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MA non-judicial mortgage foreclosure can take about 120 days, or four months, to complete. Judicial foreclosures vary depending on your state. In California, this process can take two to three years.

A nonjudicial mortgage foreclosure can take about 120 days, or four months, to complete. Judicial foreclosures vary depending on your state. In California, this process can take two to three years.

If you’ve fallen behind on your mortgage payments, the threat of foreclosure can become overwhelming. If you wonder “How long does foreclosure take?” know that you still have options.

Understanding what you can do if your house is in foreclosure can help you mitigate the damage done to your credit and overall financial health. Depending on your situation, you might even discover how to save your home from foreclosure. 

What Is Foreclosure?

Foreclosure means that your mortgage lender can legally repossess your house due to nonpayment. They can then sell your house to help repay the debt you owe on it. And this is true whether you are behind on your first or second mortgage. Home mortgage rates will define when lenders can begin the foreclosure process—this is typically determined by how behind on your payments you are.

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Remember that every state has different rules and regulations for foreclosure procedures, and many states offer exceptions that may work in your favor. If you think you may be in danger of foreclosure, work with a legal professional to determine your state’s guidelines.

For example, in some states, you have to miss a certain number of payments before foreclosure processes can begin. Some states may also allow you to reinstate the loan up until a specific deadline.

What Happens When a House Goes Into Foreclosure?

State and federal laws, your mortgage agreement, and the mortgage holder’s personal decisions are major factors. Generally, the foreclosure process starts three to six months after you miss your first mortgage payment, assuming you don’t catch up on payments.

State laws vary, so work with a legal adviser or your lender to determine what will happen in your specific situation. In general, mortgage foreclosure involves the following steps:

  1. The mortgage holder gives the defaulting homeowner a written notice of default. This is a formal notice that you have fallen behind on your payments and are in default.
  2. The homeowner receives a limited amount of time to correct the default and pay all amounts due. That can include interest, penalties, attorney charges, and any other fees allowed by your state’s laws and your mortgage contract.
  3. Once the time allowed for the homeowner to correct the default has passed, the mortgage holder will give notice of a foreclosure sale. This is the actual day of foreclosure.
  4. Many states have a redemption period after the foreclosure sale, allowing you to reclaim your home.

Foreclosure actions can wipe out some of the property owner’s debt, such as the original mortgage, home equity loans, and second mortgages. However, you still have to pay any remaining costs associated with your second mortgage.

You might also be responsible for some of the mortgage payments even after losing your home. If the property sells for less than the balance owed on the original loan, a lender could file a deficiency judgment against you in court. 

A deficiency judgment requires that you repay the difference and it lets the mortgage holder collect your assets to compensate for the debt. Not all states allow deficiency judgments in all circumstances. Work with a lawyer or legal adviser to determine your rights and plan of action.

Lenders’ Obligations in a Mortgage Foreclosure

Lenders have different obligations in different states. However, when it comes to mortgage foreclosures, they all typically have at least three common requirements:

  1. Notice of default. In most states, lenders are required to provide a homeowner with sufficient notice of default. The lender must also provide notice of the property owner’s right to cure the default before the lender can initiate a foreclosure proceeding.
  2. Written proof of money owed under the mortgage. Lenders are usually required to file statements that itemize the amount the property owner owes under the mortgage. 

The amount owed includes the principal, interest, late charges, attorney fees, and any other charges the lender is permitted to charge under the terms of the mortgage or the laws of the state.

  1. Service member relief. Lenders are also required to certify in writing that the property owner is not a member of the armed services before initiating a foreclosure action. 

The Servicemembers Civil Relief Act is intended in part to protect deployed active-duty service people. If you are a member of the armed services, consult an attorney about your rights as they concern foreclosure proceedings.

Ways to Stop or Prevent a Foreclosure

The best way to stop a foreclosure is to take action to prevent the lender from beginning the process. When possible, try these proactive ways to save your home from foreclosure:

  • Catch up on your default. In many cases, the first notice of default provides you with options for catching up on what you owe. If you can make up your payments and stay current, the lender is much less likely to foreclose.
  • Ask for a loan modification. Many lenders will work with you if you need help making your loan payments. Home affordability programs can help you catch up on late payments or potentially reduce the amount you pay if you’re experiencing financial hardship.
  • Request a short sale. If you can’t afford your home anymore, you can request a short sale. The lender has to agree to a short sale, but if they do, you can sell the house to a third party for less than you currently owe. 

In some states, the difference is forgiven, while in others, you may be required to pay the difference between the sale price and the remaining loan amount. A short sale will affect your credit, but the effect will be less than that of a foreclosure or bankruptcy.

  • File for bankruptcy. Filing a bankruptcy petition that includes your mortgage puts an automatic stay in place. This means that lenders can’t continue any type of collection procedure until the bankruptcy has been resolved or dismissed. 

Whether or not you keep your home depends on what type of bankruptcy you file and whether you can work out mortgage payments in the future. Filing for bankruptcy can have severe consequences for your credit and finances. Consult with an attorney before moving forward with this option.

Defenses Against Foreclosure

If the lender has already filed for foreclosure and none of the options above will work for you, you might be able to legally fight the filing with a technical or substantive defense. Only you and your attorney can determine how to proceed through the process.

One example of a technical defense is when a property owner is not given adequate notice of the default and proceedings. However, technical defenses are often not very helpful in preventing foreclosures because a mortgage holder can easily correct the defense by correcting the procedural defect. 

Substantive defenses use the terms of the mortgage itself to halt a foreclosure. Here are some examples of substantive defenses to the foreclosure process:

  • You aren’t in default, and the debt and interest have been paid on time according to the terms of the mortgage.
  • The mortgage holder committed fraud in obtaining the mortgage.

If you believe you may have a legal reason to stop the foreclosure, you need to file an objection to the sale with the court. In most states, you can file objections before the foreclosure sale takes place, after the sale takes place, or before the court ratifies the sale if the sale was improperly conducted. 

When a debt is forgiven in a foreclosure action, taxpayers are considered to have made money. That means that the taxpayer or property owner may owe taxes on the difference between the value of the home and what is owed on the mortgage and forgiven in the foreclosure action. You will want to work with your tax professional to help determine your tax responsibility in this situation.

Consider this example to understand how it might work:

  • You owe $120,000 on the home. The bank sells your home for $100,000.
  • The bank accepts the $100,000 it got in the sale and forgives the rest of the debt via foreclosure, which means it doesn’t seek to collect that money from you.
  • The IRS considers that $20,000 as a form of income because it’s money you should have had to pay but didn’t. You might owe taxes on that $20,000.

Help Your Credit With Credit.com

Short sales and other foreclosure proceedings can hurt your credit by a substantial amount. Foreclosure can appear on your credit report for seven years. In many cases, you will be required to wait two to eight years before you can purchase another home.No matter what happens with a foreclosure, it’s a good idea to find out where your credit stands and how you can work to improve it. Credit.com provides a Free Credit Report Card that offers a look at your credit history and a better understanding of how you’re doing with the five factors that impact your score.

Source: credit.com

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Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.

A personal loan enables you to borrow a lump sum of money and repay it in fixed installments. While personal loans can be a useful tool, there are important factors to consider before taking one out.

According to recent statistics, millions of Americans have personal loan debt, with the average loan amount being $16,931. Personal loans can be used for various reasons, whether for debt consolidation, medical expenses, or home improvements. But how do you know if a personal loan is right for you? 

Everyone’s financial situation is unique, so be sure to understand what to know about personal loans before you determine if it’s the best way to go. Here are seven things you should know before taking out a personal loan.

1. How Personal Loans Work

A personal loan allows you to borrow money and repay it in fixed installments. You can get a personal loan from banks, credit unions, or online lenders. Once you choose a lender, you’ll need to submit a formal application. When filling out the application, you’ll likely need to include identification such as your Social Security card, your address, and proof of income. 

If your application is approved by the lender, you will receive a lump sum of money that you will repay in monthly payments plus interest. 

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2. Debt Consolidation Isn’t for Everyone

With increasing amounts of credit card debt, personal loans are becoming increasingly popular. Although personal loans are a common solution for debt consolidation, that doesn’t mean it’s right for you. Here are a few indicators that debt consolidation through a personal loan is not the best solution, and you’d be better off seeking debt counseling or another financial avenue:

  • With your current financial pace, you’ll pay off your debt in less than a year. If this is the case, debt consolidation likely will not be worth it.
  • You can’t afford the monthly payment. You don’t want to be stuck with an additional payment you can’t afford. This could lead to late payments or, worse, loan default.
  • You will pay more interest and fees with a personal loan compared to your existing debt. You don’t want to take out a personal loan if it will cost you more money in the long run.
  • Your spending isn’t under control, and you might rack up more debt after you pay off your existing debt. There’s no point in taking out a personal loan to consolidate your debt if it will just tempt you to accumulate more debt on paid-off credit cards.
  • Your credit score isn’t good enough for an acceptable interest rate. You might want to take the time to improve your credit before applying for a personal loan.

Consider these statements and compare current debt costs to the costs of a personal loan to determine if debt consolidation is the best option. Also, note that not all personal loan providers are the best for debt consolidation. Some lenders specialize in debt consolidation, whereas others don’t have good enough offerings to make debt consolidation with their loans worth it.

3. The Difference Between Secured and Unsecured Loans

Most personal loans are unsecured loans. This means you do not have to offer any collateral to receive the loan. Types of collateral include owned property, a house, or a car—anything the lender can use to pay back the money owed if you default on the loan.

However, not all personal loans are unsecured, and some lenders offer secured loans that require collateral. For example, if you have little to no credit or a poor credit score, lenders may only offer you a secured loan because your credit report isn’t a good enough indicator that you will repay the loan. If you don’t mind putting up collateral and intend to pay back the loan in full, secured loans don’t have to be bad.

4. Compare APRs Before Selecting a Lender

The annual percentage rate (APR) combines the personal loan interest rate and any additional loan fees, and it fluctuates based on the personal loan provider. APRs typically range between around 5% and 36%, and this is partly determined by your credit history.

Popular personal loan providers, such as Best Egg and Achieve, are known for low APRs, especially if you have above-average credit. However, if you have a good credit score and a loan provider is still requiring a high APR, you might want to consider looking into other options for a better APR. A bad APR could cost you hundreds of unnecessary dollars over the course of the loan.

5. The Impact of a Hard Inquiry on Your Credit Score

A hard inquiry is when a lender or creditor pulls your credit for the purpose of offering you a loan. This will ding your credit a minimal amount. The hard inquiry will remain on your credit report for up to two years, but it will likely stop affecting your score after one year. Plus, if you repay your loan on time and take care of your credit in the meantime, your credit will bounce back.

It’s also important to note that you should keep your loan shopping within a specific time frame. In other words, only apply for personal loans for two weeks to 45 days at the most. If it takes any longer, you might receive multiple dings on your credit report rather than just one.

6. The Max Loan Offer May Not Be the Best Option

Personal loans can range between $2,000 to $50,000, and some lenders, such as SoFi, offer as much as $100,000 loans. With that in mind, you may qualify for a large amount, but that doesn’t necessarily mean you should take the highest offer. Consult your finances and budget before deciding what personal loan amount to accept, because if you accept one for more money than you can afford, you will likely regret this.

Check Your Credit Score Before Applying 

Most personal loan providers require at least a 640 credit score. However, some companies, such as Achieve and Upstart, offer loans to 620 credit scores and up. If you make your personal loan payments on time and responsibly handle your other credit responsibilities, a personal loan can improve your credit in the long run and immensely help your credit card utilization rate if you choose to use it for debt consolidation.

Before you determine if a personal loan is right for you, pull your credit first. With Credit.com, you can check your credit score for free. 

Source: credit.com

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Speaking with your current lender about refinancing options is a great first step if you currently have low credit.

Key Takeaways: 

  • Refi programs exist to specifically help low-credit applicants.
  • A cosigner with a high credit score can help you successfully apply for refinancing.
  • Mortgages with APR may be more costly in the long run.

When you refinance your mortgage, you’re basically replacing that mortgage with a different loan. Your lender will then use that new mortgage to pay off the old one first, so you’ll only have one monthly payment.

A refinance can have different interest rates and terms. A lower interest rate can result in less expensive monthly payments and reduce the overall cost of your loan. Conversely, shorter terms can help you pay down a new loan much faster via larger monthly payments.

It’s certainly possible to refinance with bad credit once you know your options. We’ll discuss several popular options and explain how Credit.com can help you find strong mortgage rates based on your current circumstances.

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Can You Refinance With Bad Credit?

Your credit score plays a major role when you apply for a loan, but refinancing and  is certainly possible. In fact, Federal Housing Administration (FHA) loans can help you secure financing with a credit score between 500 and 579 if you provide a 10% down payment.

Five Options for Refinancing With Bad Credit

It’s possible to secure new funding with low credit. Below are five of the most popular options for low-credit refinancing. 

1. Talk to Your Current Lender

If you’re in good standing with your current mortgage lender, talk to them about refinance options. Being in good standing means you’ve regularly made on-time mortgage payments and haven’t had any issues with your lender.

Lenders make money on your mortgage. If you want to refinance to extend your mortgage payments—to reduce your monthly payments, for example—the lender could make more money off your loan in the future. Your current lender may want to keep your business and could be more likely to work with you.

2. Use a Cosigner

A cosigner is someone willing to help you take on the responsibility of making regular mortgage payments. Cosigners with good credit can help you secure funding you normally wouldn’t be eligible for.  

Cosigners can be spouses, relatives, close friends, or business partners. If you’re attempting this approach, make sure you have a strong financial plan to show your cosigner that you’ll make timely payments. With a cosigner, your credit history  is linked, so missing a payment can hurt both your credit scores.

3. Use an FHA Streamline, Simple, or Cash-Out Refinance Loan

FHA-backed mortgages are known to have less strict credit requirements, and the same applies to refinances. If you have bad credit and late payments on your credit report, you might consider FHA programs—especially if you already have an FHA loan.

Streamline FHA Refinance

Streamline FHA refinance programs are for those with an FHA mortgage who want to refinance with an FHA loan. Your mortgage must be current, and you can’t get more than $500 cash out of this refinance. Appraisals aren’t a requirement for these loans.

There are two types of streamline loans:

  • Credit qualifying: You provide the income and credit documentation you normally would when getting a mortgage. If you’re taking one of the borrowers off the mortgage during the refi, you must use this option.
  • Noncredit qualifying: At least some credit review—and a review of past performance on your existing mortgage—is required. But it may not be as comprehensive as a credit-qualifying loan.

Simple Refinance

Simple refinance is another option that doesn’t allow cash out. This program is only relevant for refinances on primary residences or secondary residences with HUD approval. You also have to be up-to-date on mortgage payments.

Cash-Out Refinance

FHA cash-out refinance programs let you get some cash back during refinance if you have equity in your home. You’re limited to 85% to 95% of equity, depending on the status of your current mortgage.

To qualify, you must have had the property for at least 12 months and made the last 12 mortgage payments in the month they were due. Other credit and financial factors may also apply.

4. Apply for a VA Refi Program

The VA provides several refinance options for those who are eligible because they’re qualifying veterans, active-duty service members or eligible family members. As with FHA refinance options, you can find programs that support straight or cash-out refinance.

Interest Rate Reduction Refinance Loan

This is a refinance option that gets veterans a lower interest rate on their mortgage. Here’s who’s eligible:

  • Veterans
  • Active-duty service members
  • Members of the National Guard or Reserves called to active duty
  • Some surviving spouses
  • Current Reserve and National Guard members (after six years of qualifying service)

Cash-Out Refinance

This VA refinance has the same eligibility requirements as the Interest Rate Reduction Refinance Loan. The loans typically come at market rates and include a VA funding fee.

5. Consider the USDA Streamlined Assist Refinance Program

The United States Department of Agriculture (USDA) offers a few refinance programs but notes that the Streamlined Assist refi is the most popular. It doesn’t require an appraisal unless a subsidy is involved. A full credit review is not required. However, the loan must have been paid on time for the previous 12 months and is only available for certain types of homes.

Improve Your Credit Before You Refinance

If you can’t find a refinance that works with your credit score—or you don’t find one that works for you—you might want to improve your credit before applying for a refi. Start by accessing 28 of your FICO® scores via ExtraCredit® to see where you stand.

You can improve your credit by:

  • Making on-time payments. Payment history accounts for a large part of your credit score.
  • Paying down revolving credit, such as credit cards. Credit utilization is another big part of your score.
  • Dispute credit errors on your report with the credit bureaus to repair your score.

Find the Right Mortgage for You

No matter where you’re at, finding a mortgage is an exciting—and overwhelming—process. Whether you’re ready to start looking for a refinance now or want to wait until you’ve improved your credit, Credit.com can help you with your goals. 

We offer tools that help you find competitive mortgage rates and provide a mortgage calculator for anticipating your financial needs.

Source: credit.com

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Although you’re allowed to sell your own home, doing so is a lot of work. Before you move forward, take time to consider the pros and cons of handling things on your own.

If you’re thinking about putting your house on the market, you may be wondering whether you can sell your own home. Yes, you can, but don’t put up a For Sale sign just yet. Although you’re allowed to sell your own home, doing so is a lot of work. Before you move forward, take time to consider the pros and cons of handling things on your own.

Statistics on FSBO Homes

For sale by owner, better known as FSBO, tells buyers you’re not using a real estate agent or a broker. According to the National Association of REALTORS®, FSBO listings accounted for 10% of all home sales in 2021.

Nearly 30% of owners used word-of-mouth marketing via friends, family members, and neighbors to market their listings. Owners also used yard signs, third-party real estate aggregators, social networking sites, and other FSBO marketing methods to find buyers.

Why Sell Your Own Home?

Many people ask “Can I sell my own home?” because real estate agents receive a commission on every sale they make. The average commission is 6%, with the listing agent receiving slightly more than the buyer’s agent. If your home sells for $300,000, that’s $18,000 in commissions at the average rate.

Then, assuming the listing agent gets 3.5% and the buyer’s agent gets 2.5%, selling your own home would save you $10,500. You could use that money to buy new furniture, cover some of your closing costs, invest in the stock market, or take a vacation.

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Potential Pitfalls of Selling Your Own Home

If you decide to sell your own home, you’ll have to do all the work that a real estate agent would normally do. Some of the most important tasks include:

  • Setting a sale price
  • Preparing your home for walk-throughs and open houses
  • Advertising the property
  • Following all relevant real estate laws
  • Meeting with potential buyers and their agents

Learning how to do these things is time-consuming, and there’s also the risk you’ll make a serious mistake. For example, if you price your home based on emotions instead of market data, you may have trouble attracting potential buyers.

When you sell your own home, you also lose the opportunity to benefit from an agent’s extensive network of contacts. Experienced agents maintain relationships with plumbers, landscapers, home staging professionals, and other people who can help you get your home ready for the market. If you don’t have these relationships, you may have to wait weeks or even months before a home service provider can add you to their busy schedule.

One of the biggest potential drawbacks to selling your own home is that you may not get as much money as an agent would. The National Association of REALTORS reports that FSBO listings sold for an average of $225,000 in 2021. In contrast, agent-listed homes sold for an average of $330,000.

Tips for Selling Your Home Without an Agent

If you decide to sell your own home, follow these tips to maximize the sale price and reduce the amount of time it takes to find a buyer.

1. Choose the Right Sale Price

When setting a price for your home, you have to think strategically. If it’s priced too high, you’ll have trouble selling. If it’s priced too low, you’ll lose out on potential profit. The price has to be just right to attract a buyer without leaving money on the table. To find the right price, consider these factors.

Recent Sales

A comparative market analysis lists recent sales in your neighborhood, giving you valuable information about local prices. Normally, a real estate agent would provide a CMA report for you, but it’s possible to create your own. To get started, use public records or third-party listing websites to identify sold homes that are approximately the same size and age as your home.

Once you have the initial list, narrow it down by looking for homes that have features similar to yours. For example, if your home has four bedrooms and two bathrooms, you’ll want to include other four-bedroom homes in your analysis.

The market changes quickly, so limit your search to homes sold in the last three months. Once you have a workable list, note the sale price of each listing. If you’re not comfortable creating your own CMA report, consider getting a professional home appraisal.

Location

The location of your home has a big impact on the sale price. Many buyers are willing to pay a premium to move to an excellent school district or reduce the amount of time it takes to get to restaurants, salons, office buildings, and entertainment venues.

Location refers not just to what city you live in but also where your home is situated. If it’s near an airport or a busy street, you may not be able to get as much as you would if it was tucked away at the end of a quiet cul-de-sac.

Condition of the Home

The better your home’s condition, the more money you can get for it. Think top-of-the line appliances, fresh paint, and new flooring. If your home needs repairs or the appliances and flooring are a little outdated, you may have to set a lower price to attract potential buyers.

Market Conditions

Supply and demand have a big impact on home prices in your area. In a seller’s market, the demand for homes outpaces the supply, driving prices higher. Buyers may even get into bidding wars over the most desirable properties. In a buyer’s market, the supply of homes outweighs the demand, driving prices down.

2. Use Multiple Advertising Methods

It would be great if all you had to do was put your listing on social media, but it takes a little more work to sell a home. You may want to use the following marketing methods:

  • Newspaper advertisements
  • Social media posts
  • Yard signs
  • Third-party listing websites
  • Flyers at local businesses
  • Virtual home tours

3. Plan Your Open House Carefully

An open house gives potential buyers a chance to walk through your home and see if it looks just as good in person as it does in photos. Here are a few tips to help you plan a successful open house event:

  • Schedule it on a weekend: Many people work during the week, so holding an open house on a Wednesday at 11 a.m. isn’t the best way to attract eager buyers. If possible, schedule your open house for a Sunday afternoon.
  • Advertise: Yard signs are helpful, but you should use several advertising methods to make more people aware of your event. Try advertising on a third-party website or posting on social media
  • Clean thoroughly: You don’t want potential buyers focusing on dust bunnies, so give your home a thorough cleaning the day before your open house. Before people arrive, straighten your throw pillows, take out the garbage, and do some last-minute tidying.
  • Put away personal items: Potential buyers should be able to imagine themselves living in your home. They may have a tough time doing that if you have family photos and other mementos on display. To make your home more appealing, put away personal items before the open house begins.
  • Make arrangements for your pets: If possible, take your pets to a family member’s house before your event begins. Some buyers aren’t comfortable with animals, and you’ll have an easier time focusing if you don’t have to worry that one of your pets is going to escape.

4. Consult an Attorney

If you sell your home without an agent, you’re still responsible for following all relevant laws and regulations in your area. To ensure you don’t make a costly mistake, consult an attorney beforehand. A licensed attorney can advise you of your rights and educate you about the potential pitfalls involved in selling real estate.

It’s possible to sell your home without a real estate agent, but it takes a lot of time and effort. If you make a mistake, you can easily lose thousands of dollars in profit, making it critical to do in-depth research before you begin the process. You may also want to research other things before selling or buying a home, such as the state of your finances, your current credit health, or your loan options. Credit.com can help you work to understand these things better, so consider signing up for your free Credit Report Card today

Source: credit.com

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The least expensive and potentially easiest way to buy a car with bad credit is to pay cash outright for it. That way, no one even needs to check your credit history, and you don’t pay interest expense of any kind.

However, that’s not a path everyone can take, especially with the rising costs of new and used cars. The average MSRP for a new vehicle in 2023 was $34,876, and used vehicles aren’t much cheaper. The average cost of a used vehicle in mid-2023 was more than $27,000.

Even if you have money saved up and can afford to drop it all at once on a car or truck, if you’re looking to build up your credit for the future, a cash purchase won’t help you with that. So, understanding how to buy a car when you have bad credit might be important. Luckily, we’ve got plenty of tips to help you manage this financial step.

What to Consider When Buying a Car With Bad Credit

Buying a new—or new to you—vehicle can be exciting. But before you show up to browse at a dealership and get caught up in negotiations, it’s helpful to do some research and consider your financial situation. Some things to consider include:

  • What you can afford. When you don’t have great credit, you might feel like you’re lucky to get a loan. This can lead to taking any deal you’re offered, which might be a mistake. Before you start shopping for vehicles or financing, take a realistic look at your income, expenses, and monthly budget. Know what you can afford to pay each month for a car payment, insurance, fuel, and maintenance, and stick to that budget.
  • Your deal-breakers. You might not be able to get your dream car, but you also don’t want to get stuck with something that doesn’t work for you at all. Decide on a few deal-breakers, and don’t get talked into a vehicle that doesn’t meet those basic needs just because you think you can get a loan for it. For example, a family of six may not be satisfied with a sedan that seats five, no matter how great the deal or loan terms are.
  • Your credit. Check your credit so you know where you stand. This can help you understand what type of loan you may be able to get and ensure you don’t run into surprises during the financing step.

Tips for Getting a Car Loan With Bad Credit

Once you understand your personal finances, you can move on to applying for a car loan. Here are some tips for buying a car with bad credit if you need a loan to do it.

Correct Any Errors on Your Credit Reports First

When you review your credit situation, order your credit reports from all three major bureaus. Look for any inaccurate information, particularly any error that might be hurting your credit, and dispute it with the credit bureau. 

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For example, if you see that your credit card company reported a higher balance than you actually carry or that you’re shown as late on a payment when you’ve always paid on time, these issues could be dropping your score unnecessarily. The Fair Credit Reporting Act requires that credit bureaus review your dispute in a timely manner and delete or edit information that turns out to be incorrect.

Addressing inaccurate negative information on your credit report could help you improve your credit, which might help you get a better deal on a car loan. 

Pay Down Revolving Credit Card Balances 

Another way you might be able to improve your credit is by paying down credit card and other revolving credit balances. This can improve your overall credit utilization rate, which may in turn help increase your score. It also helps make lenders more comfortable taking a chance on you. If you don’t currently owe high balances to others, they may see you as someone who’s more likely to make a car payment on time every month.

Make a Bigger Down Payment

The issue with trying to get a car loan with bad credit is that lenders consider you a higher-risk borrower than someone with good credit. In short, they’re worried you might leave them holding the balance on the loan, so they want to reduce their risk as much as possible.

Lenders attempt to reduce their risk by not approving people with certain credit scores, charging higher interest, and limiting the size of loan they’re willing to offer. For example, a lender might only approve you for a loan up to $20,000. You can work with that, even if you want a car that’s $27,000, if you can make a big enough down payment. In this hypothetical example, you’d need to pay $7,000 or more down to bring the balance within the range of loan the lender is willing to approve.

Get a Cosigner

Another way you can reduce risk for a lender and potentially increase your chances of getting approved for a car loan is by getting a cosigner. A cosigner is someone who agrees to be responsible for the loan if you don’t make your payments. Typically, this needs to be someone with good credit and the income to make the loan payments.

Always consider this step carefully. You need a cosigner who’s willing to take this step with you, and if your financial situation changes and you truly can’t afford the vehicle in the future, your cosigner may be responsible for the payments. It’s helpful to have a solid plan for making your car loan payments and communicating everything up front with your cosigner.

Get Preapproved for a Car Loan

Going out to buy a car without any financial backing can increase your chances of getting caught up in the moment and signing on the dotted line of a lackluster deal. Instead, consider getting preapproved for a vehicle loan so you know exactly how much buying power you have. A preapproval may also help you negotiate a better deal, because the car dealership or seller doesn’t have any financial power to hold over you.

Improving Your Credit for the Future

Once you get a car loan despite bad credit, ensure you take steps to improve your credit in the future so your next time buying a car is easier. Make your car loan payment on time every month to build up a stronger payment history, and avoid taking out loans and racking up credit card debt unnecessarily. When you’re ready to start looking for a car loan, visit Credit.com to get free, no-obligation quotes from our network lenders.

Source: credit.com

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Overall, student loan debt in the United States now stands at over $1.77 trillion. If you’re one of the more than 43 million borrowers who currently owe student loan debt, there may be a way to have all or a portion of it forgiven.

The government offers several student loan forgiveness programs, which can help borrowers eliminate or reduce this financial burden. Keep reading to learn more and find out if you might qualify.

How to Get Your Student Loans Forgiven

Fortunately, several programs can help students reduce or eliminate their student loan debt over time. Here is a look at the most popular options available.

Public Service Loan Forgiveness Program

The Public Service Loan Forgiveness Program benefits those working for a nonprofit organization or a local, state, federal, or tribal governmental agency, such as teachers and health care professionals. Once you make 120 qualifying monthly payments while working for an eligible employer, you may be eligible for full forgiveness of your remaining balance.

Perkins Loan Cancellation and Discharge

While schools no longer offer new Perkins Loans, those who’ve already received this type of loan may qualify for loan forgiveness. To qualify, you must have worked or volunteered in a public service position, such as a firefighter, military member, or Peace Corps employee, for at least five years.

Depending on your situation, you may be able to get up to 100% of your loan forgiven. In some circumstances, a percentage of your loan may be forgiven for each year of full-time work in a qualifying position. You may also qualify for forgiveness of your Perkins Loan if you experience bankruptcy or disability.

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Programs for Teachers

Teachers who work for at least five complete and consecutive years in a qualifying low-income school may qualify for loan forgiveness through the Teacher Loan Forgiveness Program. The program provides up to $17,500 in loan forgiveness for each person who participates.

Teachers may also qualify for Public Service Loan Forgiveness or Perkins Loan Cancellation. However, you can’t receive work credit for both programs at the same time.

Programs for Health Care Professionals

In addition to the Public Service Loan Forgiveness and Perkins Loan Cancellation programs, there are several other options available to those working in the health care industry, such as:

  • National Health Service Corp Loan Repayment. In exchange for working at an NHSC-approved site, qualified health care professionals can receive up to $50,000 in student loan repayment for two years of full-time work.
  • Health Professional Loan Repayment Program. This loan repayment program is specifically designed for members of the U.S. Armed Forces. If you qualify, you can receive loan forgiveness of up to $40,000 per year.
  • Nurse Corps Loan Repayment Program. Nursing professionals, including licensed registered nurses, nurse practitioners, and nurse faculty, can receive forgiveness of up to 85% of their unpaid educational debt after working for at least two years in a critical shortage facility or qualifying nursing school.

Programs for Military Service

Those who have served or are currently serving in a branch of the U.S. Armed Forces may be eligible for various student loan forgiveness, repayment, and interest rate cap programs. For instance, the Servicemembers Civil Relief Act sets a cap on interest rates for student loans while on active duty. Members of the military may also be eligible for the Public Service Loan Forgiveness Program.

The Military College Loan Repayment Program may repay a portion of eligible student loans. You must have at least three years of active-duty service or six years of National Guard service to qualify. Maximum repayment levels are set by each branch of the service. For instance, the Army and Navy pay up to $65,000, the National Guard pays up to $50,000, and the Coast Guard pays up to $30,000.

Disability Discharge

Borrowers who experience a military-related disability or are eligible for Social Security disability insurance may be able to receive student loan forgiveness for all or a portion of their debt.

Misled by School

The Borrower Defense to Repayment Program protects borrowers who were misled by the school they attended. The Department of Education makes this determination. If it finds a school or program within the school misled students, it may dismiss all or a portion of the associated student loan debt.

How to Challenge Student Loans on Your Credit Report

If you believe student loan information listed on your credit report is inaccurate, there are steps you can take to fix the error.

1. Review Your Credit Report

The first step is to regularly review your credit report. An easy way to do this is to sign up for Credit.com’s ExtraCredit subscription. Through this program, you can get 28 FICO® scores plus your credit reports from all three bureaus in one place. This step lets you identify errors on your credit report as quickly as possible so you can take immediate action if needed.

2. Send a Dispute Letter

If you detect any incorrect information about your student loans, make sure you take steps to have these details removed. Submit a credit dispute letter to the reporting agency listing the incorrect information. Be sure to provide as much information as possible.

Instead of handling this process yourself, you can also work with a credit repair agency. This type of agency can contact the credit bureaus on your behalf and work to have the incorrect information removed from your report.

3. Keep Making On-Time Payments

If the information on your credit report is correct, the best thing you can do to help your credit is continue making on-time payments. This step is important because your payment history is the factor that can impact your credit the most. Ensuring you make your student loan payments on time can actually help improve your credit.

Student Loan Forgiveness and Your Taxes

Depending on your specific situation, the IRS may consider any student loan forgiveness as income. If this is the case, you may need to pay state and federal taxes on it. You’ll receive a 1099-C form that details the amount you must report on your tax returns. It’s recommended to contact a tax attorney for more information about how to report any student loan forgiveness on your tax returns.

If you still owe money on your student loans, it’s important to see if you qualify for any of these student loan forgiveness programs. If not, take steps to create a workable budget to ensure you can continue making on-time monthly payments.

It’s also important to continuously track your credit score to determine how your student loans may be impacting your credit. You can start with Credit.com’s Free Credit Report Card.

Source: credit.com

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If you’re interested in investing in a new vehicle, it’s not always easy to know what’s in your price range. Understanding your options and learning how to calculate your budget can determine what you can afford. 

Discover how auto loans can enhance your ability to afford a range of vehicles, from brand-new cars to those with some mileage. 

How to Calculate How Much Car You Can Afford

Calculating how much you can afford for your new car is a helpful step in saving money when you’re ready to make the purchase. Follow the next steps to calculate your budget effectively.

1. Calculate Your Car Payment Budget

There are two main expenses to consider when calculating your car payment budget: your down payment and your monthly payment. 

Above is an example of how to calculate your monthly payment calculation. Let’s say you have a net monthly income of $4,500. Multiply your income by 0.10, or take 10% of your income. This number will be your estimated monthly payment. In this example, it would be $450. 

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  • Monthly payment: We recommend spending no more than 10% of your monthly net (take-home) income on your monthly car payment. This doesn’t include other expenses like gas and maintenance. Round up to 15% to include all vehicle expenses. 
  • Down payment: If you plan on purchasing a car, we recommend putting around 20% of the vehicle’s purchase price toward your down payment. The more you put down, the lower your auto loan will be. 

2. Determine Which Auto Loan You Qualify For

You now have a better idea of how much you can potentially borrow based on your budget. 

Several determining factors affect how much you can borrow, including: 

  • Credit score: This will influence the annual percentage rate (APR) of the loan. Higher FICO® credit scores between 661 and 850 can lower your auto loan interest rate. 
  • New vs. used: Auto loans for new cars typically come with reduced APRs.
  • Loan term: This is how long you’ll be repaying your auto loan. The average car loan term ranges between five and six years. 

If you already have an auto loan, you can refinance and customize your loan with Credit.com. Try out our Auto Loan Calculator to simulate your current payment and find out what savings you can earn today. 

3. Estimate Auto Insurance Cost

You should also factor in car insurance when considering purchasing a new vehicle. Factors like the make and model of the car, your driving history, and where you live can impact your insurance costs. Reach out to several insurance companies for quotes and get a clearer picture of what you’ll likely need to budget for insurance. 

4. Calculate Your Purchase Price

It’s important to note your auto loan isn’t the total price you’re going to pay for your vehicle. There are other hidden costs you should be aware of beyond the number on the price sticker. Take note of these common additional costs:

  • Sales tax: This can be around 5% to 10% and may include local, county, and state taxes. However, not all states have sales tax, such as Montana and Oregon. 
  • Documentation fees: These can range from $100 to $400, depending on your state. 
  • Registration fees: These can range from $8 to $225, depending on the state. 

What Car Options Do You Have?

You never want to put yourself in a financially vulnerable position if you can avoid it. That’s why it’s important to consider all of your purchasing options. Keep reading to understand how buying versus leasing can help you afford a car. 

New Vehicle

Everyone wants a shiny new car, but it’s not always affordable. If there’s a particular type of vehicle you want, do some research to determine the vehicle’s current market value. That way, you’ll know exactly how much that car is worth and avoid purchasing a vehicle with an inflated price tag. 

Used Vehicle

Purchasing a used vehicle can be the best route for those with a lower budget. Used vehicles tend to have considerably reduced prices compared to brand-new cars, leading to more affordable monthly payments. Additionally, used cars typically have lower car insurance costs. 

Leased Vehicle

Leasing a car can be a great option for those who want a brand-new car, but would prefer lower monthly payments. There are drawbacks to this option, however, as the payments that go toward the vehicle don’t provide value and there are mileage limits. But if you don’t mind those drawbacks and like to try out different cars every couple of years, leasing is worth considering. 

FAQ

Here are answers to some frequently asked questions about car affordability and monthly payments. 

How Much Car Can I Afford Based on My Salary? 

Determining your car affordability based on your net income is one way of estimating how much car you can afford. You should put 10% or less of your monthly income toward your car payments. 

Annual Income

Monthly Car Payment Maximum

$30,000

$250

$40,000

$334

$50,000

$416

$60,000

$500

$70,000

$584

$80,000

$667

$90,000

$750

$100,000

$833

However, this doesn’t include costs such as fuel, parking, and maintenance. You can plan on dedicating about 15% of your monthly income to total vehicle expenses. 

How Much Should My Monthly Car Payment Be?

Your monthly car payment will depend on a few factors, such as your auto loan interest rate, loan term, and how much you put toward your down payment. Your choice of vehicle and where you purchase it can also affect interest rates. 

However, your monthly car payment should be around 10% or less of your monthly take-home pay. You can always choose to pay more every month to pay your auto loan quicker and save money on interest. 

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Take your first step toward vehicle ownership by learning more about credit scores with Credit.com. Get your free credit report card today.

Source: credit.com

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The amount you need to borrow to buy a new or used car is higher than normal due to the COVID-19 pandemic. Although the world appears to be back to normal, during the height of the pandemic, there were many supply chain shortages and factory shutdowns. Due to supply and demand, this made the price of vehicles higher than normal. Although people are still trying to get their finances back on track post-COVID, we’re still experiencing the effects as the world recovers.

Credit Score

New vehicles

Used vehicles

All

$40,068

$25,041

781 to 850

$36,663

$27,303

661 to 780

$42,438

$28,402

601 to 660

$43,807

$26,527

501 to 600

$40,746

$23,065

300 to 500

$36,690

$19,912

Total Auto Loan Debt in America

During the first quarter of 2011, the total auto loan debt in America was close to $700 billion. Since then, it’s more than doubled and was over $1.5 trillion by 2023. Not only are vehicle prices continuing to rise over the years, but part of the overall debt may be due to more people having access to auto financing as well.

Auto Loans as Percentage of Consumer Debt

As mentioned earlier, buying a vehicle is one of the largest purchases you’ll ever make. Millions of Americans are in debt, and a lot of this comes from auto loans. The average American credit card debt is only 5.8% of consumer debt, but auto loans are the third largest portion at 9.2% of consumer debt. The two largest amounts of debt come from mortgages and student loans.

How Much Do Americans Borrow for Car Loans?

Each quarter, Americans borrow money to purchase new and used vehicles. In 2011, Americans borrowed a little over $72 billion during the first quarter. As you can see in the chart below, the number rises and falls over the years, but as of the first quarter of 2023, the quarterly total is close to $159 billion. This is lower than the third quarter of 2022, when it was over $181 billion.

Average Car Loans by Age Group

The age group that takes out the largest auto loans is those between the ages of 30 and 49. During the first quarter of 2023, Americans between 30 and 39 took out about $37 billion in auto loans, and those 40 to 49 took out $36.5 billion. The lowest borrowers are younger people ages 18 to 29 as well as the older age group of 50 to 59.

Average Car Loan Term by Credit Score

The loan term of your car is the length of the loan if you’re making minimum monthly payments. The loan term is shorter when you make extra payments or larger payments. Based on the recent data from Experian, people with credit scores of 601 to 660 have the longest loan terms for new vehicles. When you have a longer loan term, you’re also paying more in interest fees, which you can see by using a simple loan calculator.

Credit score

New vehicle loans (in months)

New leased vehicles (in months)

Used vehicle loans (in months)

Overall average

70.5

35.88

66.11

781 to 850

61.6

35

64.7

661 to 780

70.15

35.91

68.41

601 to 660

74.20

36.30

68.34

501 to 600

73.80

36.31

66.27

300 to 500

72.79

N/A

62.85

Car Loans by Lender Type

When purchasing a new or used vehicle, you have a variety of options for lenders. For new vehicles, most people use dealer financing, which is 54% of new car loans.  Used vehicles have more of a mix with people using banks, credit unions and other options. “Buy here, pay here” lenders typically have the highest interest rates and market toward people with poor credit.

4 Tips to Lower Your Car Payments

If you’re in the market for a new car, there are ways that you can lower your car monthly car payments. Knowing these tips before walking into the dealership can help you create a plan. Below, we list four ways to lower your monthly payments: 

  1. Put down a larger down payment: Your monthly payments are based on your overall loan amount. When you make a larger down payment, you have lower monthly payments.
  2. Trade in your old vehicle: If you don’t have the money for a larger down payment, your old vehicle has a value the dealer applies to lower the loan amount. You can also trade in your vehicle and make a larger down payment.
  3. Extend the loan term: By opting for a longer loan term, your monthly payments will be less.
  4. Improve your credit: Improving your credit score is one of the best ways to lower your monthly payments because you’ll likely get a better interest rate, which also decreases the total amount of a vehicle.

When buying a vehicle, keep in mind that although lower monthly payments are helpful, the more important factor is the overall cost of the car. A longer loan term may lead to lower monthly payments, but you may pay thousands more for the car due to interest fees.

How Your Credit Score Affects Your Car Payments

Your credit score is a determining factor when getting a car loan, so it’s beneficial to improve your score before getting an auto loan. The average car loan interest rate for those with low credit scores can be 2% to over 13% more than someone with a good credit score.

If you’re unsure of your credit score, get a copy of your free credit report card to find out. You can also sign up for ExtraCredit® and receive additional credit reporting, which may help you know where you need to work on your credit.

Source: credit.com