To find out for sure what an extended warranty does and doesn’t cover, read the agreement’s fine print carefully.

How much do extended car warranties cost?

When you buy a car from a dealer, they’ll likely ask if you want to purchase an extended warranty to go with it. But much like the financing they offer, dealerships tend to mark up the cost of extended warranties to make a profit.

If you’re serious about purchasing one, consider negotiating with the dealer to get the price down or check out some independent providers.

Coverage options vary widely, and the cost you’ll pay varies based on what the plan covers and the make and model of your car. The upfront cost of the warranty can range from $1,000 to $3,000 or more. Plus, if you roll the cost of the warranty into your auto loan, you’ll pay interest — and potentially fees — on it.

You may also be required to pay a deductible. Deductibles are usually charged in one of two ways — per repair or per warranty service visit. It’s important to find out how deductibles work for your plan, because if a problem can’t be fixed in a single trip to the repair shop, you may end up paying multiple deductibles for one repair.

Extended car warranties: New and used cars

When you buy a new car, you probably won’t need to use an extended warranty right away because the manufacturer warranty — which is typically included in the price of the car — covers the cost of most repairs for the first few years you own the car.

However, if you buy a used car from the dealer, it may not be covered under the manufacturer’s warranty. To find out, look for the Buyer’s Guide on the car window. It should let you know whether the car is being sold with a warranty. If it is, you may need to pay a fee to have it transferred to you.

If you’re buying a car that’s no longer covered by the manufacturer warranty or you want additional coverage after it expires, you may buy an extended warranty for an extra fee.

Should I get an extended car warranty?

It may be tempting to purchase an extended warranty plan to protect against unexpected repair costs. But before you do, consider both the pros and the cons.

Pros of an extended warranty

The biggest benefit of an extended warranty is that it can save you money if your car needs a costly repair that’s covered under your contract. Instead of paying the entire bill out of pocket, you’d only be responsible for covering the deductible (if you have one) — and then the warranty provider would pay for the rest, so long as the issue is included in the service contract.

Having an extended warranty can also help provide peace of mind if worrying about how you’ll pay for a repair is something that will keep you up at night.

“[It’s] similar to your car insurance,” Roberts says. “We don’t like to pay for it, but we certainly appreciate it when we need it.”

Cons of an extended warranty

Before you decide if the cost is worth it, there are some disadvantages to consider, as well.


Bottom line

An extended warranty could add thousands of dollars to the purchase of a car. This may not seem like much if you’re financing it and rolling the cost of the warranty into your monthly payment. But it still can be a significant amount of money, even if you’re not paying it all up front.

If you’re buying a vehicle with a reliable track record, it might make sense to skip the warranty. Instead, consider setting aside the money you’d spend on it, and save for that rainy day when something could go wrong. If you don’t end up needing the money for repairs, you can keep saving it or use it for something else.

Ultimately, it’s up to you to decide whether the peace of mind an extended warranty can provide is worth the price tag. If you do decide to purchase an extended warranty, be sure to do your homework, watch out for auto warranty scams and work with a reputable company.

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Pool financing: 5 things to know before you take the plunge

If your dream of a backyard includes kids splashing around or long days floating on a raft and sipping margaritas, perhaps you’ve thought about building a swimming pool. But in-ground pools can cost tens of thousands of dollars — so how can you pay for it?

Plenty of options for pool financing are available. But swimming pool loans can be expensive, and they can sink you into long-term debt. Understanding all the ways you can pay for your pool can help you decide if you really want to borrow for the expense and what the best loan type might be for you.

Before you dive into a pool loan, here’s a look at types of pool financing and some important realities of pool ownership.

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1. You have multiple financing options

When it comes to paying for a pool, you have multiple financing options.

2. Pool financing can be expensive

Putting in a swimming pool is a huge expense, although the cost varies widely depending on the type of pool you install and other factors, like your location, pool size and the features you choose.

Typical price ranges for different types of swimming pools include the following:

Keep in mind that these are just average costs. If you’re looking for the type of pool that could be featured on HGTV, with waterfalls, grottos, slides, an attached spa or other special features, you could end up spending $100,000 or more on your dream oasis.

And no matter the cost of your pool, borrowing to finance it means you also have to pay interest costs on top of the purchase price. The interest rate will vary by lender and the type of pool financing you choose. Interest rates can range from as low as about 5% APR for some loans to up to around 36% or higher for others, depending on different factors, including the lender, length and type of loan, and your credit.

So say you borrow $40,000 for a pool and pay 10% interest on a 48-month loan. Your monthly payments would be around $1,015 per month and you’d pay $8,696.16 in interest. Your pool would end up costing you almost $49,000 thanks to the interest costs.

3. It may be difficult to qualify for pool financing

Even if you decide to pay the high interest costs associated with many swimming pool loans, there’s another possible obstacle to contend with: Qualifying for swimming pool financing.

Lenders will consider different factors, including your credit history, when deciding if you’re eligible for a loan.

While it may be possible to find some lenders willing to provide financing to homeowners with fair or even bad credit, these loans typically come at even higher interest rates. In this case, there’s a bigger consideration: If your credit needs work or you’re having financial difficulties, it might not be the right time to add the financial burden of buying, installing and owning a pool.

Working to improve your credit and your financial situation now might help you get a better pool-financing deal with a lower interest rate in the future.

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4. Don’t count on a big bump in home value

If you’re assuming your pool will significantly increase the value of your home — and therefore make up for the cost when you sell the house — you may need to think again.

Swimming pools typically provide only a nominal increase in the value of your home — if any at all. In fact, House Logic indicates a new pool will typically increase the value of your home by a maximum of 7%, and you’ll see this increase only in ideal circumstances.

What are these ideal circumstances? A pool could make the sale of your home easier and is most likely to boost the value of your house if …

Your pool should also be styled to fit your neighborhood, be relatively new, and in good condition if you hope to see the maximum return on investment for it.

Other factors can affect how much a pool could increase your home value, including the preferences of any buyers interested in your home.

5. A pool is expensive to maintain

When you’re figuring out the financing of your pool, don’t forget that costs don’t end once the pool builders leave your home.

Swimming pools require ongoing maintenance. That can mean big bills will keep coming for as long as you’re enjoying your backyard haven. Some of the expenses pool owners have to bear include …

All these expenses can add up. In fact, HomeAdvisor indicates basic upkeep for a pool runs around $1,200 to $1,800 annually, depending on location. And after factoring in potential repairs as well as higher utility costs, keeping your pool in ideal condition could run as much as $5,000 per year.

Depending on where you live, local code may also require the installation of a secure fence around your pool. This could add thousands of dollars to your initial installation costs.


Bottom line

Ultimately, it’s up to you to decide if installing a pool will be worth the investment. It’s important to weigh all the financial considerations, like the cost of pool financing and the expense of maintaining a pool, against possible benefits like home value, comfort and quality of life.

Pools are expensive. To lower the costs, consider saving up to pay for your pool in cash — or make a sizeable down payment to reduce the loan amount. This will eliminate or at least cut the amount of interest you’ll have to pay.

If you do decide to borrow, shop around and get prequalified by multiple lenders to identify the best possible loan offers for you. And as with any loan, don’t sign the loan paperwork until you know the total interest cost over the life of the loan, how much your monthly costs will be, and all the details of the loan term.

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Boat loans: How boat financing works

If you’ve fallen in love with a boat — or the idea of one — it pays to learn more about boat loans.

Similar to car loans, boat loans come with a fixed loan amount on which you pay interest over a certain time period. But compared with auto loans, financing a boat can be a much heftier investment. Boats can be more expensive than a car, which means loan amounts can be higher and terms can be much longer.

Just how much you pay to finance a boat depends on a number of factors, including the type of boat loan you choose, the loan terms, your down payment and your credit.

Let’s take a look at the different types of boat loans, how they work and what you should consider before applying for one.


Types of boat loans

Boat financing options include secured and unsecured loans. Each type of loan has benefits and drawbacks.

Secured loans

A secured loan is backed by collateral. If you default on the loan, the lender can take the collateral as a form of repayment.

A secured boat loan “is very similar to an auto loan,” says John Haymond, board president of the National Marine Lenders Association and director of business development and senior vice president of Medallion Bank, which offers various lenders boat financing for their customers.

In many states, if you stop making payments on your car loan, the lender can repossess it. Similarly, with a secured boat loan (which is a personal loan), the boat acts as the collateral, which means the lender may be able to take it back if you go into default.

Unsecured loans

An unsecured loan doesn’t use the boat — or anything other asset or property — as collateral. Since unsecured loans aren’t anchored to a specific asset, lenders view them as riskier and typically charge higher interest rates than with a secured loan. But you might have more options in how you use an unsecured boat loan compared with a secured boat loan where the funds go to paying for the boat.

For example, an unsecured loan could be used for an older boat for which “you wanted to do a lot of upgrades,” says David Mann, membership programs manager for the Boat Owners Association of The United States, better known as BoatUS.

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Second mortgage

“Some boat owners opt for a second type of secured loan: a second mortgage,” says Scott Croft, director of public relations for BoatUS.

A home equity loan, which is a type of second mortgage, uses your home as collateral for the boat loan. Interest rates for secured loans tend to be lower than those for unsecured loans That said, home equity loans can be particularly risky because the stakes are so high: If you default on the loan, the lender may be able to take your home.

How boat loans work

If you’ve had a car loan before, you already have a basic understanding of how a boat loan works. You can apply for a loan amount — minus any down payment — and a repayment term. If approved, the lender may offer a higher or lower interest rate based on your creditworthiness.

Several lenders to choose from

You have a range of lender options. Some banks, credit unions and boat dealers offer boat loans. Additionally, marine finance companies specialize in these types of loans.

Boat loan terms

You can generally get up to a 20-year loan term for a secured boat loan, depending on the loan amount and lender. Unsecured boat loans — which are personal loans — tend to come with shorter terms (typically no more than five to seven years). The longer your loan term, the more you’ll pay in total interest on the loan.

Down payment

Boat loan lenders often want to see a down payment, generally between 10% and 20%, depending on factors including the lender and the cost of the boat. But some lenders offer 0%-down loans. While it may seem attractive to not make a down payment, this can actually increase the total cost of the loan once interest is taken into account.

“As with a car, a down payment is a hedge against depreciation,” says Bob Stroup, director of consumer loan products strategy for BECU (formerly Boeing Employees Credit Union). He recommends putting at least 20% down.

“If you’re buying something like a boat — a luxury item — you should be putting some money into it. There is some depreciation, so you should be prepared for that,” Stroup says.

Interest rate

Interest rates on boat loans may be fixed or variable and can vary widely based on the lender and your credit profile. As of April 2019, some lenders offer APRs starting between 4% and 6% on secured boat loans. But factors such as your credit history, loan term and loan amount will affect your rate.

What to consider before getting a boat loan

Before you begin making plans to set sail, there are a few things to consider.

Your credit

Some lenders will offer a boat loan to borrowers with subprime credit, but they may still also require a down payment and low debt-to-income ratio. Keep in mind that lower credit scores also typically result in a higher loan interest rate.

The true cost of owning a boat

When determining your boat budget, don’t forget to factor in the costs beyond your boat loan payment. These ongoing expenses might include slip fees, winterizing, towing, land storage, fuel, boat insurance, repairs, maintenance, registration and taxes.

You may need to get a marine survey

When you apply for a secured boat loan, the boat’s value will be a factor in how much you can borrow. “If you’re financing a used boat, the lender will usually require a marine survey,” Stroup says.

During a marine survey, an inspector will examine the vessel, engine and trailer, detail the boat’s condition, note any repairs needed and determine whether it’s safe to take on the water.


Bottom line

Experienced boaters do everything possible to be prepared on the water — so it’s good to take the same approach with a boat loan. Shop around and compare offers from multiple lenders to find one that fits your financial needs.

If you’re not able to find a boat loan after getting a few estimates and comparing your options, consider taking some time to build your credit, pay down your debt and save for a down payment. And remember to consider ownership costs in your overall boat budget to help avoid choppy financial waters in the future.

A car trade-in with negative equity: Your options

When you consider that a new car can lose 20% or more of its value within the first year, it’s easy to see how you could wind up owing more on your auto loan than your car is worth.

If the amount you owe exceeds the value of your vehicle, you have what’s known as negative equity. This is also referred to as being upside down on your car loan.

When trading in a car that has negative equity, you have several options — but they can be costly, and some require a big chunk of money out of your pocket.

Let’s take a look at how you can figure out how much negative equity you might have, along with your potential trade-in options.

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How to calculate negative equity

If you’re pretty sure you’re upside down on your car loan and you’re thinking about trading in your vehicle, it’s important to figure out an estimate of how much negative equity you have. You’ll need to know some key pieces of information:

Third-party automotive websites, such as Kelley Blue Book and Edmunds, offer tools to help estimate your car’s trade-in value. You’ll just need to input details including the year, make and model of your car, and the number of miles on its odometer.

Contacting your lender is an easy way to find out how much money you owe on your car loan. You can usually find out by phone or by logging into your account on your lender’s website to view the payoff amount. Your loan payoff amount can be different from your current loan balance because it includes any interest you owe through the day you pay off the loan, in addition to any unpaid fees.

If the amount owed on your car loan is higher than your vehicle’s estimated value, the difference between the two is negative equity. For example, if you owe $9,000 on your car loan and your vehicle has an estimated value of $6,000, you currently have $3,000 of negative equity.

How to get out of your car loan when you’re upside down

Car trade-in option  No. 1: Delay the trade-in

When trading in a car that has negative equity, you have two main options: Delay your trade-in until you’re not upside down on your loan or move forward with the trade-in and pay off the negative equity.

Delaying your trade-in is generally the better option financially. But this works only if you can wait on getting a new car. You could either hold off your trade-in until you’ve saved up enough to pay off your loan, or — in the shorter term — you could pay extra on the loan until you’re no longer upside down.

Making additional, principal-only loan payments or paying more than your monthly minimum could help you pay down your loan faster and reduce your negative equity. But before you do this, make sure the terms of your loan don’t include a prepayment penalty. This is a fee some lenders charge borrowers who pay their loans off earlier than expected.

Car trade-in option No. 2: Pay off the negative equity

If you need a new car sooner rather than later, you’ll have to pay off the negative equity one way or another. There are a couple of ways to do this.

Pay the difference between the trade-in value and your loan balance

To get rid of your auto loan’s negative equity, you could pay it off all at once, out of your own pocket. For example, if you owe $12,000 on your vehicle and the dealer offers $10,000 for the trade-in, you would make up the $2,000 difference to your lender. Again, be sure there is not a prepayment penalty included in the terms of your loan.

Roll the negative equity into your new car loan

If you don’t have enough cash in the bank to pay off your negative equity, a car dealer will sometimes allow you to roll your negative equity into your new car loan. Let’s say you owe $15,000 on your car loan, but your dealer is offering only $13,000 for your trade-in. The $2,000 difference would be rolled into your new car loan. This can be convenient, because it doesn’t require you to pay off your negative equity out of pocket.

But going this route usually means borrowing more on your next loan than your new car is worth — putting you at greater risk of becoming upside down on that loan. A bigger loan amount also means you could pay more in interest. Be sure to confirm that you are not required to make payments on both loans, and that you are clear on all the terms of the new loan.

Another heads-up: According to the Federal Trade Commission, some dealers may promise to pay off your existing car loan as part of a trade-in, but will actually just roll your balance into your new car loan or deduct it from your down payment. Doing either can increase your loan costs. Be sure to review your sales contract carefully before signing.

If a rollover is your only option, consider getting a used car that’s a year or two old rather than the new version. A used car will have a lower value, due to depreciation, which means you likely won’t need to borrow as much.

Trade-in alternative: Sell your car privately

Keep in mind that trading in your car at the dealership isn’t your only option. You could also be able to sell your car to a private buyer. Check first with your lender to ensure this is an option based on the terms of your loan and what, if any, additional steps would need to be taken to make the sale.

This option comes with one big advantage: You’ll likely get more money if you sell privately versus trading in your car at the dealership. Dealers generally offer no more than wholesale value on a trade-in. With a private-party buyer, you can usually sell the car at a higher price, which could help offset your negative equity.

The drawback to selling to a private party is that it can require more legwork and time than a dealership trade-in. Often this involves gathering documents such as your title and maintenance records, posting ads for the car, vetting potential buyers and giving test drives.


Bottom line

If you’re upside down on your car loan, it’s a good idea to delay your trade-in if you can — unless you are comfortable paying off your negative equity upfront.

But if you need a new car soon and a negative equity rollover is your only option, consider buying a used car and borrowing as little as possible.

And make sure to double-check that the loan term and monthly payment amount can fit within your budget. As the loan term lengthens, the risk of negative equity becomes greater because the car will continue to depreciate. You could also end up paying more in interest over the length of the loan.

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Cars getting pricier, auto sales slowing. What this means for you.

Vehicle prices are revving up. At $36,733, the average price of a new vehicle was 2.3% higher in March 2019 compared with the same time last year, according to data from Kelley Blue Book.

Although March’s average vehicle price was $174 less when compared to February, the overall upward trend of auto prices could put a brake on sales. According to J.D. Power, overall sales of new vehicles fell 1.7% in the first quarter.

Despite some weakness in the auto industry, first-quarter reports from some banks show healthy auto loan business — suggesting there’s still demand for cars and that people may be borrowing more to get them.

If you’re thinking about getting a loan for a new car, it’s important to understand all of your options so you don’t end up taking on more debt than you can manage.

Want to know more?

How is the vehicle market changing, and how could it impact you?

Average monthly auto loan payments were up about $30 in March compared with the same period a year ago, according to Kelley Blue Book data. This increase may seem slight, but it could be contributing to the first quarter’s slower sales pace, according to Kelley Blue Book analyst Tim Fleming in a press release.

What’s more, higher car prices could be translating to bigger auto loan business for banks. Wells Fargo recently reported that its auto loan originations rose 24% in the first quarter compared with the same period a year ago.

As the average price for a new car has risen, many consumers’ ability to keep up with their auto loan payments has been tested. Recent New York Federal Reserve data on household debt showed that in the fourth quarter 2018 auto loan debt climbed to $1.27 trillion, about a 4% increase compared with the fourth quarter of 2017. The rate of borrowers falling at least 90 days behind on their monthly auto payments rose to 2.4% in the last quarter of 2018.

To help avoid financial trouble with your auto loan, do your research on auto loans before you borrow and understand the important steps to follow before you take on a new loan, like setting a budget and shopping for a loan that works for your situation.

What happens next?

2019 is shaping up to be a pricier year for people in the market for new vehicles. However, with the Federal Reserve signaling that it’ll keep interest rates steady for the rest of the year, interest payments on auto loans may remain relatively flat.

At the same time, if vehicle sales continue to be sluggish through the second quarter, dealers could be more aggressive about offering discounts to buyers.

What is inheritance tax and who pays it?

Inheriting money or property can be a boon to your finances, and since just a handful of states tax inheritances, chances are good it will be a tax-free windfall, too.

That’s because the federal government generally doesn’t consider inheritances to be taxable, and only levels an estate tax on large estates of more than $11.4 million. Just 12 states and the District of Columbia have estate taxes. But what about state-level inheritance taxes?

“Only six states currently assess the tax, and it’s different depending on where you live,” says Anthony S. Park, an executor and estate attorney at Anthony S. Park PLLC in New York. “If you happen to inherit money in Iowa, Kentucky, Maryland, Nebraska, New Jersey or Pennsylvania, you should consult a tax attorney about your potential inheritance-tax liability.”


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How do inheritance taxes work?

Inheritance taxes are the responsibility of beneficiaries who receive property after an individual’s death. Depending on the state, these taxes can be charged on property transferred via a will, a trust or a deed. They can also be charged on property that transfers via intestate laws of succession, which determine who inherits if the deceased hasn’t provided instructions.

“The major difference between inheritance and estate tax is who pays the tax,” Park says. “Estate taxes are paid out of the estate, off the top, before any money is distributed to heirs. Inheritance tax is paid by the beneficiary once the money has been received.”

Each state sets its own rules for how inheritance taxes work. Additionally, some counties may have their own inheritance tax. The tax is generally a percentage of the value of all the property inherited, including money, real estate and personal property. The specific percentage may depend upon the relationship of the heir to the deceased person.

The IRS generally doesn’t consider inheritances to be taxable income, so you likely won’t have to pay federal income tax on any inheritance you receive. But if you inherit property that generates income (a rental property, for example), you’ll likely have to pay tax on that income.

Who has to pay inheritance tax?

You may have to pay inheritance tax if you live in one of the six states that levies it. Here’s an overview of the rules for inheritance tax laws in each of these states. It’s important to note that rules can vary depending on the year in which a person dies.

Iowa

Kentucky

Maryland

Nebraska

New Jersey

Pennsylvania

If you don’t live in one of these states, chances are you won’t have to pay an inheritance tax — but the value of your inheritance may still be reduced if the estate of your deceased relative is required to pay federal estate tax, state estate tax or both.

Mitigating inheritance taxes

Inheritance taxes can sometimes be minimized through estate-planning techniques. For example, the federal tax code allows individuals to gift up to $15,000 per recipient without triggering federal gift taxes.

The more property you transfer during your lifetime, the less that’s transferred after death, when the property could be subject to estate and inheritance taxes.

An estate-planning attorney may be able to help families lawfully reduce taxes owed after a death.


Bottom line

Most Americans won’t be affected by estate or inheritance taxes.

Only Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania have an inheritance tax, and there is no federal-level inheritance tax. Just 12 states and the District of Columbia currently have state-level estate taxes, and the federal estate tax only applies to estates of more than $11.4 million.

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Citibank personal loan review: Competitive interest rates and a low minimum amount

Pros Cons
Competitive interest rates Must have an eligible Citibank account
Loan amounts as low as $2,000, up to $50,000 Funding can take up to five business days
Ability to earn Citi ThankYou® Rewards points No ability to prequalify

What you need to know about a Citibank personal loan

Citibank offers unsecured personal loans in amounts as low as $2,000 with competitive fixed interest rates. To qualify, you’ll need to have an eligible Citibank account with adequate balances averaged over the past three months and you’ll generally need excellent or good credit to qualify for the most competitive rates.

Competitive rates

To qualify for Citibank’s lowest interest rates, you’ll need the following:

Citibank also offers a rate discount for Citigold or Citi Priority customers.

Wide range of loan amounts

Citibank offers personal loans from $2,000 to $50,000. And at $2,000, their minimum loan amount is low compared to many lenders — particularly other banks, which can have minimums of $3,000 to $5,000.

Earn rewards points

Link your Citibank personal loan to an eligible Citibank checking account and you may earn Citi ThankYou Rewards points every month. Points can be redeemed for retailer gift cards, travel rewards, cash rewards and other goodies. Just be sure to read the program rules to see if you’d qualify for this program.

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Personal loan details

Citibank is a global bank with almost 700 branches across the U.S. Here are a few other things to know.

Who a Citibank personal loan is good for

A Citibank personal loan could be a good option for someone with a Citibank account and strong credit. Those who qualify for the bank’s competitive interest rates might find a Citibank personal loan comes in handy to consolidate existing high-interest debts.

It could also be an ideal choice if you want a smaller loan to cover an emergency expense or minor home improvement, or if you want a shorter loan term of 12 months.

How to apply with Citibank

You can apply for a Citibank personal loan online, over the phone or at a branch office. To apply online, you’ll need to have an eligible CitiBank account — and your requested loan amount can’t be more than $30,000. If you want to borrow more than $30,000 — or would simply rather speak with someone — you can apply over the phone.

When you apply for a personal loan, you usually need to provide your …

If this personal loan isn’t right for you, consider these options

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What is the ‘death tax’?

When you’ve been paying taxes all your adult life, the idea that Uncle Sam could want a bit more after you die may be frustrating.

The truth is that most people will never have to worry about the federal estate tax — often called the “death tax.” In fact, less than 0.1% of all the people who passed away in 2018 (more than 2.8 million died in 2017, the CDC reports) are likely to be subject to the estate tax, according to a Tax Policy Center analysis of IRS data.

But whether you wind up on the receiving or giving end of a big estate, or just want to set your mind at ease regarding a smaller inheritance, understanding how the estate tax works can help.

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What is the death tax?

The death tax is an informal name for the federal estate tax. The term is also sometimes used to describe inheritance or estate taxes levied by a state. The IRS says that the federal estate tax is a tax on your right to transfer property (like bank accounts, real estate or other types of assets) when you die.

“It’s the last toll on your exit from this life that the government imposes upon you,” says Mark Misselbeck, a CPA and tax principal at Massachusetts-based Katz Nannis and Solomon.

The estate tax is also closely tied to the federal gift tax, which considers any taxable gifts you make (beginning in 1977).

Most Americans probably don’t need to worry about either the federal estate or gift taxes. That’s because federal tax law allows estates to exclude a certain amount in a tax year up to a certain threshold ($11.4 million for 2019) from being subject to the estate tax.

And if the heir is a spouse, the estate they’re inheriting may not be subject to the estate tax at all. The 100% marital deduction generally allows surviving spouses to inherit without paying estate tax, no matter the size of the estate.

Learn about tax deductions for married couples filing jointly

Who pays the death tax?

It’s important to understand that death taxes are paid by estates, and not by the heirs inheriting assets from the estate, because the IRS doesn’t consider inheritances to be taxable income in most cases.

But income that the deceased person (referred to as the “decedent”) had the right to receive, but which was instead received by their heir,  could be subject to estate taxes and income tax for the heir. The heir might be able to claim a deduction on their own tax return for the estate tax paid on that postmortem income — however, to do that, they’d have to take the deduction in the same year they received that portion of the inheritance.

If you inherit property that later makes you money, the income you receive from that property is taxable. For example, if you inherit a rental property that later generates rental income or stocks that pay dividends, you may face a tax bill for that income.

Remember, though, that estate tax typically only applies if a person dies and their combined assets and lifetime taxable gifts are more than the threshold amount. That would require their estate to file an estate tax return and be liable for any tax obligations over that threshold.

The federal tax reform law that passed in December 2017 doubled the estate tax exemption amount from $5 million to $10 million (indexed for inflation to $11.4 million for 2019). But the increase made by the Tax Cuts and Jobs Act is temporary, applying only to tax years between Dec. 31, 2017, and Jan. 1, 2026. That means the threshold amount is set to change at the end of 2025, unless Congress acts to extend the increase or change it in some other way.

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How much is the estate tax?

How much tax an estate must pay depends on several factors.

Generally, the IRS calculates the value of transferred assets, including real estate, based on the current fair market value of those assets. That may not necessarily be the same amount as the deceased person paid for the assets or their value when the deceased first acquired them.

The estate may be able to make some adjustments as well, including deductions for mortgages owed on real estate included in the estate, debt, estate administrative expenses, losses during the estate administration and more.

After you calculate the taxable portion of the estate, the applicable tax rates, ranging from 18% to 40%, are applied to the estate tax bracket the amount falls into. For example, if the taxable portion of the estate is $20,000, then you would be taxed at 18% for the first $10,000 and then 20% on the next $10,000, adding up to $3,800 in tax total.

What about the gift tax?

In addition to calculating the value of your assets when you pass away, the estate tax also considers the value of your lifetime taxable gifts.  If you give someone property (including money), or allow someone to use income from your property, without expecting something of at least equal value in return, the IRS considers that a gift.

The gift tax also has an exemption or threshold amount, but it’s on an annual basis. In 2018 and 2019, for example, you can gift up to $15,000 per recipient without the amount being taxable. Other gifts are considered nontaxable and can be excluded, including the following:

Any gifts beyond these exclusions count toward your lifetime taxable gifts.

Federal estate tax vs. state inheritance and estate taxes

On top of the federal estate tax, estates may also be subject to tax by the deceased person’s home state. Currently, 12 states and the District of Columbia have their own state estate tax in addition to the federal tax. But states assess estate tax in different ways.

For example, Oregon bases its estate tax on the federal taxable estate amounts and adjustments. And in addition to applying to individuals’ estates, Minnesota’s estate tax applies to estates of owners of certain types of small businesses who don’t live in the state but own real property (land) or personal property there.

The estate tax exclusion amount for each state may be lower than the federal government’s threshold. This means an estate could end up owing state-level estate tax but not federal estate tax.

And there’s inheritance tax, which is different from estate tax.

While an estate typically would be responsible for paying any estate tax that’s due, heirs are generally responsible for paying any state-level inheritance tax that may be owed. Some states, however, may exclude heirs like spouses, children or grandchildren from paying inheritance tax.

The federal government doesn’t have an inheritance tax, but six states currently do. Iowa, Kentucky, New Jersey and Pennsylvania have state-level inheritance taxes, Nebraska has county-level inheritance taxes, and Maryland has both its own estate tax and an inheritance tax.


Bottom line

If the idea of Uncle Sam or a state government taxing you or your loved ones just one last time rankles, don’t fret. Most inheritances are well below the threshold amount at which estate taxes begin to apply.

In fact, most inheritances are small, with about half of them coming in at less than $50,000, according to the Federal Reserve. That means most inheritances aren’t subject to federal (or state) estate tax.

But if you or a loved one has done well enough financially for estate or inheritance taxes to be a consideration, it may make sense to work with a tax professional who can help you understand the complicated process of preparing and filing the necessary tax returns.

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JOMO: The anti-social trend that could save you thousands

Last year Credit Karma revealed that fear of missing out was driving many young adults into debt. The antidote may be JOMO — a new trend on the rise.

A Credit Karma/Qualtrics survey of Americans ages 18 to 34 shows that 81% say they’ve experienced JOMO, or the joy of missing out, by opting to stay in instead of going out.

One of the biggest benefits of JOMO? Saving money, according to our survey. In fact, 84% of respondents who have experienced JOMO report spending less when they opt to stay in. Our findings indicate they could save an estimated $1,300 a year by staying in once a week. And staying in at least three times a week could amount to more than $4,000 a year in savings. (Learn about our methodology.)

What’s more, we found that JOMO could be key to helping young adults feel less stressed and more in control of their lives. Of respondents who’ve saved money from JOMO, 30% reported feeling less stressed, 23% said they felt more financially stable and 20% felt more in control.

With JOMO benefits stretching from the financial to the mental, it’s no surprise that many young people are ditching their fears of missing out and embracing the joys of a night in.

Key survey findings

Among young adults who have JOMOed, 84% say they save money when they opt to stay in versus going out.
With most respondents (58%) who have skipped plans to stay in saving more than $25 each time they JOMO, young adults could save an estimated $1,300 a year by JOMOing just once a week and more than $4,000 a year by JOMOing three or more times a week.
Saving money from JOMO makes young adults feel good — 30% of respondents who saved money from JOMO reported feeling less stressed, while 23% felt more financially stable and 20% felt more in control.
JOMO’s benefits aren’t just financial 71% of respondents said JOMO gives them “me” time, 47% say it lets them focus on their mental health, and 41% say it lets them spend time on hobbies.

How much is JOMO saving young adults?

Our survey suggests that JOMO is key for young adults trying to budget. A large majority of respondents (84%) who have JOMOed said staying in saves them money, and 67% cited “saving money” as a primary benefit of JOMO.

We’re not talking small change, either. Here’s how much young adults report saving each time they opt to stay in versus going out.

How much do you save each time you JOMO? % of respondents who JOMO
$10 or less 13%
$11–$25 28%
$26–$50 35%
$51–$100 16%
More than $100 7%


With a majority of JOMOers (58%) saving more than $25 every time they opt to stay in, and a majority of respondents (54%) opting to stay in at least once a week, young adults may be able to save
an estimated $1300 a year thanks to JOMO.

Meanwhile, more than a quarter (28%) of respondents said they stay in multiple (three or more) times a week, setting them up to save an estimated $4,000 a year.

Why is JOMO replacing FOMO?

With a new wave of hustle culture permeating the millennial workforce and debt-inducing FOMO driving their social scene, JOMO looks to be a trend among young adults who want a break from being “always on.” In other words, it’s possible that many young adults are simply too burned out to go out.

In fact, survey respondents said they’re willing to give up a number of activities — including drinks with friends (52%), a night out dancing (48%), shopping (42%), and sporting events (40%) — to reap the benefits of JOMO.

Perhaps the reason JOMOers are so willing to give up an array of social activities is that JOMO’s benefits go way beyond the financial. According to young adults from our survey, some of the biggest pluses of staying in relate to mental health and personal care.

What are the primary benefits of JOMO? % of respondents
Having alone time 71%
Saving money 67%
Getting to prioritize my mental health 47%
Pursuing my interests and hobbies 41%
Getting to prioritize my physical health 21%


And many say the best part of missing out is the break you get from things like late nights and bad conversation.

Among respondents who have JOMOed, 30% say getting a full night’s sleep is the best part of missing out, while 14% say it’s avoiding small talk. Other things JOMOers love to “miss” include having to dress up (14%), hangovers (8%) and “regrets” (13%).

JOMO spending is a thing, but it’s still better than FOMO spending

Our survey shows that when young JOMOers spend when they stay in, they spend on things like food delivery (59%), movies (53%) and alcohol (36%). But 72% of those respondents reported spending just $25 or less on JOMO-related activities.   

Compare that to the $26 to $100-plus that the great majority (76%) of JOMOers typically spend on a night out.

So, net-net, a little treat-yourself JOMO spending is likely the better option for your wallet and no cause for guilt — as long as you keep it in check.


Tips for balancing FOMO and JOMO

Sometimes people catch flak from those closest to them when opting to stay in.

Our survey found that more than a quarter (26%) of JOMOers said staying in resulted in disapproval from friends and family. That might hurt — but it doesn’t appear to be a deterrent, based on the overwhelming number of young adults who are taking part in the JOMO revolution.

Ultimately, the key to mental, social and financial health may come down to balancing FOMO and JOMO.


Methodology

On behalf of Credit Karma, Qualtrics conducted a nationally representative online survey in January 2019 of 1,045 Americans ages 18 to 34 to learn about their spending habits related to JOMO, or the “joy of missing out”. All percentages have been rounded to the nearest whole.

Can I get a hardship loan for money troubles?

Sudden expenses can create severe financial hardship. In fact, four in 10 adults don’t have enough saved to cover a $400 emergency expense, according to a 2018 Federal Reserve report.

Instead, they’d have to borrow from friends, sell something, use credit or resort to a hardship loan to cover the expense. Would you be in the same boat?

When you need to borrow money under pressure, financial products that market themselves as “hardship loans” may seem like a solution. But while these options may solve a short-term financial emergency, they can hurt your finances in the long run.

Before taking on a hardship loan, it’s important to understand what you’re really getting into and learn about less-costly options that might be available.

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What is a hardship loan?

You can definitely find lenders that market products they call “hardship loans.” But when you take a closer look, you can often find clues as to what kind of loans they really are: high-interest and high-risk.

Watch out for these warning signs.

If you’re looking for a low-interest loan with a fast payout and easy repayment terms to help you weather a financial hardship, you may have trouble finding anything that really fits that description. Many “hardship loans” come with high interest rates and short repayment terms. Either could mean you’ll have trouble repaying the loan — potentially making your financial hardship even worse.

Hardship withdrawals vs. 401(k) loans

Hardship withdrawals from a 401(k) may be the closest option to an actual hardship loan. But you’ll need to have a 401(k) and meet strict criteria to make a hardship withdrawal.

Hardship withdrawals

Hardship withdrawals may be available depending on your 401(k) plan. The law doesn’t require 401(k) plans to provide hardship withdrawals. But if they do, the reasons for the withdrawals must meet IRS criteria for a hardship.

Here are some emergency expenses that may qualify for a hardship withdrawal.

There are limitations though. IRS rules state you can withdraw only the amount necessary to cover your emergency expense, and that you can only take the withdrawal after you’ve exhausted other available distributions. Plus, you won’t be able to defer money from your paycheck into your 401(k) for at least six months after taking the distribution.

You’ll also have to pay income tax on the withdrawal and possibly a 10% penalty if you’re younger than 59½. And you can’t avoid the tax consequences by repaying the money you took out or by rolling the money into another plan or IRA.

401(k) loans

Provided your 401(k) plan allows loans, borrowing from your 401(k) can be a low-cost alternative to a hardship withdrawal. Employers may offer 401(k) loans for any reason — meaning you don’t have to be in a difficult financial situation to take one.

Keep in mind, 401(k) loans aren’t “free money.” You’ll need to repay the full amount plus interest. And if you’re unable to repay your loan or you lose your job, you could face penalties and tax consequences. On top of all that, until you repay the loan, you’re also missing out on the potential to grow your invested money.

When considering your financial-hardship loan options, talk to your 401(k) administrator to find out loan criteria and withdrawal qualifications.

Alternatives to hardship loans or withdrawals

If you don’t qualify for a hardship withdrawal or 401(k) loan, you may have other financing options that come with interest rates and loan terms you can live with. Here are a few lending alternatives if you’re strapped for cash.

Personal loans

Personal loans allow you to borrow a fixed amount of money and pay it back with interest in monthly payments over the life of your loan. Typical personal loan terms range from 12 to 84 months. And loan amounts typically range from $1,500 to $100,000. Interest rates, which can range between 5% to 36%, vary from lender to lender.

If you have good credit, you may qualify for an unsecured loan with competitive interest rates and favorable repayment terms. If you can secure a personal loan with collateral — like a savings account or CD — you may qualify for a secured loan. Be cautious though — if you can’t repay your secured personal loan, the lender can claim your collateral as repayment.

Take note that applying for an unsecured personal loan with bad credit may have less-favorable rates and terms. Keep a look out for origination fees and prepayment penalties that some lenders tack on to loans.

Home equity loans

A home equity loan lets homeowners borrow money against the equity they’ve built up in their home. Typically, the loans have fixed interest rates, terms and monthly payment amounts.

But be careful about solving a short-term money challenge with your home equity. As with a mortgage, your home is your collateral for a home equity loan. So if you fail to repay the loan, the lender could foreclose on your home.

Loan or mortgage modifications

If your financial hardship is affecting your ability to pay your mortgage, a mortgage modification may be an option. A modification can lower your monthly payments, trim interest rates or reduce your principal balance. Be sure to understand how the changes to your loan terms affect the longevity of your loan and the total amount you owe.

Peer-to-peer lending

When you need a small amount of money, peer-to-peer lending may be a better alternative than using a credit card or taking out a payday loan. Instead of borrowing from a bank or loan company, peer-to-peer lending connects borrowers directly with individual lenders who fund loans in small increments.

Taking out the go-between can allow for a faster lending process and reasonable interest rates for borrowers with good credit. But if you have low credit scores, you may face higher interest rates — sometimes even higher than the average credit card APR.

Borrowing from friends or family members

When money’s tight, lending between friends or family members can be mutually beneficial. Even if you have a poor credit history, a loved one may be willing to give you a no- or low-interest loan. But remember, a loan between family members is still a loan. You should have a contract (even if it’s informal), agree on how you’ll repay the loan (and follow through on repayment), and be aware the lender may have to pay income tax on any interest you pay.

Before asking for a family loan, it’s a good idea to consider any potential relationship risks, along with how taxes might come into play.

A word of caution

Other lending options include payday loans or credit card cash advances. These options should be a last resort to cover a sudden expense. Here’s why.


Bottom line

It would be great if lenders made no- or low-interest loans to anyone suffering a financial hardship, but that’s generally not how the finance industry works. Be cautious of products marketed as “hardship loans,” since they often come with high costs.

If you qualify for one, a 401(k) hardship withdrawal or 401(k) loan could be a lower-cost solution for a significant emergency expense, but both have financial consequences you should consider. Before committing to any kind of credit, be sure you understand the actual cost of the money you’re borrowing and have a plan for how you’ll repay the debt.

When you’re facing a financial hardship, the last thing you want to do is make your situation worse by taking on high-cost debt.

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Discover personal loan review: Direct payments for debt consolidation

Pros Cons
Checking your estimated rate won’t affect your credit scores Other lenders may offer lower rates
No origination fee Good credit may be needed to qualify
Debt consolidation option requires at least 70% of the loan funds go directly to creditors Maximum loan amount is $35,000

What you need to know about a Discover personal loan

Discover is a large financial services company known for its credit card offerings. But it also issues student loans and personal loans. Personal loan uses can include debt consolidation, home improvements, major purchases and emergency expenses.

Loan amounts offered range from $2,500 to $35,000, which is less than what you’ll find at some competitors. Repayment terms range from 36 months to 84 months, providing many options for different budgets.

Discover is also known for having U.S.–based customer service. Read our Discover personal loans review to learn more about the pros and cons.

Check your estimated loan rate without affecting your credit scores

Discover lets you see what loan rate you may qualify for before you submit your final application — without hurting your credit scores. This feature, also known as a soft credit inquiry, allows you to shop around for rates before deciding which lender you’d like to officially apply with.

No origination or application fees

Compared with other lenders that may charge origination or administrative fees for personal loans, Discover’s fee schedule is more customer-friendly. Some of the fees you may encounter include a $39 late fee for not making your monthly payment on time or an insufficient funds fee if you don’t have enough money in your bank account to cover a payment.

You can also pay off your loan early without facing a prepayment penalty, too.

Consolidating debt? Discover can pay your lenders directly

If you’re using a personal loan to consolidate debt, Discover will pay your lenders directly. In fact, Discover requires at least 70% of the loan proceeds to be paid directly to lenders if you’ve selected debt consolidation as the purpose for the loan. Otherwise, your final loan approval and annual percentage rate, or APR, may be affected.

Although this feature may seem restrictive to some, it helps you ensure the loan proceeds are used to pay off the debt as planned rather than face temptation to use it for another purpose.

You may find better rates elsewhere

Discover loan rates are competitive, but you may be able to find better interest rates elsewhere, depending on your creditworthiness. Make sure to shop around to find the best loan for your situation.

You may need good credit to qualify

Discover’s website does not list requirements for minimum credit scores, debt-to-income ratio or other minimum credit requirements needed to be approved for a loan. But according to its 2018 public annual report filed with the SEC, the vast majority of personal loan recipients have credit scores of 660 or above.

You will also need to have a minimum household income of $25,000 to qualify.

If you have poor credit, it probably makes sense to explore other personal loan lenders.

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Who is a Discover personal loan good for?

Discover personal loans are a good option for people who want a debt consolidation loan for their credit card debt or other debts. Discover’s customer-friendly policies can help you get the maximum value from your personal loan.

Since Discover doesn’t charge origination or administrative fees, you can get the full proceeds from your loan. The company even has certain requirements for direct payments to your lenders to help make sure the money you borrow for debt consolidation actually gets used to pay down your debt.

If you need the money quickly, funds may be sent as soon as the next business day after approval, but it could take as long as seven days in some cases.

If you do end up finding a better deal on a personal loan, you could take advantage of Discover’s 30-day, money-back guarantee in which you can return the entire loan amount and pay no interest. Just remember that Discover won’t retrieve that money. There are a lot of hoops to jump through to take advantage of this option, so you should still consider whether Discover is the right lender for you before applying.

How to apply with Discover

Applying for a Discover personal loan is relatively straightforward. You can begin the application process either online or over the phone by calling 1-866-248-1255. You’ll probably want to start by checking the estimated rate you qualify for.

Keep in mind that to qualify, you’ll need to be a U.S. citizen or permanent resident and be at least 18 years old. Co-signers are not permitted.

To start the application process, you’ll need to enter in some information about yourself:

After you receive your rate quote, you can either fill out the rest of the application and apply for the loan or shop elsewhere. To complete your application, you’ll need to provide some additional information:

In certain cases, Discover may call you to verify your application information and final details after you submit your application.


If a Discover personal loan isn’t right for you, consider these alternatives

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What is the federal gas tax?

Every time you top off your vehicle at the pump, you’re paying federal and state gas taxes that are included in the price of every gallon of gasoline.

The federal tax, at 18.4 cents per gallon, is meant to help the federal government pay to build and fix things like highways and bridges. Every state adds its own tax to every gallon sold in the state, too.

However, the federal gas tax has been stuck in neutral since 1993, which is the last time the tax was increased. Here’s what you need to know about the federal gas tax and whether it may increase in the near future.

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What is the federal gas tax?

The gasoline tax is an excise tax, which is a cost added to the purchase of specific goods and services. The federal government charges a tax of 18.4 cents on every gallon of gasoline and 24.4 cents on every gallon of diesel.

On top of that, you’ll also face location-based gas taxes. Every state has a gas tax, and local and municipal governments may apply additional taxes to gasoline.

The federal gas tax, introduced in the Revenue Act of 1932, was originally intended to help balance the national budget. In 1956, it morphed into a sort of user fee to pay for the nation’s roads and bridges. But what began as a 1 cent tax on motor fuels hasn’t grown much in the past century. The federal tax has only been raised a handful of times, and when accounting for inflation, its purchasing power has fallen in the past 25 years.

Where do my gas tax dollars go?

As a driver, you’re supposed to directly benefit from the gas taxes you pay. Federal gas tax revenue is pumped into a Highway Trust Fund. The HTF funds federal and state infrastructure projects for roads, bridges and public transportation systems. State gas taxes go into state-managed funds, and each state decides how to use them.

State gas taxes

Every state imposes its own tax on gas. As of August 2018, drivers pay an average of 28.62 cents in state taxes on every gallon of gasoline, plus the federal fuel tax — adding up to an average 47.02 cents in total taxes on every gallon.

More than half of U.S. states have raised their gas taxes since 2013.

Though you may not pay attention to the taxes added to every gallon of gasoline, they add up over time. By filling up a 12-gallon gas tank, you’ll pay an average of $5.64 in tax. If you fill up your tank once a week, you’re paying about $293 in gas tax per year.

Other state taxes to know about

Will the federal gas tax increase?

The short answer? Maybe.

When the federal gas tax was last increased, in August 1993, the average gallon of gasoline cost $1.06 and the first “Jurassic Park” movie had just hatched in theaters.

While the federal gasoline tax hasn’t changed in over 25 years, construction and infrastructure-maintenance costs have greatly increased. State and local officials have estimated the cost of the nation’s infrastructure needs at $2 trillion.

While the Highway Trust Fund raised $41 billion in 2018, it still hasn’t been enough to cover projects in recent years, forcing Congress to transfer money from other sources to cover the shortfall. The HTF may become insolvent by 2021 if nothing is done to patch the gap, according to the Congressional Budget Office.

Fuel efficiency, which has steadily improved since 1975, has contributed to the shortfall.

Adding hybrid and electric cars further reduces gas tax revenues because they either use very little or no gasoline. As a response, some states have started charging a special registration fee for select vehicles to recoup some of the lost gas tax revenue.

The Trump administration has fielded the idea of increasing the federal gas tax, gaining both support and opposition in Washington from Republicans and Democrats. But it’s still unclear whether an increase will become a reality.

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What you can do

An increase in the federal gas tax could affect anyone who drives a gas-powered vehicle. You can let your representatives in Washington know how you feel about the possibility of a higher federal gas tax.

Meanwhile, you can take steps to reduce the amount of gas you use — and therefore the gas taxes you pay.

The U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy suggests you …


Bottom line

Gas taxes are intended to help maintain the country’s road system, but federal gas tax revenues have been falling short for a while. Some states have already raised their gas taxes to increase funding for road projects, and lawmakers in Washington have begun considering an increase to the federal gas tax.

If you drive a gas-powered vehicle in the U.S., you’re paying the federal gas tax and at least one state-level gas tax. Understanding how gas taxes work, what might happen to them in the future and how to drive more fuel-efficiently can help you manage the amount of gas tax you pay.

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Tax-exempt interest and how it can affect your tax bill

In general, the IRS wants to know about — and tax — all your sources of income, including interest you’ve earned on a bank account balance or other investment and financial accounts.

But certain types of earned interest can be considered tax-exempt. If you think you’ve earned tax-exempt interest during the year, it’s important to understand what qualifies and what to do about it.


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What is tax-exempt interest?

Tax-exempt interest is interest income that’s not subject to federal income tax, so while you may still need to report it on your return, you aren’t required to include it in your taxable income. Because it’s excluded from your taxable income, it’s not subject to federal tax.

In general, there are three types of tax-exempt interest.

What counts as taxable income?

“Tax-exempt interest is not always exempt from taxes, despite the name,” says Eric Nisall, a Florida-based accountant and owner of AccountLancer. For example, if you’re subject to the alternative minimum tax, or AMT, you may need to include interest earned on certain bonds when calculating how much you owe.

Do I need to report tax-exempt interest?

In general, the IRS requires you to report all the interest you earned during the year, both taxable and tax-exempt. That’s because even if you’re not including it in your taxable income, the IRS uses it to calculate your modified adjusted gross income, or MAGI.

“[MAGI] is used to determine eligibility for certain tax deductions, credits or retirement contribution amounts,” Nisall says.

With tax-exempt interest earned from Series EE and Series I bonds, you’ll fill out Form 8815 to determine how much may be excludable from your income, then report the number on Schedule B of your 1040 form.

With interest earned on municipal bonds, you’ll need to include it in the total amount you report on Line 2a of your 1040 income tax return, but it won’t be included when totaling your gross income.

Interest earned on insurance dividends and left on deposit with the VA is an exception to the reporting requirement.

Will my state tax my federally tax-exempt interest?

Depending on the type of tax-exempt interest, you may need to pay state taxes on the amount you earned. Interest earned from a Series EE or Series I savings bond, for instance, is not taxable at the state level. Municipal-bond interest, however, may be partially or fully taxable, depending on where you live.

“States have their own rules for dealing with tax-exempt interest,” says Nisall. “For the most part, only bonds issued within your state may be exempt from state taxes. If you receive interest from bonds issued by other states, you may have to pay state taxes on that portion of the interest.”

Some states have reciprocity agreements, however, choosing not to impose an income tax on interest earned on municipal bonds issued by states that have the agreement.


Bottom line

Unless you purchased Series EE or Series I savings bonds or certain municipal bonds, or left interest you’ve earned on insurance dividends on deposit with the VA, you likely won’t have any tax-exempt interest to claim on your tax return. Be sure to review all forms you receive to help determine what interest income you must report on your tax return.

If you do earn what the IRS considers tax-exempt interest, make sure you know the reporting requirements. Also, check with your state’s tax department to understand how you might be taxed on the state level.

Earning tax-exempt interest may complicate your tax situation a little, but it can be a way to take advantage of investment opportunities while minimizing your tax burden.

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How can I get a motorcycle loan?

If you’re longing to feel the wind in your face while you’re roaring down the open road, buying a motorcycle might be on your mind — and that could mean shopping for a motorcycle loan.

Many lenders offer financing for motorcycles, so you’ll want to compare interest rates and loan terms to get the best deal for you. Even if you’ve financed a car purchase, you’ll find parts of the motorcycle-buying process to be unique. Understanding what to look for will come in handy.

Before you head to the dealer, examine your budget and decide if you need a loan at all. Paying cash may be your best option if you can make it work financially.

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What is a motorcycle loan?

Motorcycle loans are often secured loans, meaning you must back them up with collateral — in this case, the collateral is usually the motorcycle itself. When you get a secured loan, your property can be repossessed by the lender if you fail to make your payments.

If you’re concerned about using your motorcycle as collateral against your loan, you may consider applying for an unsecured personal loan. But be aware that unsecured personal loans can be viewed as a greater risk by lenders since they can’t take your property if you fail to meet the terms of the loan. This is why unsecured loans typically come with higher interest rates and may require higher credit scores for approval.

Motorcycle loan types

If you shop around for motorcycle financing, you may notice that lenders usually classify motorcycle loans and auto loans differently. Some lenders may charge higher interest rates for motorcycle loans than they might for an auto loan.

Some lenders break motorcycle loan types into more detailed categories, with options for new versus used bikes and specifications about what is and isn’t considered a motorcycle. Certain lenders won’t offer financing for a dirt bike, scooter or ATV. Others may not even finance motorcycles at all.

FAST FACTS

Disclosures you may not get with a used motorcycle

The Federal Trade Commission requires used-car dealers to post Buyers Guides for your review before you purchase an automobile. But this requirement doesn’t apply to motorcycles. Here are the disclosures you won’t necessarily get for a used motorcycle without a Buyers Guide.

Just because the dealer isn’t required to provide this information upfront, doesn’t mean you can’t ask for the details. Be sure to request the info before you purchase a motorcycle. The FTC also advises that you get oral promises and agreements put in writing.

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Where can I get a motorcycle loan?

You can shop for your motorcycle loan online or in person. Getting started is as simple as asking for quotes and comparing financing options.

Getting a motorcycle loan from a bank, credit union or online lender

When you apply for a motorcycle loan through a traditional lender like a credit union or bank, you can often apply for preapproval. Just like an auto loan, your motorcycle loan preapproval will likely include a quote on loan terms like an estimated interest rate and the amount you may be able to borrow. Traditional lenders can also offer unsecured personal loans, if you decide to go that route.

Your preapproval can help guide your shopping experience. It’ll give you an idea of how much financing may be available and you can look for the best deal for you within that price range. Just remember: Preapproval doesn’t guarantee you’ll get the loan — you still have to apply and get approved, and then the terms of your loan may also differ from the estimates provided in the preapproval.

Getting a loan from a dealership

You may decide to arrange financing through a dealership instead of going on your own to a bank. Some motorcycle dealers will submit your loan application to lenders on your behalf to help you secure financing.

While going through a dealership may seem more convenient than finding your own loan, it usually costs more since dealers often add fees to the lender’s quote. It can also stop you from comparison shopping at other locations.

Some dealerships offer a less favorable option: in-house financing. In-house financing, provided directly through the dealer, is often aggressively marketed to buyers with poor credit. While this option might appeal to you if your credit isn’t in great shape, loans financed in-house — also known as “buy-here, pay-here” loans — tend to come with much higher interest rates, meaning the overall cost of borrowing will likely be greater.

Getting a loan from a manufacturer

Some motorcycle manufacturers offer loans online. Harley-Davidson, for example, offers the opportunity to apply for a loan online. BMW also offers the opportunity to apply for motorcycle financing directly through its dealerships.

Tips for getting a motorcycle loan

While your motorcycle loan may not be as big as an auto loan, the terms of your loan still matter. Whether you’re borrowing $3,000 or $30,000, starting with a bit of research and preparation can help you find a loan that works for you.

Review your credit

Your creditworthiness can affect the terms you qualify for, including your interest rate and monthly payment. If you’re thinking about applying for a motorcycle loan, check your credit scores to see if there’s an opportunity to improve your scores and possibly get a better interest rate.

Determine what you can afford

Before you fall in love with a new motorcycle, figure out what you can afford to pay. Here’s a good rule of thumb to consider: Your auto payments shouldn’t exceed 15% of your monthly net income. Ultimately, affordability depends on the details of your personal budget.

Comparison shop

Making comparisons throughout the shopping process may help you find not only the lowest sale price on a motorcycle, but also the best deal on a loan. The difference between 5% and 6% interest rates may not seem like a lot. But over the course of a four-year repayment on a $15,000 loan, getting a 5% interest rate, instead of 6%, could mean saving hundreds of dollars in interest.

Here are some other figures to look for, compare and even negotiate.

Make sure to check the total annual percentage rate, or APR, since it should include your interest rate and certain fees in your loan agreement, like an application or origination fee.


Bottom line

Finding a good motorcycle loan for you can involve a bit of work. There’s no one-size-fits-all financing method for your new bike, but if you’re willing to research the market, compare estimated interest rates and calculate how much new debt you can afford to take on, you’ll be in a better position to make a deal that’s best for you.

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Chase Ultimate Rewards: Our guide to getting the most value from your points

Chase Ultimate Rewards is one of the most valuable credit card rewards programs — as long as you don’t mind putting in the time to search for good deals on travel.

We’ll show you some of the best ways to earn Chase Ultimate Rewards, going beyond typical credit card sign-up bonuses and rewards rates to focus on lesser-known point strategies that can be just as valuable. We’ll also lay out your redemption options and explain how to get the most bang for your buck.



Who is Chase Ultimate Rewards good for?

The Chase Ultimate Rewards program is great for experienced travelers who don’t mind putting in a little elbow grease to get a good deal. If you’re willing to search for the best airline and hotel rates through Chase’s travel portal or to transfer your points to airline partners, you’ll appreciate the potential added value from Chase. That’s especially true if you have the Chase Sapphire Reserve® as your primary rewards card, because it offers the program’s highest rewards rate (at 1.5 cents per point) on travel redemptions through the Chase Ultimate Rewards portal.

But if you prefer hassle-free redemptions, you might be better off with another travel rewards program where you don’t have to search for the best value.

Want travel rewards? Compare Travel Cards Now

What are your Chase Ultimate Rewards points worth?

Method of Redemption Point Value (in cents)
Travel As much as 1.5 (depending on your card)
Gift cards As much as 1.11 (depending on the gift card)
Cash back 1
Apple products 1
Amazon 0.8


Travel:
When you redeem for travel through Chase Ultimate Rewards, Chase Sapphire Reserve® cardholders will get a 50% bonus (the highest rate available via the program, though it can vary by card). We used it as our point value, but you might get a different rate depending on how you redeem and what card you use.

Chase Ultimate Rewards allows you to transfer your points at a 1-to-1 rate to more than a dozen travel partner programs, including United MileagePlus and Southwest Rapid Rewards.

Read more: The best travel credit cards for 2019

Gift cards: Chase Ultimate Rewards offers a handful of gift cards that you can redeem at a rate of up to 1.11 cents per point (depending on the gift card), but most gift cards it offers are worth 1 cent per point. Those discounted gift cards change on an ongoing basis, so it might be helpful to wait for the best deal on a particular redemption. 

Cash back: When you redeem for cash back, your points are worth 1 cent each. Chase Ultimate Rewards gives you the option to choose a statement credit or a deposit directly into a U.S. bank account.

Apple: You might be able to turn your points into a new iPhone or iPad. Your points are worth 1 cent each when redeemed through Chase’s shopping portal for Apple products.

Amazon: When you shop on Amazon, you can link your Chase Ultimate Rewards account and pay points. But keep in mind that your points redeemed here are worth less than 1 cent a piece, which is lower than all the other forms of redemption mentioned above.

3 cards that offer Chase Ultimate Rewards points

Great for earning Chase Ultimate Rewards: Chase Sapphire Reserve®

From our partner
Chase Sapphire Reserve®

Chase Sapphire Reserve®

From cardholders in the last year

The Chase Sapphire Reserve® features enhanced rewards for the money you spend on travel and dining. But it comes with a serious annual fee.

Sign-up bonus 

Rewards rate

Point value

Annual fee 

Good for earning Chase Ultimate Rewards: Chase Sapphire Preferred® Card

From our partner
Chase Sapphire Preferred® Card

Chase Sapphire Preferred® Card

From cardholders in the last year

For a more affordable annual fee, the Chase Sapphire Preferred® Card gives you a little extra for travel and dining purchases.

Sign-up bonus

Rewards rate 

Point value

Annual fee

If you’re interested in a similar business version of this card, check out our review of the Ink Business Preferred℠ Credit Card.

Can’t decide between the Chase Sapphire Reserve® and Chase Sapphire Preferred® Card? Read our comparison

Good for earning Chase Ultimate Rewards with a low annual fee: Chase Freedom®

From our partner
Chase Freedom®

Chase Freedom®

From cardholders in the last year

Thanks to its quarterly rotating categories, the Chase Freedom® features the highest available earnings rate of any Chase Ultimate Rewards credit card on certain purchases. Chase typically advertises it as a cash back credit card, but you’ll still earn points.

Sign-up bonus 

Rewards rate

Point value

Annual fee:

If you’re interested in a similar business version of this card, check out our review of the Ink Business Cash℠ Credit Card.

More ways to earn points

There are three more ways you can earn Chase Ultimate Rewards.

1.  Shop with certain brands through the Chase Ultimate Rewards portal.

2. You may be able to earn a referral bonus for a friend who gets a Chase credit card. Check with the card issuer for details.

3.  If you add an authorized user to your account, you’ll earn bonus points for the money that person spends. But adding an authorized user comes with risks, so make sure you’re on the same page before going through with it.

4 of the best ways to use your Chase Ultimate Rewards points 

1. Travel redemptions through the Chase portal

Chase Ultimate Rewards can offer the best value when you redeem your points for travel through its portal, depending on your card. This includes redemptions for airfare, hotels, cruises, rental cars, vacation rentals and things to do on your trip. 

Your points are worth 50% more on travel redemptions through the portal with the Chase Sapphire Reserve®, which also offers an $300 annual travel credit for travel purchases charged to your card each account anniversary year that you can pair with your rewards to save money on your next trip. The Chase Sapphire Preferred® Card’s 25% boost on travel redemptions through Chase Ultimate Rewards could add to your value too.

But keep in mind that it can take some work to find the best deals through Chase’s portal. If you’re looking for more straightforward redemption options, you might want to go with another rewards program. 

2. Gift cards that are on sale

Chase Ultimate Rewards offers a 10% discount on a handful of gift cards on a rotating basis. Your points are worth 1.11 cents apiece when you redeem this way, so there are opportunities to get nice discounts at certain stores and retailers. 

3. Combine Chase Ultimate Rewards points from different credit cards

Because Chase Ultimate Rewards allows you to transfer points between cards, you can maximize your value by spending with the card that earns the most points in particular categories and then moving those points to another card that offers a higher redemption value.

For example, the Chase Freedom® offers five points per $1 spent on up to $1,500 in combined purchases in rotating bonus categories each quarter you activate (then one point per $1), which is the highest earnings rate of any credit card in the Chase Ultimate Rewards program.

But the value of those points all depends on how you redeem them. With the Chase Freedom®, each point is typically worth 1 cent.

The Chase Sapphire Reserve®, on the other hand, gives you 1.5 cents for every point redeemed for travel through Chase’s portal. But the card’s top earnings rate is three points for every $1 you spend on travel and dining purchases (and then one point per $1). 

If you have both cards, you can make purchases with the Chase Freedom® to get your five points per $1 spent in certain categories and then transfer those points to the Chase Sapphire Reserve®, where you can earn a 50% redemption bonus when redeeming for travel through the Chase portal.

For more on transferring points between accounts, check out our article on maximizing the Chase Freedom®’s cash back categories. 

Read more: The best Chase credit cards of 2019

4. Use the program’s transfer partners

You might be able to top the 1.5-cent value per point for the Chase Sapphire Reserve® if you use one of Chase’s travel transfer partners wisely.

Instead of redeeming through Chase Ultimate Rewards, you could transfer your points to more than a dozen airlines and hotels and redeem through their programs. 

We found at least two transfer partners in March 2019 that offered more valuable points: Southwest Rapid Rewards, where points were worth 1.81 cents on average, and Hyatt, where points were worth an average of 1.62 cents.

The actual value you receive varies each time you redeem your points. Generally speaking, you’ll get a better value on more expensive flights and hotels that have a high dollar cost but don’t require as many points or miles to redeem. You can learn more about how this process works from our article on point valuations.

Want travel rewards? Compare Travel Cards Now

BankAmericard® Secured Credit Card review

Pros Cons
Secured cards are typically easier to qualify for High interest rate
Refundable security deposit based on a periodic review of your credit history High late payment fee
Access to your monthly FICO® score High minimum deposit of $300
Customizable credit line based on your security deposit No rewards

What you should know about the BankAmericard® Secured Credit Card

If you apply and are approved for the BankAmericard® Secured Credit Card, the first thing you’ll need to do is provide a security deposit. There’s a minimum security deposit of $300 and a maximum of $4,900. The amount you deposit will determine your credit limit, so it’s up to you to decide how much you need to deposit.

Here are some of the reasons a card like the BankAmericard® Secured Credit Card might be worth getting. 

Could be easier to qualify for

If your credit isn’t established enough to qualify for an unsecured card, the BankAmericard® Secured Credit Card could be a good starting point. Secured cards are designed for people who are new to credit or who are working on building their credit, which means they can be easier to qualify for than unsecured credit cards.

That’s because the security deposit you provide after you’re approved for the card “secures” the line of credit. This deposit reduces the risk that lenders take on when they lend to someone without a strong credit history.

Building credit? Explore Secured Credit Cards Now

Return of your security deposit

Providing a security deposit when you open a secured credit card is no fun, but the good news is that it’s possible to get that money back.

For example, Bank of America will automatically review your account and, based on your credit history, may decide to return your deposit at any time, while continuing to let you use the card. There’s no official description of when and how often your account will be reviewed, but it’s good to know that it’s a possibility.

No annual fee

One of the greatest benefits of the BankAmericard® Secured Credit Card is that there’s no annual fee.

You can find unsecured credit cards that are designed for people who are still working on their credit, but you’ll often find that these cards come with an annual fee. And unlike a security deposit, this is money you won’t get back.

So while secured cards like the BankAmericard® Secured Credit Card require money upfront — in the form of a one-time deposit — that money can be returned to you in some cases. Make sure to read the card’s fine print to learn more. 

Monthly FICO® credit score

Bank of America makes it easy for you to track your progress as you build your credit by giving you free access to your FICO® credit score with monthly updates. You’ll also get access to credit education tools and resources, including articles and calculators that you can use to learn how credit scores work and about budgeting and other financial tasks.

Things to consider before you apply

Before you apply for the BankAmericard® Secured Credit Card, here are some things you should know. 

High APR

The BankAmericard® Secured Credit Card has a very high variable APR of 25.24% for purchases and balance transfers. So if you ever carry a balance, you’ll wind up paying a lot in interest. 

High late payment fee

The BankAmericard® Secured Credit Card can be a valuable option if you can use it to build your credit. If you miss the due date on a payment or two, not only will it likely hurt your credit, but the card’s $39 late payment fee will add some extra pain to your wallet.

Learn more: How late payments can affect your credit

Who this card is good for

The BankAmericard® Secured Credit Card could be a good option for someone who already banks with Bank of America and needs to build or rebuild their credit. The greatest benefit of using this card is that you get to keep all of your financial activity with the same institution, which can be convenient for many.

But if you’re not already a Bank of America customer, there are other secured credit cards on the market that offer lower minimum deposits or other perks like rewards.

The best Bank of America credit cards of 2019

Not sure this is the card for you? Consider these alternatives.

If you still want a secured credit card and don’t think that the BankAmericard® Secured Credit Card is right for you, consider one of these secured cards instead.

Building credit? Explore Secured Credit Cards Now

Why Amex and Delta extended their credit card partnership

Credit Karma’s editors and writers want to help you stay on top of credit card news. The information below is accurate to the best of our knowledge when posted. Heads up: Credit card terms are subject to change, and the terms outlined below may not be current after the date of publication.

American Express and Delta have extended their co-branded credit card partnership through the end of 2029, a nod to how profitable the pairing has been for both companies. In 2018 alone the co-branded Delta SkyMiles Credit Card led to 1 million new accounts for American Express.

The continued partnership means co-branded cardholders will be able to continue using their cards for American Express’ Membership Rewards and transfer those rewards to Delta’s SkyMiles® Program.

Want to know more?

What are the terms of the extended Amex-Delta partnership?

Through the end of 2029, American Express and Delta will continue offering the following perks for co-branded cardholders:

Why was this partnership extended?

The hookup between American Express and Delta has been lucrative for both parties since they began partnering on co-branded cards in 1996.

American Express said in a press release that these cards fetched 1 million new accounts in 2018, along with “double-digit” spending growth. And Delta expects annual revenue from the co-branded cards to nearly double by 2023 to some $7 billion, the statement said.

This growth highlights the popularity of rewards cards among U.S. consumers. By partnering with airlines to offer rewards to frequent fliers, card issuers like American Express can entice cardholders to use their cards more frequently.

What’s in the future for these types of partnerships?

American Express isn’t the only card issuer to partner with an airline. Chase and United also offer co-branded cards, for example.

A number of card issuers (including American Express) have been working to make their rewards cards more profitable, which industry experts say may be to offset losses from rewards programs. But given the relative success that card issuers like American Express and airlines like Delta are enjoying from these partnerships — along with record-high credit card spending among U.S. consumers in 2018 and fierce competition for their business  — it’s likely these partnerships will continue for the foreseeable future.

Capital One Auto Finance review: Prequalification process and car shopping made easy

Pros Cons
Apply for prequalification with no hard credit inquiry You must shop at participating dealers
Search for vehicles online with the Auto Navigator tool You won’t know final loan terms until you apply
Competitive interest rates Minimum monthly income required (depending on your credit)
Find an auto loan that works for me Explore Auto Loans Now

What you need to know about Capital One Auto Finance loans

Basic car loan options

Capital One offers three common types of auto loans:

If you want a private party loan or a loan for a lease buyout, you’ll need to look elsewhere.

You must buy a car from a participating dealer

Capital One Auto Finance loans can only be used to buy a vehicle from one of the company’s participating dealers. Capital One does have more than 12,000 participating dealers. But if you have a particular dealership in mind that’s not on its list, or limited participating dealers in your area, a Capital One Auto Finance loan may not be the best option for you.

You can apply for prequalification and shop online for a car

Capital One’s Auto Navigator is an online tool that makes it easy to apply for prequalification for a new or used auto loan and search for vehicles within your budget, all in one place.

Capital One Auto Finance completes a soft credit inquiry, then lets you know within minutes if you prequalify. From there, you can use Auto Navigator to search for cars based on a number of factors, such as make, model, mileage and distance from you. In the results, you can see the estimated annual percentage rate, or APR, and payment terms you might get for each car. This prequalification offer is good for 30 days. Keep in mind that this offer isn’t a loan approval, so the rate and terms could change.

For a refinance, you can submit a prequalification application online and can typically hear back within 24 hours.

You won’t know final loan terms until you’re at the dealership

Your final loan offer from Capital One Auto Finance may be different from the loan terms you prequalify for — but you won’t know until you’re at the dealership and ready to buy a car.

At the dealer, you’ll be required to complete a formal loan application, which could result in one or more hard inquiries on your credit report. According to Capital One, the dealer looks for financing for you typically by sending your application to multiple lenders, including Capital One Auto Finance. If the information you provide the dealership is different from what you provided Capital One Auto Finance to get prequalified, Capital One may offer you different loan terms.

A closer look at Capital One Auto Finance loans

Here are some other things to know if you’re considering a Capital One Auto Finance loan.

Is a Capital One Auto Finance loan the right fit for you?

If you have a consistent monthly income and don’t mind being limited to participating dealers, Capital One may be a good choice for an auto loan.

It’s possible to get prequalified with a soft credit check. And the Auto Navigator tool can come in handy if you’re on a tight budget. The tool allows you to find cars that meet your preferences and adjust the price, which can help you find a car that fits within your monthly budget.

And while Capital One Auto Finance is willing to consider applicants who are rebuilding their credit, keep in mind that its better APRs are available only to those with strong credit.

How to apply for a loan from Capital One Auto Finance

You can apply for prequalification for a new or used car loan online, but you’ll need to submit your final loan application at a participating dealer.

To apply for prequalification, take the following steps.

  1. Click “Get Pre-Qualified” on the auto financing page.
  2. Indicate whether you’re applying on your own or with a co-applicant.
  3. Provide your name, contact information, Social Security number and date of birth.
  4. Enter information about your residence.
  5. Provide details on your income and employment.
  6. Review the information you provided, along with the borrower agreement and terms and conditions.
  7. Click the “Submit Information” button.

If you get prequalified, you can find a participating dealer by clicking on “Find a Dealer.” Bring your prequalification offer to your chosen dealer within 30 days to begin the car-buying process.

Auto loan alternatives to consider

Capital One makes it easy to navigate the process of applying for prequalification for an auto loan and finding a car at a participating dealership.

But if you’re not sure a Capital One Auto Finance loan is right for you, here are some other options to consider.

Find an auto loan that works for me Explore Auto Loans Now

Need IRS debt forgiveness? Consider an offer in compromise.

When you owe more federal income tax than you can afford to pay, you may hope for IRS debt forgiveness.

Having a creditor forgive some or even all your debt may be possible for other types of debt, like student loans or even credit card balances — although it almost always comes with negative consequences. But the IRS doesn’t typically work that way.

While IRS payment plans or installment agreements can help you pay your full tax debt over time, an offer in compromise is about as close as anyone can come to total IRS debt forgiveness.

Let’s cover offers in compromise so you can understand how you might be able to settle a tax debt for less than the full amount you owe.

Credit Karma Tax® — Always free Learn More


What if I can’t pay my tax bill?

If you can pay off your tax bill, you’ll save money in the long run. That’s because the IRS charges interest and a penalty on any past-due unpaid tax until you pay in full — even if you arrange for a payment plan or have an offer in compromise accepted.

So if you’re struggling to pay the tax you owe, the worst thing you can do is avoid it. In fact, if you don’t pay your tax bill in full, the IRS could place a federal tax lien against property you own, like a house, and can even garnish your wages through a federal tax levy.

Tax liens 101: What you should know about tax liens and levies

Instead, making a payment arrangement might allow you to avoid the worst consequences of a past-due tax bill. And if your situation is dire enough, you might even qualify for partial IRS debt forgiveness in the form of an offer in compromise.

Can I qualify for an offer in compromise?

Not everyone who asks for an offer in compromise from the IRS will get one. In fact, your chances might be slim. In 2017, the IRS received 62,000 offers in compromise and accepted only 25,000 of them — that’s a success rate of roughly 40%.

The criteria for qualifying are strict. Here are three situations the IRS will consider for an offer in compromise.

There are also other requirements you’ll need to meet to qualify, including …

If you’re not sure whether you’re eligible, use the IRS offer in compromise prequalifier tool to help you find out.

Applying for an offer in compromise

If you have reason to believe that you could qualify for IRS debt forgiveness through an offer in compromise, you should take a look at the offer in compromise booklet and Form 656. If you feel overwhelmed or need help, consider hiring a tax professional who can walk you through the form and give you general guidance.

How the offer amount is determined

An offer in compromise starts with you, the taxpayer, making an offer to the IRS using Form 656 — but you can’t just offer any amount you wish as a settlement for your debt.

The IRS usually expects the amount you offer to be equal to or greater than the value of your assets — real property, vehicles and bank accounts — as well as anticipated future income minus basic living expenses. The IRS terms this your “reasonable collection potential.”

In order to determine your ability to pay your outstanding tax debt, the IRS may require you to complete and submit Form 433-A. The form gathers details of a wage earner’s or self-employed person’s financial situation, including a taxpayer’s assets and expenses.

“You always have to put down some kind of an amount for an offer,” says Josh Dixon, a certified public accountant and owner of J. Dixon Tax Advisory Services. “It could be as little as $1, but [the IRS] will not accept $0 on an offer.”

When it comes to figuring out an offer, there may be a lot of math involved.

“The IRS wants to look at your financial picture and your ability to pay,” says Dixon, “and then they’re going to look at their ability to collect.”

Don’t worry too much about getting the number exactly right, though. If you qualify for the program and your offer is too low, the IRS will allow you to update your offer.

Afraid of audits? Get Free Audit Defense

Application fee and initial payments

An offer in compromise isn’t a get-out-of-jail-free card — in fact, you’ll have to pay the IRS just to make the request.

You’ll typically need to enclose a $186 fee with your application. But it may be waived if you meet the agency’s low-income certification guidelines or if the offer in compromise is based on doubt as to your liability.

While filling out your offer in compromise, you can choose from two payment options.

The fee and your payments are nonrefundable, but the amounts get applied to your tax liability. If you qualify for a low-income exception, you won’t need to include an initial payment or make monthly payments while the IRS considers your terms.

What is the Taxpayer Advocate Service and can it help me?

Hearing back from the IRS

If the IRS accepts your offer in compromise, you’ll need to meet all the terms of your agreement with the agency. If you fail to comply with the agreement, the IRS can sue you for up to the original amount of the tax debt plus penalties and interest (minus any payments you’ve made).

If the IRS rejects your offer, you’ll have 30 days to file an appeal. The agency has an online tool that can help you determine whether you should request an appeal.

Heads-up: Watch out for tax-relief scams

There are companies, some legitimate and some not, that will offer to help you obtain tax debt relief. These companies may charge thousands of dollars in fees for something you can do on your own for less.

Beware: A company may try to scam you by taking your fee without actually submitting your offer in compromise to the IRS, or even add unauthorized fees on top of the upfront charge.

If the offer sounds too good to be true, it probably is. And if a company makes promises or guarantees, it may be a scam.

“A lot of times, you’ll want to just contact the IRS first,” says Dixon.


Bottom line

Owing the IRS is no joke, so it’s important to have a plan to pay what you owe. If you can’t afford your full tax bill, either immediately or through a payment plan, you may qualify for IRS debt forgiveness in the form of an offer in compromise.

But offers in compromise are difficult to get, and you’ll need to follow all the IRS rules for applying for an offer in compromise and fulfill the terms of the offer if it’s accepted. If you think you might be eligible, take your time to go through the process and make sure you read the fine print in the agreement. If everything goes well, you may be able to settle with the IRS for less than what you owe.

Knowing how you’ll handle your tax debt starts with knowing whether you’ll owe at all. And the sooner you find out, the sooner you can plan on making arrangements to pay what you owe.

Credit Karma Tax® — Always free Learn More

Installment loans for bad credit: Worth considering?

When you borrow a fixed amount of money to be repaid on a set schedule, that’s called an installment loan.

Mortgages, auto loans and personal loans are examples of installment loans. Installment loans involve a set timeline for repaying the loan. And monthly payments are calculated so that you repay the loan on schedule.

While installment loans are common, not all have good terms. Good credit can make it easier for borrowers to qualify for a loan and possibly get a better interest rate. But when you have lower credit scores, you may end up with an installment loan with a higher interest rate and expensive fees.

Whenever you’re shopping for any kind of credit, it’s important to understand the terms you’re agreeing to — and also to know where your credit stands. In this article we’ll keep the focus on personal loans. Here are some things to be aware of as you’re looking for this kind of installment loan.

Want to prequalify for a loan? See if I’m Prequalified Now

What are installment loans for bad credit?

Installment loans for bad credit are personal loans specifically designed for people with lower credit scores, or imperfect or no credit history.

Some online lenders market installment loans for borrowers with low credit scores. Some local banks and credit unions may also consider applications for personal loans for bad credit.

Personal loans for credit-challenged borrowers may be secured (meaning borrowers must put up collateral in order to get a loan) or unsecured (no collateral required). But higher interest rates are a common characteristic of both secured and unsecured installment loans for borrowers with bad credit.

Secured and unsecured personal loans: What’s the difference?

Common features of bad credit installment loans

Bad credit installment loans function just like any installment loan.

Interest rates and terms can vary from lender to lender, but bad credit installment loans typically have…

Installment loans for bad credit vs. payday loans

While installment loans for bad credit may have higher rates and less-borrower-friendly terms, these loans are not the same as payday loans. Here’s how installment loans for bad credit and very short-term payday loans differ.

Installment loans for bad credit Payday loans
APRs may be wide ranging but typically top out around 36% APRs can effectively be close to 400%
Repaid in a series of fixed payments over a period of time Repaid in a single lump sum with your next paycheck (typically two to four weeks after you get the loan)
Loan amounts may range from several hundred to several thousand dollars Loans are for very small amounts (typically $500 or less)
Lender usually makes a hard inquiry on your credit Lender usually does not do a hard inquiry on your credit
Loan repayment history may be reported to credit bureaus (could help you build your credit) Typically don’t report repayment history to credit bureaus (won’t help you build your credit)

Learn more: What is an APR?

Beware: Some lenders of short-term loans may blur the lines between an installment loan and a payday loan. For example, you might see “installment loans” advertised for small amounts with repayment terms ranging from one to 12 installments and APRs as high as 749%. And both online installment loan lenders and payday lenders may promise delivery of funds on the next business day.

So when shopping for a loan, don’t just focus on how the lender labels it — look carefully at the APR and repayment terms to know what kind of loan you’re getting and if it’s right for you.

Eligibility for installment loans for bad credit

Eligibility requirements for installment loans for bad credit vary by lender. You’ll usually need to provide at least the following:

Lenders may let you find out if you’re likely to qualify and check your estimated rates without a hard credit inquiry. When shopping for loans, look for lenders that provide this info with only a soft credit inquiry, as too many inquiries could hurt your credit scores.

Learn more: Hard credit inquiry vs. soft credit inquiry

Alternatives to installment loans for bad credit

While installment loans for bad credit will almost always have better terms than payday loans, interest rates can still be pretty high.

Before applying for a new loan, you might want to explore some alternatives to borrowing — like seeking credit counseling, negotiating with your current creditors for more time to repay what you owe, or shopping around for a lower-interest credit card.

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Payday alternative loans, which are small-value loans issued by some federal credit unions, can also be a more affordable alternative — but you’ll need to be a member of the credit union you’re applying with. And you’ll still need to look closely at the terms of these loans.

Because rates can be high on many bad credit installment loans, shopping around to find the right lender is especially important if you need an installment loan, or any kind of credit, and you have less-than-perfect credit scores.


Bottom line

Today, borrowers with bad credit have many options for installment loans thanks to online lenders. But before you decide to apply for a loan with the high interest rates that typically go along with these loans, make sure you explore all potential options to figure out which will work for you.

And be careful not to fall for marketing that tries to disguise a very-high-interest, short-term payday loan as an installment loan. Always check loan terms and look for financing with favorable interest rates and a repayment schedule that works for you.

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What is car loan amortization?

Knowing your car loan amount and interest rate can be crucial for financial planning — but understanding how you’re paying off your loan over time can be just as important.

The process of paying down your loan over time is known as amortization. With an amortizing car loan, some of your monthly payment is applied to the amount you borrowed, which is known as the principal, and some goes toward interest and any fees.

Let’s dive into how car loan amortization works and what an amortization schedule looks like. We’ll also go over factors that can affect that schedule and, in turn, how that affects the amount of interest you pay over the life of the loan.

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How does car loan amortization work?

Amortization is the term used to describe the way in which a simple interest auto loan is paid off. A portion of each payment goes toward …

With an amortizing loan, more of your payment is applied toward interest at the start of the loan, when the principal balance is at its highest. As the principal balance diminishes, the amount paid toward interest decreases and the amount paid toward principal increases.

What is an amortization schedule?

Curious about how much of your monthly payment goes toward interest and principal? You can answer this question by creating an amortization schedule. This schedule provides a road map of how your payments will be allocated between interest and principal over the term of your car loan.

Some online calculators can help you estimate your amortization schedule. To calculate your schedule, you’ll need your loan amount, interest rate and the loan term.

What does a typical amortization schedule look like? Let’s say you made a $3,000 down payment on a $30,000 car in January 2019. To pay the balance, you took out a $27,000 car loan with a five-year loan term and 10% interest rate.

Your car loan amortization schedule would look like this.

Year Interest Principal Ending Balance
2019 $2,502.80 $4,381.24 $22,618.76
2020 $2,044.03 $4,804.01 $17,778.75
2021 $1,537.22 $5,346.82 $12,431.92
2022 $977.34 $5,906.71 $6,525.22
2023 $358.83 $6,525.22 $0.00

 

As you can see from this example, the amount paid in interest decreases each year. As the total interest paid gets smaller, a larger portion of the payment goes toward reducing the loan’s principal.

Factors that affect your car loan amortization schedule

The following factors can have a big impact on your loan’s amortization schedule and the total amount of interest you pay.

Your down payment

You can reduce the amount of interest you pay by increasing the size of your down payment. In the previous scenario, the interest paid over the life of the loan would shrink from $7,420.21 to $6,595.74 if you increased the down payment from $3,000 to $6,000.

Your loan’s interest rate

The higher the interest rate, the more interest you’ll pay on your loan. If the interest rate on your $27,000 loan was 15% instead of 10%, the amount of interest you’d pay would increase from $7,420.21 to $11,539.69.

The length of your loan term

Increasing the length of your loan term will increase the amount of interest you pay on your auto loan. If you were to extend the loan term on your $27,000 loan from five to seven years, the total interest paid on the loan would rise from $7,420.21 to $10,651.49.

Paying off your car loan early: Should you do it?

Bottom line

Calculating a car loan amortization schedule can give you a clear idea of how much you’re paying in interest over the course of the loan. To reduce the interest paid, consider increasing the size of your down payment or shortening the length of your loan term.

Another factor that can affect how much interest you pay on your loan is your credit. If you have lower credit scores, you may not qualify for the better interest rates on a car loan.

Taking time to rebuild your credit before taking out a new car loan could help you get a lower interest rate and pay less interest overall. If you need a car now, focus on making on-time payments for any loans you currently have. This could help boost your credit health, which might allow you to refinance your car loan down the road at a better interest rate.

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Best way to pay off credit cards

With average credit card interest rates in the U.S. hanging around the mid-teens, paying off credit card debt is an important financial goal.

Unfortunately, many people end up paying credit card interest for years — especially if they make only minimum payments on their debt. Depending on your interest rates and how much you owe, being strategic about paying off your credit card debt could mean saving hundreds — or even thousands — of dollars in the long run.

Paying off credit card debt should top your financial to-do list. But what exactly is the best way to pay off credit cards? Here are five steps you can take that can help get you closer to financial freedom.


  1. Stop using your credit cards
  2. Make a budget to send extra money to creditors
  3. Try lowering your interest rates
  4. Choose a debt-repayment approach
  5. Implement your payoff plan

1. Stop using your credit cards

You can’t get out of a hole if you continue to dig deeper — and you can’t get out of credit card debt if you continue to run up balances that you can’t pay back. The first step to getting out of credit card debt is to commit to not using your card for anything you can’t pay off in full at the end of the month.

That’s easier said than done.

Everybody faces financial emergencies from time to time. To help protect you from falling back on your credit cards, consider saving up an emergency fund of around $1,000 while you work to pay off your credit cards. This financial cushion can protect you from getting deeper into debt once you start your debt-payoff plan in earnest.

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2. Make a budget to send extra money to creditors

If you want to get out of credit card debt quickly, paying more than the minimum payment is essential. Once you’ve saved up enough money for an emergency fund, you’ll want to pay as much as possible on your credit card balances. The best way to do this is to make a budget so that you can limit spending and prioritize debt repayment.

There are many different ways to budget. One strategy is the 50/30/20 method, which allocates 50% of your income to needs, 30% to wants, and 20% to either savings or debt repayment. But you may decide you need a more detailed budget to ensure you have money for debt repayment. If so, you can make a budget that outlines where each dollar of income will go, putting as much money as possible to debt repayment. The Consumer Financial Protection Bureau offers a simple budgeting worksheet, which is a good place to start.

Whatever approach works best for you, make sure you’ve got a budget that helps keep your spending under control — this way you’ll have a substantial chunk of cash to send to creditors each month.

3. Try lowering your interest rates

Because credit card interest rates are often very high, it can be an uphill battle to pay down your debt when so much of your monthly payment goes to interest. One way to make repayment easier is to try to reduce the interest rate you’re paying.

You can take a few approaches when attempting to reduce your interest rate.

If you can successfully lower your credit card interest rate, more of each payment will go to the principal amount owed. This way, debt freedom should come much more quickly.

4. Choose a debt-repayment approach

If you’ve consolidated all of your credit card debt using a personal loan or balance transfer credit card, pay as much as possible to this loan each month. If you avoid getting into more credit card debt, you could be debt-free when this loan is paid off.

If you haven’t consolidated your debt, you’ll need to decide which creditor to pay off first. When you do, send all of your extra payments to this creditor each month while paying the minimums on your other debts. There are two different approaches to deciding which creditors to pay first.

Some financial experts recommend the debt snowball method because studies show that successfully paying off a debt in full gives you a quick win — which can help you stay motivated. But because your lowest-balance cards may not carry the highest interest rates, the snowball approach could mean your higher-rate debt hangs around for longer, adding to your total interest costs.

If you’re good at staying motivated on your own, opt for the debt avalanche method. But choose the snowball method if you know you’re motivated by small wins.

5. Implement your payoff plan

Finally, it’s time to put your payoff plan into action. Automate payments for your budgeted amount to the first creditor you’re paying off. For example, you can set up an automatic $150 payment to the card you’re paying off first, even if the minimum payment required is only $50. Once you’ve paid that card off, add the $150 to the minimum you were paying on the next card you’re paying off.

As you pay off each card, continue to roll over your payments to the next one. Track your progress by monitoring your credit reports. You should eventually see your debt balances drop and you may even see your credit improve.

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Bottom line

These five steps can help you free yourself from credit card debt. Now that you have an approach pay off credit cards, there’s no excuse not to get started on your payoff plan today.

Learn more: Credit Karma Guide to Debt

What is a secured line of credit?

If you’ve got recurring expenses or several large purchases to make and don’t want to use a credit card, a secured personal line of credit may be a good option for you.

When a lender approves you for a line of credit, you’re given a set amount of money that you can borrow against as needed, which is similar to a credit card. You’ll pay interest as you spend money, too.

A secured line of credit means you’re promising an asset like real estate or a savings account as collateral in case you don’t pay back what you owe.

With an unsecured line of credit, you don’t have to put down an asset as collateral to secure the loan. Since your assets can’t be taken away upon default, your lender’s risk is typically greater than with a secured line of credit. And personal lines of credit are often unsecured.

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Pros of a secured line of credit

Cons of a secured line of credit

Types of secured lines of credit

Depending on your circumstances and what you need the money for, there are different kinds of secured lines of credit to consider. 

Alternatives to a secured line of credit

If you don’t think a secured line of credit is right for you, there are other options out there for you to consider.


Bottom line

A secured line of credit may be a good idea if you have an asset like a home or car that you’re willing to pledge and are confident you’ll be able to pay back your loan.

Before you take out any line of credit, make sure the monthly payments will fit into your budget so you don’t get in a financial jam.

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Bank of America auto loan review: Competitive interest rates and no upfront fee

Pros Cons
Competitive rates Many independent dealerships are ineligible
Interest rate discount for Preferred Rewards members Vehicle must be worth at least $6,000
No application fee or prepayment penalty No prequalification option
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What you need to know about Bank of America auto loans

If you’re considering applying for a Bank of America auto loan, here are some features that stand out.

Several car loan options

Bank of America offers a range of auto loan options, depending on what you’re trying to do.

Dealership limitations

If you’re planning to buy from a dealership, take note that only franchise dealerships, such as Ford, Honda, Chrysler, General Motors and others, are eligible. You may also purchase your vehicle from an approved independent dealership, which includes CarMax, Hertz Car Sales, Enterprise Car Sales and Carvana.

If you want to buy from a different independent dealer, you’ll need to find another lender.

Discounts for eligible Bank of America customers

If you’re a Preferred Rewards client, you can qualify for an interest rate discount of 0.25% to 0.50% on top of Bank of America’s already competitive interest rates.

But to qualify as a Preferred Rewards client, you need an eligible personal checking account with the bank and a three-month average combined balance of $20,000 or more in qualifying Bank of America, Merrill Edge or Merrill Lynch accounts.

No prequalification option

Many auto lenders allow borrowers to get prequalified to get an idea of what terms they might be eligible for. This prequalification typically requires only a soft credit inquiry, which won’t hurt your credit scores.

With Bank of America, you’ll need to officially apply with a hard credit inquiry to see what rate you qualify for. That said, you might be able to get a decision in as little as one minute, and the rate is locked in for 30 days, which could give you time to find the right car.

A closer look at Bank of America auto loans

Here are some other things to know as you compare Bank of America with other auto lenders.

Is a Bank of America auto loan the right fit for you?

A Bank of America auto loan could be a great option if you’re a Preferred Rewards client with the bank and can take advantage of the interest rate discount. Even if you’re not, it could be a good fit if the car you’re planning to buy meets the lender’s standards and you’re looking for a competitive interest rate.

Keep in mind that Bank of America’s starting annual percentage rates for auto loans are only available to those with what the bank considers excellent credit. Your APR may be higher, based on factors including your credit history, loan amount, loan term and state of residence.

Since it comes with no prepayment penalty, a Bank of America auto loan is worth considering if you’re thinking about paying off the loan quickly.

How to apply for a loan from Bank of America

You can choose where you apply — online, over the phone or at one of the bank’s branches. And you don’t need the vehicle information to apply.

Here’s how you apply online.

  1. Click the “Apply Now” button on the Bank of America auto loans page.
  2. Check the box to prefill your application with your information if you’re an existing Bank of America customer.
  3. Enter your desired loan amount and loan term, along with personal information, including your address, Social Security number and date of birth. You’ll also need to provide employment and income information, and specify whether you have a co-applicant.
  4. Carefully read the terms and conditions. Once you accept them, you can review your application one more time and submit it.

Lender alternatives to consider

Bank of America auto loans offer competitive rates, making them worth considering if the vehicle you’re looking at meets the lender’s requirements.

If you’re not sure that a Bank of America auto loan is right for you, here is another option to consider.

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How to get a classic car loan

Whether you’re dreaming of a Euro-chic 1961 Jaguar E-Type or an all-American 1963 Chevrolet Corvette Sting Ray, classic cars can give you a chance to own a beautiful piece of the past.

Purchasing a classic car can be a good investment since it has the potential to increase in value over the years — and an auto loan can help you fund the purchase if you can get approved.

As you begin researching classic car loans, it’s important to remember that some lenders place age restrictions on the vehicles they finance. Since classic cars are generally much older than the average vehicle purchase, they may not qualify for a traditional auto loan.

In order to secure funding through a loan — should you need it — to buy your slice of automotive history, you may have to find a lender that provides classic car loans.

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What exactly is a classic car, anyway?

Age is an important part of a classic car’s identity. So in order for a vehicle to fit this definition, it needs to meet a certain age requirement.

Different organizations have different ideas about what exactly makes a car a classic.

If you want to finance the purchase of one of these vehicles, you’ll need to find a lender that offers loans for classic cars. You’ll also need to make sure your vehicle qualifies as a classic car under the lender’s guidelines, which vary from lender to lender.

For example, Florida-based Collector Car Lending defines classic vehicles as those built between 1928 and 1998. Massachusetts-based lender J.J. Best Banc & Co. defines classic vehicles as those made between 1900 and 1985. There’s also Woodside Credit, a nationwide lender based in Southern California, which will consider financing collector cars that are at least 25 years old.

How can I get a classic car loan?

Ready to apply for a loan for your classic-car purchase? These tips can help you streamline the process and get the best deal for you on financing.

1. Check your credit

Take a look at your credit scores, which can affect whether you’re approved for a loan. With some lenders, you’ll need good to excellent credit if you want to apply for a classic car loan. But there’s at least one exception to this rule: Collector Car Lending advertises that it will consider borrowers with credit scores as low as 600.

2. Decide on a down payment

With some lenders, you’ll need to put down a certain amount in order to qualify for financing, so it’s important to know how much of a down payment you can afford. For example, at J.J. Best Banc & Co., a 10% to 20% down payment is usually required to qualify for a classic car.

3. Shop around for a classic car loan

Make a list of potential lenders and then shop around to compare interest rates. A lower rate can help lower the cost of the loan.

Here are some lenders that offer classic car loans:

FAST FACTS

Will making multiple inquiries when shopping for a car loan hurt my credit scores?

If your credit reports show multiple applications for a car loan within a short period of time, certain credit-scoring models will treat these applications as a single inquiry. This can help you to shop for the best interest rates without hurting your credit scores. The timeline to apply within varies, but certain scoring models will follow this rule as long as the inquiries are all made within a 14-day window, so keep this timeline in mind when applying for loans.

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4. Look into specialized car insurance

Lenders that provide classic car loans may require proof of vehicle insurance before finalizing funding for your loan — and not all car insurers cover classic vehicles. This means you’ll need to look for an insurer that provides classic car coverage. Get quotes from several insurers to find the rate that’s best for you.

5. A financing alternative: Apply for a personal loan

You might be able to get a personal loan to finance your classic car purchase. Some personal loans are unsecured, meaning you don’t need to use assets or property, such as your vehicle, as collateral.

But keep in mind that unsecured loans can have higher interest rates than typical auto loans because they aren’t secured with property.

You’ll probably want to avoid riskier lines of credit, such as home equity loans, since they’re secured by your home — and if you don’t make your loan payments on time, you can risk losing your home.


Bottom line

A classic car loan is usually different than a standard auto loan, which will affect your funding options. Plus, you may need to seek out certain lenders to finance your dream car.

If you’re unable to qualify for a classic car loan, consider saving your money to make your purchase with cash down the road. Then you won’t have to worry about financing at all.

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What are car invoice prices?

Knowledge is power when it comes to understanding new-car pricing, and a little preparation can go a long way in helping you get a price you’re happy with.

So you’re ready to buy a brand-new car. Maybe you’ve gone on a few test drives and done some research — but you’re not yet ready to start talking money.

Buying a new car isn’t cheap — according to analysts at Kelley Blue Book, the average new-vehicle price in the U.S. was $37,577 in December 2018. So for some, the process of purchasing a vehicle can be costly, too.

Let’s take a look at what a car invoice price is and why it’s important, and scenarios where you might be able to get a car at — or even below — this price.

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How is a car invoice price different from MSRP?

A car’s invoice price is one of a few prices you may hear at the dealership or see during your research. Here’s how they all differ.

Invoice price

The invoice price, or dealer cost, is what a car manufacturer charges the dealer for the vehicle. Freight charges, which are also called destination charges, are usually included in this price. The invoice price is often higher than what the dealer ends up paying for the car.

That’s because dealers often receive manufacturer rebates, allowances, discounts or incentives for selling a car. They can also receive a holdback — a refund the dealer gets after making a sale. Dealer holdbacks vary by automaker, but are generally 2% to 3% of the invoice price or manufacturer’s suggested retail price.

Manufacturer’s suggested retail price

The manufacturer’s suggested retail price, or MSRP, which is commonly called the car’s sticker price, is the auto manufacturer’s suggested price for the car’s make and model. It doesn’t include optional features, which can raise the car’s cost above the MSRP. Dealers can choose to sell the car at a price that’s higher or lower than the MSRP.

Fair market value

The fair market value is an estimate of what the car is worth at an auto lot or in a normal private sale. Kelley Blue Book and Edmunds offer tools that allow you to see the fair market value of a car based on factors including make, model, your location and what others in your market have paid for the same vehicle.

How can you find out a car’s invoice price?

Sites like Kelley Blue Book and Edmunds can conveniently show you the car’s estimated invoice price, MSRP and fair market value in one place. Generally, a car’s invoice price will be the lower price, the MSRP will be higher, and the fair market value typically falls somewhere in between.

For example, according to the Edmunds True Market Value tool in April, a 2019 Honda CR-V LX SUV with four-wheel drive in the Chicago area has an estimated invoice price of $25,225, fair market value of $25,373 and MSRP of $26,795 as of March 2019.

Can you buy a car at its invoice price?

You might be able to buy a car at or near its invoice price if you …

Negotiate the price

Some dealers may be willing to bargain with you on a price of a vehicle. Their profit margin is generally 10% to 20% — often the difference between the car’s invoice price and its MSRP. You might consider starting your negotiations with the invoice price in mind.

How to negotiate your car price

Choose a less-popular car

You might be able to buy a new car at the invoice price, but that may be unlikely if you want an in-demand model. If the car isn’t popular and it’s in stock, you may be able to get a good deal. Dealers generally want to keep their current inventory moving — partly because they can keep more of their holdback if they sell the car sooner.

Shop around

Dealers are competing for your business, so it may be worth shopping around. Before heading out for a test drive, do some research, and compare dealer-specific incentives and pricing to help identify the best deals in your area.

Buying a car: How much can you afford?

Bottom line

Buying a new car may be one of the biggest purchases you may make in your lifetime. Before signing on the dotted line at the dealership, make sure you fully understand how the dealer is pricing the car and that you’re happy with the final price negotiated.

If the dealer is holding firm at a price that’s beyond your budget, remember that you can always shop around to help find a better deal elsewhere.

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Car loans for students: Can you get one?

Getting a car loan as a student is possible, but you may face some challenges that other borrowers might not have to deal with.

Before you decide whether a car loan is right for you, let’s explore how they work, some of the challenges you may face when applying and what you can do to improve your chances of getting approved.


How does a car loan work?

Car loans are closed-end loans. That means you’ll borrow a fixed amount of money to finance your car purchase and then repay it, with interest, in equal monthly payments for the life of the loan. Longer loan terms can mean a lower monthly car payment (but more interest paid overall). Shorter loan terms can mean a higher monthly car payment (but less interest paid overall).

An auto loan is also a secured loan, meaning your car is used as collateral. So if you don’t make your payments on time and end up defaulting on your loan, the lender typically has the right to repossess your car as payment for the outstanding debt. That’s why it’s important to make sure you can afford your loan payments, on top of your other expenses, before applying for a car loan.

The true cost of owning a car

Challenges to getting a student car loan

Many college students are just beginning their journeys to financial independence. So it can be difficult to qualify for traditional auto loans and student car loans alike. Here are a few roadblocks you might encounter during the application process.

Limited credit

Before approving you for a loan, financial institutions want to be reasonably confident you’ll repay it on time. That’s why lenders look at a variety of factors, including your credit history, to evaluate your creditworthiness before making a loan decision. And since most lenders will check your credit when deciding to give you a loan, it’s a good idea to know where your credit stands before applying.

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If you’ve never used credit before, or you don’t have enough credit to have established a responsible payment history, lenders may be less willing to approve your application for a traditional auto loan.

The good news is that some car loans for students offered are designed for individuals with a limited credit history. Instead, certain lenders offering student car loans might focus on other factors, like employment and GPA.

What’s the minimum credit score needed for an auto loan?

Limited income

Although some college students work full-time jobs while attending college, it’s not unusual for many students to have inconsistent or no income. But your ability to repay a loan is one of the factors lenders consider when deciding whether to lend you money. Without a consistent, reliable income, it might be tough to be approved for either a traditional or a student auto loan.

High interest rates

Applicants who qualify for the lowest interest rates are typically those with a strong credit history and high credit scores. If your credit history is limited or you have bad credit, you may not qualify. And if you do qualify, your loan’s interest rates will likely be higher, which could make it difficult to afford the loan.

When you’re shopping around, look for lenders that offer discounts for being a student or maintaining a certain GPA. It could help you save money on interest charges.

Maximum loan amounts

Some lenders offering student car loans cap the loan’s amount. Maximum amounts for students may be around $15,000 to $20,000, which could limit the type of car you can buy — unless you have a hefty down payment saved up.

Improving your chances of getting approved for a car loan

Although you may have a tough time qualifying for a car loan, there are things you can do to help improve your chances.

Get good grades

Like we mentioned, some student car loan lenders offer discounted interest rates if you keep your grades up. But other lenders might check your GPA when reviewing your loan application.

So if you’re in the market for a car, hitting the books could pay off.

Build your credit

Establishing a strong credit history takes time. Fortunately, financial institutions offer products — like credit-builder loans and secured credit cards — designed to help people establish or rebuild their credit. Payments on these types of loans are typically reported to the three major consumer credit bureaus each month (but make sure to check with your lender).

With consistent on-time payments, you can establish a pattern of positive borrowing, which may improve your chances of being approved for an auto loan down the road.

Learn more: Credit Karma Guide to Building Credit

Becoming an authorized user on someone else’s credit card may also help you build your credit. That’s because their use of the card may be reported to the credit bureaus for you as well. Before becoming an authorized user, check with the credit card issuer to see if they report for authorized users.

Take note: Even if the card does report for authorized users, it can only help you if the card’s owner makes their payments on time and stays well below their credit limit.

Save for a down payment

The more money you have saved for a down payment, the less you’ll need to borrow to purchase a car. Starting out with a smaller loan means your monthly payments may be more affordable. Plus, some student car loan lenders require you to make a minimum down payment, which can range from 10% to 25%. Consider saving as much money as you can before you start shopping around.

Five reasons to make a car down payment

Secure a steady income source

Even if you have good credit, a lender is unlikely to grant you a loan if you can’t afford it. Lenders want to see that you make enough money to repay your loan on time, while meeting your other debt obligations.

Consider a co-signer

If you’re unable to qualify for an auto loan by yourself, you may be able to secure one if you have a co-signer. A co-signer is someone who agrees to repay the loan if you’re unable to, which means their credit is on the line just as much as yours is — not something to take lightly.


Bottom line

It’s possible to get a student car loan. But if you don’t have an established credit history and steady source of income, it might not be easy.

Take some time to shop around. Loan requirements and interest rates vary from lender to lender. Doing your research could help you find the lowest interest rate available to you, which can save you money over the life of your loan.

If you’re unable to qualify for a loan with an affordable interest rate, it may be better to wait until you’ve had a chance to build your credit, save up for a down payment or secure a job. But if you need a car now, consider a less-expensive vehicle, and then budget well so that you can pay off your loan as quickly as possible.

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How do online title loans work?

If you’re short on cash, an online title loan may sound like a convenient option.

According to a Pew Charitable Trust report, about 2 million Americans turn to high-interest automobile title loans every year. Online title loans allow you to borrow money and use your car as collateral to secure the loan. Similar to payday loans, these title loans are designed to cover an emergency or other short-term expenses. If approved, in exchange for the loan, you’ll give the lender the title to your car until the loan is paid in full.

Online title loans may sound appealing because some lenders don’t require a credit check and you may be able to get funds the same day. You can also continue to drive your car while you pay off the loan. But title loans can trap borrowers in a cycle of debt that’s hard to reverse.

Refinancing your car loan? Find an Auto Loan Now

What is an online title loan?

Car title loans are secured by the value of your car. Depending on a number of factors — like the lender, how much your car is worth and the laws in your state — the amount you can borrow may range from $100 to $10,000, although the average auto title loan is about $1,000, according to the Pew Trust. Online title loans can be convenient if you want to start the process online or you want to set up an account electronically to check your balance and make payments.

Terms for online title loans are usually about a month long, although they may last more than a year depending on the state. The costs of these loans often translate to an annual percentage rate of around 300%. Because of the high APRs that come with these types of loans, they should always be a last resort.

Steps to take out a title loan online

Here’s the application process for a typical online title loan.

The lender will keep your car’s title until you repay the debt, but you will get to keep the car — so long as you continue to make payments. And keep in mind that the application process, along with requirements for approval, varies by state.

FAST FACTS

Where are title loans legal?

Many states allow title loans, while other states impose restrictions or don’t allow title loans. Depending on where you live, title loans may not be available or be available for less than you need. Make sure to check your state law to see what’s available in your state.

The following states allow title loans: Alabama, Arizona, California, Delaware, Georgia, Iowa, Idaho, Illinois, Indiana, Massachusetts, Missouri, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Wisconsin, West Virginia.

These states impose restrictions on title loans: Alaska, Florida, Kansas, Kentucky, Louisiana, Maryland, Maine, Michigan, Minnesota, Mississippi, Vermont, Washington.

These states do not allow title loans: Colorado, Connecticut, Hawaii, Oregon, Rhode Island, South Dakota, Wyoming.

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Risks of online title loans

Online title loans may seem great once you have the cash, but the drawbacks may not be worth it.

They are expensive

The average borrower pays an eye-popping $1,200 in fees over a year on a $1,000 loan, according to the Pew report.

Although lenders will typically charge either fees or interest — not both — they’re bad for your wallet. And remember, online title loans typically have APRs of around 300%.

It’s easy to drive up your debt

Most borrowers end up paying so much in fees or interest because they often can’t pay off the loan in time. When this happens, the lender may offer to renew or “roll over” the loan for a fee — as long as state law allows it. This is when debt can begin to pile up for many borrowers. According to the Consumer Financial Protection Bureau, about a third of borrowers roll over title loans six or more times, keeping people in debt for longer than they’d planned.

You might lose your car

If you default on a title loan, the lender can seize the car. One in five borrowers has their vehicle seized by the lender, according to a 2016 report from the CFPB. So if you use the car to get to work and lose your vehicle, your financial situation could worsen without reliable transportation.

Scams that are more difficult to avoid

Aside from the sky-high costs, another risk to taking out an online title loan “is the online environment itself,” says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling. “You don’t really know who you’re dealing with.”

For example, some predatory lenders may have hidden fees or bury their terms on their site, making it harder to figure out what you’re really getting.

Alternatives to online title loans

“Before you take out an online title loan, check your credit scores,” McClary says. You might qualify for other types of financing, “meaning you could avoid going to a car title lender altogether,” he says.

Not sure if an online title loan is for you? Here are a few alternatives.


Bottom line

Although an online title loan can be an option to get you fast cash, you may end up paying more than you thought you would. Only about 12% of borrowers manage to pay back their loan, fees and interest with a single payment without quickly reborrowing, according to the CFPB.

“It’s not a good route to travel on your journey of financial health,” McClary says. “You’re going the wrong direction when you use one of these title lenders.”

Refinancing your car loan? Find an Auto Loan Now

Carvana auto loan review: Used-car loans, with restrictions

Pros Cons
Check if you’re prequalified without affecting your credit scores Available only for in-stock Carvana cars
Prequalification good for 45 days Minimum annual income: $10,000
Will consider applicants with all types of credit Co-signers not allowed
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What you need to know about Carvana auto loans

If you’re considering an auto loan from Carvana, which offers its customers the ability to pick up their vehicle from one of its car-vending machines, here are a few key features to consider before deciding.

Only one option

Carvana offers loans only from its own inventory of used cars. If you want an auto loan that offers more flexibility, consider working with a bank or credit union, where you’ll likely have more options, including new car loans, private-party loans and used-car loans that aren’t restricted to a single dealership.

Prequalification available

Carvana offers a prequalification process that won’t affect your credit scores and can be completed online in as little as two minutes. After you fill out an application, you’ll see the estimated financing terms, including monthly payment, minimum down payment and annual percentage rate, that you might qualify for within minutes.

With many lenders, prequalification is often good for only 30 days. But Carvana’s prequalification offers are good for 45 days, giving you ample time to find a car that meets your needs.

All credit types welcome

Carvana considers working with consumers regardless of their credit history — although there are age and income minimums. Because Carvana doesn’t require borrowers to have minimum credit scores, you might qualify for a Carvana loan even if you have low credit scores.

Your guide to credit score ranges

A closer look at Carvana auto loans

If you’re shopping around, here are a few more things to be aware of when comparing a loan from Carvana to those from other lenders.

Is a Carvana auto loan the right fit for you?

A Carvana loan can be a good option if you’re interested in purchasing a used car, and if you’re comfortable with a buying process that takes place entirely online. Since there are no minimum credit score requirements or prepayment penalties, it could also be a good fit if your credit history has a few dings or if you plan to pay off your loan early.

Consider getting prequalified so you can compare Carvana’s offer with other lenders’ offers to find the best deal for your financial situation.

Should you consider an online car loan?

How to apply for a loan from Carvana 

All loan applications must be submitted through the Carvana website. The first step in the process is to get prequalified.

1.  Select “Get Prequalified” from the financing menu on the home page.

2. Provide the requested information, including your name, annual income, full mailing address and date of birth. Click “Next.”

3. Create an account by providing your email address and phone number and creating a password.

4. Carefully read the terms and conditions. If you agree, click “Get My Terms.” Agreeing to the terms will generate a soft credit inquiry, which won’t impact your credit scores.

Take note: Getting prequalified doesn’t guarantee that you’ll be approved for an auto loan or what terms you’ll receive. After you find the Carvana car you want to buy, you’ll still need to submit an official loan application, which generates a hard credit inquiry and could impact your credit scores. Only then will you know whether you’re approved for a loan and the terms you’re approved for, too.

Not sure a Carvana auto loan is right for you? Consider these alternatives.

If you want to finance the purchase of a car, but you’re unsure whether a Carvana loan is right for you, here are some other lenders to consider.

Find an auto loan that works for me Explore Auto Loans Now

Upgrade personal loan review: Self-employed may apply

Pros Cons
Wide range of loan amounts ($1,000 to $50,000) Origination fees of up to 6%
Clear application process for self-employed borrowers Only two loan terms: 36 or 60 months
Soft credit inquiry available to check potential rates No direct payments for debt consolidation
Find a personal loan that works for me Shop for Loans Now

What you need to know about an Upgrade personal loan

Upgrade is a San Francisco–based online lender founded in 2016 that offers unsecured personal loans, personal lines of credit and free credit monitoring. Its loans are available in every state except Colorado, Connecticut, Iowa, Maryland, Vermont and West Virginia.

Popular uses for Upgrade personal loans include debt consolidation, home improvements, and major purchases like vacations, medical procedures or emergency expenses. Here are some important details about Upgrade personal loans.

Learn more: Bill consolidation: How to do it with a personal loan

Wide range of loan amounts

One benefit of applying for a personal loan with Upgrade is the range of amounts you can potentially borrow. Upgrade offers loans as small as $1,000, depending on your state, though you should always determine if you need to finance a purchase at all before taking out a loan.

Upgrade issues loans up to $50,000, which is higher than a number of online competitors.

Self-employed borrowers may qualify

If you’re self-employed, you may want to look into a personal loan with Upgrade. Just keep in mind that self-employed applicants will likely have to submit more documentation during the application process than wage-earners. Upgrade requires two recent years of tax returns and most recent bank statements to verify income for self-employed (sole proprietor) borrowers. It may also request additional documentation.

Origination fees

One downside to Upgrade is that the lender charges origination fees, ranging from 1.5% to 6%, on every single loan. It may make more sense to work with a lender that doesn’t charge origination fees, particularly if you have excellent credit.

Upgrade deducts the origination fee when you receive your loan funds. For example, if you take out a $10,000 loan with a one-time 5% origination fee, you’ll receive $9,500 in your bank account. 

Since the origination fee is included in your annual percentage rate, or APR, an Upgrade loan could come with higher interest rates. On the flip side, competitors that don’t charge loan origination fees may have lower interest rates. 

No direct payments for debt consolidation

If you plan to use an Upgrade loan to consolidate credit card debt, you’ll have to pay creditors off on your own from the funds deposited into your bank account.

Compare that to lenders like Marcus and Wells Fargo, which will send money directly to your creditors to pay off your balances (if requested).

What else you should know about Upgrade personal loans

Here are some additional details about Upgrade personal loans.

Who an Upgrade personal loan is good for

With origination fees and higher interest rates than a number of competitors, Upgrade is probably not a top choice for people with excellent credit. But people with fair credit who want an unsecured personal loan might consider Upgrade. You can check your estimated rate without hurting your credit scores, since Upgrade uses a soft inquiry to screen you.

Your guide to credit score ranges

But if you’re looking for a loan that you’ll want to pay off early, Upgrade may be a good choice, since you won’t face any prepayment fees.

Because Upgrade is an online lender, you’ll want to be comfortable working with a financial-services company that doesn’t have physical bank branches. 

How to apply for an Upgrade personal loan

To apply for an Upgrade personal loan, you must be at least 18 years old (19 in some states); have a verifiable bank account; have a verifiable email address; and be a U.S. citizen, permanent resident or have a valid visa to live in the U.S.

You can check your estimated rate. If you decide to proceed with the loan, you’ll then have to complete a formal loan application.

You can apply online or start an application by calling 1-844-311-0088. Applications by mail are not accepted.

To complete the application process, you’ll need to submit the following information:

Upgrade may also request income verification documents, like recent pay stubs, bank statements or tax returns, or a copy of a government-issued photo ID.

If your loan application is approved, Upgrade may deposit the loan proceeds in your bank account as soon as one business day. Depending on how quickly your bank processes the loan transaction, it could take up to four business days to receive the funds.

Not sure an Upgrade personal loan is right for you? Consider these alternatives.

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Prosper personal loan review: Peer-to-peer lending for debt consolidation

Pros Cons
Loan amounts starting at $2,000 Potentially high interest rates
No minimum income requirement Fees for loan origination, late payments and check processing
No prepayment penalty Limited loan repayment terms
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What you need to know about a Prosper personal loan

Prosper isn’t a bank or credit union. It’s a peer-to-peer lending platform that allows institutions and individuals to earn interest by investing in loans to borrowers. Using its proprietary rating system, Prosper gives each potential loan a letter grade to help people decide whether to invest in it.

The most popular use for its unsecured personal loans is debt consolidation, with 75% of borrowers using their loan proceeds for that purpose. Home improvements and other large purchases are also common uses.

Low loan minimums

Loan amounts offered by Prosper range from $2,000 to $40,000, which may be ideal if you need to borrow only a few thousand dollars as an emergency loan for a car repair or medical bill. But if you’re looking for larger loan amounts, you’ll need to work with a different lender.

No minimum income requirement

You don’t need to earn a minimum income to qualify for a Prosper loan. But if you’re going to apply for a loan, it’s important to make sure you can repay it on time. Late and missed payments can negatively affect your credit.

You’ll need an established credit history — along with other factors — to qualify for a Prosper loan. You must have a minimum of three open tradelines on your credit reports, a debt-to-income ratio below 50%, no bankruptcies filed within the previous 12 months and less than five credit bureau inquiries within the previous six months. 

Potentially high interest rates

Prosper loan interest rates range from competitive to very high. If you have what Prosper considers “excellent” credit, you’ll be more likely to qualify for better rates. If your credit isn’t strong, you’re less likely to qualify for its lower rates.

In fact, the interest rates Prosper charges its least-creditworthy borrowers are much higher than the highest rates charged by some other personal loan lenders. If you can only qualify for Prosper’s highest rates, you may want to consider whether getting the loan is worth it. It may make more sense to explore a credit-builder loan.

Origination, late and check fees

A variety of fees may be attached to a Prosper loan. These fees can start to add up before you even get your funds.

Limited repayment terms

Prosper offers only two repayment terms — three years or five years. If you want more flexibility to repay your loan, you may want to look elsewhere. Of course, with Prosper, if you’re looking for a shorter loan term, you can always pay off your loan early without a prepayment fee.

Who is a Prosper loan good for?

A Prosper loan may be right for you if you want to consolidate credit card debt, complete a home improvement project or finance an emergency expense. But Prosper loans can’t be used for postsecondary education expenses. And if you need a loan to pay for a medical procedure, Prosper has a subsidiary, Prosper Healthcare Lending, that specializes in offering medical loans.

Because of the origination fees and potentially high interest rates, Prosper loans are best for those with good credit who want small loan amounts. Prosper could also be a good choice if a three- or five-year term works for you.

If you’re still establishing your credit, looking for a loan larger than $40,000 or want loan funds quickly, Prosper probably isn’t your best bet.

How to apply with Prosper

Prosper loans are available to U.S. residents 18 and older — except residents of Iowa and West Virginia — with a bank account and Social Security number. If you meet those requirements, applying should be straightforward.

You can get started online by providing some basic information about yourself to check your potential interest rate. If you want to proceed after that, you’ll need to register as a borrower and create a listing for your loan request, which investors will review and decide if they want to fund.

Be prepared to provide the following information on your loan application:

You may be asked to provide documentation that supports the information you provide in your application.

And you might have to wait awhile to receive your money. After your loan is listed, investors have up to 14 days to fund it, and there’s no guarantee that it will be funded. But if your loan is funded, it typically takes one to three business days for the money to be deposited in your account.

Not sure a Prosper loan is right for you? Consider these alternatives. 

If you want to explore other personal loan lenders, here are some options to consider. 

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The credit card perks you should know about for festival season

Credit Karma’s editors and writers want to help you stay on top of credit card news. The information below is accurate to the best of our knowledge when posted. Heads up: Credit card terms are subject to change, and the terms outlined below may not be current after the date of publication.

It’s music-festival season and some credit card issuers are taking the opportunity to expand their offerings to cardholders, with exclusive perks that could be music to your ears — and wallet.

American Express, Chase, Citibank and Capital One are all offering unique music-related perks to some cardholders across the U.S. And many could benefit music festival-goers, including those headed to Coachella, Outside Lands or Outlaw.

Continuing the latest trend of offering more perks that are also bottom-line friendly, these perks are also meant to provide unique value for cardholders in an increasingly competitive credit card rewards space.

Want to know more?

What perks are being offered?

Here are a few examples.

Platinum Card® from American Express cardholders and Centurion members can also gain access to Amex’s Platinum House, at The Avalon Hotel Palm Springs, during the festival weekend for perks like exclusive performances, acupuncture and massage, a sculpture garden and more.

What should cardholders keep in mind?

If you’re an avid music festival-goer, the trend in exclusive music-related credit card perks could be a great way to enhance your festival experience. But before you head out to the festival grounds, it’s a good idea to think about whether you were already planning to make a purchase, so that you avoid spending just to take advantage of perks like these.

Student loan debt stats for 2019: Breakdown by age, location and credit score

Average student loan debt over the past 12 months was $34,662 — but this varies based on age, city and credit score, a Credit Karma analysis found.

When it comes to age, for example, our analysis found millennial Credit Karma members shoulder the biggest student loan burden, with a total student loan debt of about $302 billion. But Gen X members have the highest average student loan balance per person at $42,557 each.

We also found that some U.S. cities have members with higher average student loan debt than others, and that student loan debt varies for members who fall into different TransUnion VantageScore 3.0 credit score ranges — with members in the 660 to 759 range having the highest total student loan debt burden. (Learn about our methodology.)

Want to know more?

Additional findings

Average student loan debt among Credit Karma members has risen nearly 7% year over year, from $33,686 in March 2018 to $35,910 in March 2019.
Millennial Credit Karma members carry the highest total burden of student loan debt, at more than $302 billion in total student debt. Meanwhile, Gen X members have the highest average debt per person at $42,557 each.
Average student loan debt is highest among members in Washington, D.C., at $54,377. This is more than twice the average student debt in Laredo, Texas, which has the lowest average student debt at $22,632.
Compared with other score ranges, members with VantageScore 3.0 credit scores from TransUnion of 660 to 759 carry the highest total student loan burden, with more than $168 billion in total student loan debt. But members with scores of 580 to 659 carry the highest average student loan debt per person, at nearly $37,000 each.

What’s the average student loan debt across generations?

Average student loan debt is in the tens of thousands of dollars for many adults aged 18 to 75 who are Credit Karma members, our analysis found.

Gen Z members 18 to 24 years old have the least total student loan debt, at about $37 billion. This breaks down to an average of $17,057 each — much less than the average student loan debt carried by every other age group.

Millennial members, on the other hand, are facing crushing student loan debt. In fact, our analysis found that this generation’s total student loan debt accounts for 55% of all total student loan debt among Credit Karma members — at about $302 billion. This means that each millennial member carries nearly $35,000 in student loan debt — that could be enough to purchase a new car or even be enough for a down payment on a home.

Still, Gen Xers and baby boomers who are members of Credit Karma are also under the weight of student loan debt. Gen Xers have the highest average student loan debt at more than $42,000 each, with baby boomers close behind at more than $40,000 each.

Average student loan debt for Credit Karma members by generation

Generation Total student loan debt Average student loan debt
Gen Z $37,185,473,039 $17,057
Millennials $302,327,280,713 $34,943
Gen X $154,185,702,786 $42,557
Baby boomers $52,492,424,622 $40,144

 

A pie chart that breaks down the total student loan debt burden by generation

What cities have the highest and lowest average student loan debt?

Washington, D.C., isn’t just the nation’s capital, it’s also the capital of student loan debt. Our research shows the average student loan debt of Credit Karma members who live there is $54,377. That’s almost $4,000 more than the average in Atlanta, the city with the second-highest average student loan debt.

What’s more, people with student loan debt in Washington, D.C., carry more than twice the average student loan debt than those who live in Laredo, Texas, the city with members who — at $22,632 — carry the lowest average debt.

10 cities with highest average student loan debt

Rank City Average student loan debt held by Credit Karma members
1 Washington, D.C. $54,377
2 Atlanta $50,608
3 Durham, N.C. $50,122
4 Irvine, Calif. $49,851
5 Boston $49,077
6 New Orleans $46,176
7 San Francisco $46,033
8 Nashville, Tenn. $44,518
9 Oakland, Calif. $43,991
10 Charlotte, N.C. $43,529

 

10 cities with lowest average student loan debt

Rank City Average student loan debt held by Credit Karma members
1 Laredo, Texas $22,632
2 Corpus Christi, Texas $28,423
3 Fresno, Calif. $28,631
4 Bakersfield, Calif. $28,729
5 Santa Ana, Calif. $28,940
6 Stockton, Calif. $29,278
7 El Paso, Texas $29,628
8 San Bernardino, Calif. $29,981
9 Anchorage, Alaska $30,274
10 Garland, Texas $30,479

What’s the average student loan debt by credit score range?

As we saw when looking at average student loan debt by age, looking at average student loan debt across TransUnion VantageScore 3.0 credit score bands shows that Americans in all credit ranges are affected by student loan debt.

VantageScore 3.0 score band Total student loan debt held by Credit Karma members Average student loan debt held by Credit Karma members
Thin file (no score) $3,706,777 $9,833
Lower than 500 $48,197,189,205 $27,493
500-579 $119,630,668,455 $33,041
580-659 $163,778,019,815 $36,876
660-759 $168,988,554,530 $36,034
760 and higher $46,016,389,500 $35,736

 

In the chart above, those with VantageScore 3.0 scores between 580 and 659 have the highest average student loan debt, at almost $37,000 each, while those in the 660 to 759 range carry the highest overall student debt burden.


Methodology

To determine the average student loan debt among Credit Karma members, we looked at those who had student loan debt between April 2018 and March 2019 (approximately 16 million members). In aggregate, we analyzed the amount of student loan debt carried by certain age groups and VantageScore 3.0 credit score bands from TransUnion. We also aggregated ZIP codes from members’ TransUnion credit reports to determine the most-populated U.S. cities where members help the most student loan debt on average.

Tax reform impact: Millennials see smallest bump in federal refunds, Gen Z sees largest

Americans overall have seen their federal tax refunds shrink from last tax season to this one by about 0.7% on average, according to the IRS. A review of Credit Karma Tax filers shows some age groups and income brackets faring better than others.

To find out how average federal refunds differed when looking at different age groups, income and marital status, we compared members who filed with Credit Karma Tax within the first two months of the current filing season with members who filed during that period last year.

Notably, we found that Gen Z filers (18–24) and those 65 and older on saw the biggest percentage increase in refund amounts on average year over year. While millennial filers (25–39) also saw a year-to-year gain on average, it was the smallest increase among all age groups. (Learn about our methodology.)

Key findings among early Credit Karma Tax filers

Gen Z filers saw an increase of 24% in the average federal refund amount between tax years 2017 and 2018 — the largest increase overall among age groups. Millennials had the smallest increase, just 3% on average year over year.
Among all age groups, filers age 40-44 saw the largest average federal refund amount ($2,034 — an 18% year-over-year increase) for the tax year 2018, while those 65 and older have gotten the smallest amount back on average (just $789).
Filers with more than five dependents, and who owed tax, saw a 29% increase in the average amount they owed.

Amounts refunded and owed — by age, income and filing status

How Americans seem to be faring this tax season appears to depend on the lens you’re looking through, according to our review of Credit Karma Tax filers.

Age

Average federal refund by age, among early Credit Karma Tax filers
Age range 2017 tax year 2018 tax year Percent change
18–24 $719 $889 24%
25–39 $1,319 $1,352 3%
40–44 $1,727 $2,034 18%
45–54 $1,361 $1,431 5%
55–64 $1,132 $1,089 -4%
65 and older $658 $789 20%

By income

Average federal refund by income, among early Credit Karma Tax filers
Income bracket 2017 tax year 2018 tax year Percent change
$30,000 or less $909 $983 8%
$30,001–$50,000 $1,300 $1,250 -4%
$50,001–$75,000 $1,761 $1,821 3%
$75,001–$100,000 $1,960 $2,007 2%
$100,001–$125,000 $2,258 $2,289 1%
$125,001–$150,000 $2,394 $2,380 -1%
$150,001–$175,000 $2,815 $2,701.5 -4%
More than $175,000 $3,261 $3,481.5 7%

By filing status and dependents

Median federal refund by marital status, among early Credit Karma Tax filers
2017 2018 Percentage Change
Head of household $3,708 $4,316 16%
Married filing jointly $2,034 $2,430 19%
Married filing separately $978 $1,037 6%
Qualifying widower $3,081 $3,709 20%
Single $954 $971 2%

And it appears tax reform is a mixed bag for Credit Karma Tax filers with more than five qualifying dependents.

What it all means

It’s important to note that we analyzed Credit Karma Tax filer data available through March 28, 2019 — so we may see these numbers change as Tax Day approaches.

Regardless, the biggest takeaway from this analysis is that while many factors can influence how much any individual filer will receive as a refund or how much they will owe, average amounts seem to vary depending on the age and income groups you’re looking at — as well as filing status and numbers of dependents.


Methodology

To determine how federal refunds and tax bills changed year over year, we analyzed Credit Karma Tax member data for those who filed their 2018 federal taxes with Credit Karma Tax between Jan. 28, 2019, and March 28, 2019, compared to those Credit Karma Tax members who filed their 2017 federal taxes with Credit Karma Tax between Jan. 27, 2018, and March 27, 2018.

The data reflect anticipated federal refunds barring any changes by the IRS. These findings are subject to change as more people file their 2018 federal returns.

How does a 401(k) loan work?

If you’ve been contributing to a 401(k), you might be able to access some of the money you’ve saved early.

But a 401(k) loan could be costly. There are rules you need to follow so that you aren’t taxed on the amount you borrow. And there are possible drawbacks — like missing out on potential investment growth — to consider before deciding to take out a 401(k) loan.

Let’s look at how a 401(k) loans work, as well as the pros and cons of getting one.

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How does a 401(k) loan work?

While some 401(k) plans allow you to borrow from your account, there are still some plans that don’t allow it. Look at your plan documents to see whether a loan is allowed on your 401(k) account.

If you are allowed to borrow, you’ll be required to pay your 401(k) loan back over a set period of time. A key difference with this type of loan, though, is that you’re borrowing money from yourself — so you’re paying yourself back, with interest.

Here are some other unique features of 401(k) loans.

Maximum loan amount of $50,000

A 401(k) plan will usually allow you to borrow up to 50% of your vested balance, with a maximum loan amount of $50,000.

Say you have $150,000 vested in your 401(k) account. You won’t be able to borrow the full 50%, or $75,000, of your vested balance. The most you could borrow in this scenario would be $50,000.

On the other hand, if 50% of your vested account balance amounts to less than $10,000, your plan may include an exception and allow you borrow up to $10,000.

You may be able to take more than one loan from your 401(k), but the total amount of your loan balance can’t exceed these limits.

Maximum loan term of five years

The maximum loan term is five years — with one possible exception. If you’re using a 401(k) loan to buy a home that will be your primary residence, you may be able to repay the loan over a longer period of time — up to 25 years in some plans.

Loan payments made at least quarterly

Loan payments are typically fixed and must be made at least quarterly. You might be able to make payments with after-tax deductions from your paycheck.

How do you apply for a 401(k) loan?

If your 401(k) plan offers loans, your plan administrator can provide information on the steps you’ll need to take to apply.

Keep in mind that if you’re married and planning to borrow more than $5,000, some plans will require your spouse’s written consent.

If the loan is approved, you’ll sign a loan agreement that includes details like the principal, loan term, interest rate and any fees.

401(k) loans: The pros and cons

While 401(k) loans can be a low-cost way to borrow money, there are some drawbacks to consider, too.

Pro: Low cost

Compared with other forms of borrowing, 401(k) loans are a low-cost way to borrow money. Rather than paying a lender interest, you’re paying that interest to yourself. This could be a better option than using a credit card or taking out a loan that could have a higher interest rate.

Interest rates vary, but you must be charged a rate comparable to the rate you would get if you took out a personal loan of a similar size through a traditional lender.

What is the average interest rate on a personal loan?

Con: Missed investment growth

When you borrow money from your 401(k), that money is no longer invested, which means you could potentially miss out on years of investment growth. There’s no way to know in advance how much money your investments could potentially earn, but it’s important to understand that you could lose out on some investment returns.

On top of that, if you decide to reduce or stop contributions to your 401(k) account as you repay your loan, you could miss out on any returns on those contributions. When you stop contributions, you’ll also lose out on any matching contributions from your employer.

Pro: Quick funding

Since you’re borrowing money from yourself, the process can be fast. You may be able to access your money within a week.

Pro: No credit check

Your credit scores won’t impact your ability to take out a 401(k) loan. Since you’re borrowing money from yourself, there’s no credit check.

Con: Penalties for missed payments

If you miss loan payments and your loan goes into default, it can be treated as a retirement plan distribution. That means you’ll have to pay income tax on the total amount of your loan balance. It could get even more expensive from there.

You would likely have to pay a 10% penalty tax for an early withdrawal if you’re under age 59½ and don’t qualify for an exception.

Keep in mind that if you don’t repay your loan, you’re essentially taking money from your retirement fund. Any unpaid loan amount means fewer dollars in your 401(k).

Taking a loan from your 401(k)? Some things to know about repayment.

Con: Loan balance due if you leave your job

If you leave your job while you’re still paying back your loan, your 401(k) plan sponsor may require you to pay back your remaining balance in full.

If you can’t repay it, the amount of money you still owe will be considered a “deemed distribution” and could be taxed as it would be if you were to default on the loan.

To avoid paying tax at the time of distribution, you could roll over your loan balance into an eligible retirement plan by the federal income tax filing date (including extensions) for that year.


Bottom line

Depending on your financial situation, a 401(k) loan could be a good option for accessing money to pay off high-interest debt or to cover a big expense. But in other cases, this type of loan could end up costing you, so it might not be the right choice.

Before you take out a 401(k) loan, consider possible alternatives, like a home equity loan or personal loan. And if you do decide to borrow from your 401(k) account, be sure to carefully read the information and loan terms provided by your plan sponsor.

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Your options for auto repair financing

If you’re struggling to come up with cash for an emergency auto repair, you’re not alone.

According to a AAA survey, a new car costs an average of almost $1,200 per year to maintain and repair — and only one-third of U.S. drivers are financially prepared to cover unexpected repair costs.

If you need an auto repair that’s not covered by your warranty or your insurance, and you don’t have the cash on hand, there are a few ways to help you get the financing you need. Let’s review some options and compare pros and cons of each.


Financing auto repairs with a personal loan

A personal loan is one option that could help you get the money you need for your car repair. And depending on the lender and whether you’re approved, funds may be deposited into your checking account as soon as the next business day. These types of loans are installment loans, meaning lenders will allow you to pay back the money you borrow over time through regular monthly payments. In addition to the amount you borrow, you may be required to pay interest and fees, which can vary from one lender to the next.

Your credit history is one factor that may affect your ability to qualify for a personal loan — and if you’re approved, your credit will likely affect the terms and interest rate you’re offered. If you want to take out a personal loan for auto repairs, but can’t qualify for the loan or the rates you want, you may want to consider applying with a co-signer, who can help give the lender confidence that the debt will be repaid.

Here are some places you can go for a personal loan, and how those loan options compare.

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Traditional loans

Banks and credit unions can be a good starting point for a personal loan when you’re ready to shop for competitive rates. Online lenders are another option to consider — you can compare terms on auto repair financing between all the personal loan lenders you’re considering to look for the best loan terms for your situation.

But before you borrow money from any financial institution, you should review the terms of your personal loan.

Personal loan terms to know

Tip: Thinking about getting your auto repair financing from a payday lender? Consider reaching out to your credit union to learn more about a payday alternative loan, which can be an affordable loan option for some. These loans range from $200 to $1,000 and are paid back over a one- to six-month period, with a 28% APR cap.

Payday loans

Payday loans, sometimes referred to as cash advance loans or check advance loans, typically require that you provide a post-dated check or give the lender permission to make an automatic withdrawal from your bank account. Payment for the full loan balance, plus fees, may be due by your next payday.

Borrowing against your future paycheck has limitations — as well as risks. In states where payday loans are allowed, the maximum loan amount may be capped at a set amount. Even with such a small loan, the fees can be astronomical — equal to APRs as high as 400% or more. And additional fees may be charged if you don’t have the funds available in your account when the payment is set to go through, or if you roll over the loan for another reason, if allowed.

Title loans

Like payday loans, car title loans are risky short-term financing options. If you’re approved for a car title loan, the lender provides a loan in exchange for your car title. When you repay the loan and fees, which are usually due 30 days after the loan is issued, you can get your title back.

But if you fail to pay, you either face a vehicle repossession or have to cover “rollover fees,” on top of other fees, so that you can delay your loan repayment date.

This can be a very expensive and risky way to borrow money. The typical APR for a car title loan is 300%. According to the Consumer Financial Protection Bureau, more than two-thirds of auto title loan borrowers roll their payment over at least six consecutive times due to the difficulty of repaying the high costs. The CFPB also found that one in five borrowers ends up having their vehicle repossessed because they can’t repay their debt.

Financing auto repairs with a credit card

Using a credit card could be a quick and convenient option for covering an emergency auto repair — for some. But weigh these options before you reach for plastic.

Existing cards in your wallet

If you’re considering turning to a credit card you already have, know that paying for your auto repair with a credit card may not be cheap. For example, at an APR of 15% with a $25 per month payment, a $1,000 repair could take you 56 months to repay and cost you almost $395 in interest. At 20% APR, it would take 67 months to pay for the repair and cost you almost $662 in interest.

For that reason, we recommend using an existing credit card only for purchases you can comfortably afford to pay on time and in full within one billing cycle.

New card with a low introductory APR

While using an existing credit card may hit you with high-APR costs, there are other ways to pay for an auto repair with a credit card. If you want to avoid getting hit with high interest charges, check out credit cards that offer introductory 0% purchase APRs. With these credit cards, you can avoid interest charges on your purchases during an introductory period after your account opens — typically, this time lasts for about 12 months to 21 months. But be aware: After the intro period ends, your card will have an APR. If you don’t pay your balance off before the intro period is up, the remaining balance will get hit with the APR.

If you qualify for a card that offers an intro 0% purchase APR, and know you can repay the full balance of your auto repair charges before the intro period ends, using a credit card could be the most affordable way to finance your auto repairs.

Branded cards from your mechanic or auto supply store

Some mechanics or auto parts stores offer financing options for car repairs through branded credit cards.

Synchrony offers a Synchrony Car CareTM credit card in partnership with a number of major auto repair chains — including Midas, NAPA Auto Parts and Discount Tire — that allows customers to apply for a co-branded credit card that can be used to pay for repairs, maintenance, gas and more.

And Napa AutoCare, for example, offers customers a NAPA EasyPay credit card through Synchrony that includes some perks and no annual fee for new cardholders.


Bottom line

Comparison shopping isn’t just useful for getting the best deal on jeans or a new kitchen appliance. It can help make your auto repair financing more affordable, too.

Before you take out a loan or apply for a new credit card to finance your car repair, compare quotes for the repair work you need. Ask mechanics about pricing before you take your car to the shop and consider asking for a written estimate.

Once you decide where to have your repairs done, you can compare loan offers to make sure you’re getting the most cost-effective deal available for you.

And before you get stuck in the same boat again, start building up an emergency fund for future financial needs.

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