Posts Tagged ‘financial planning’

Let Your Pink Slip Help You Get Out of the Red

Your pink slip could be your ticket to lower rates!

Many people have worked hard to get their cars paid off and still have plenty of miles to go before they need a new vehicle.  It’s a great feeling to have that pink slip in hand!  But, if one still has credit card payments or other unsecured debt, money may be slipping away.  If you are in that position, why not let your pink slip work for you?

While mortgage rates are at historic lows, many people with good credit can get even lower rates with a loan against their vehicle.  At PFCU, for example, our best rate can be had on new or used vehicles for up to 60 months, and there is no pre-payment penalty, so if things change you can react easily.  Consolidating higher interest debt with a car loan can help your credit score, too.   But be careful.   These loans, which are often referred to as “Car Title Loans” or “Pink Slip Loans”, are offered by a score of predatory lenders, but they are actually the same car loans your credit union has always offered!  Isn’t it great to know you can get a fantastic rate without all the fees at a credit union known and loved in the community like PFCU?  You can even apply right here, right now!

There are a few things to consider when determining if refinancing a vehicle with a clear title makes sense. 

  1. What is the value of the car?  Is it an older vehicle?  PFCU will finance up to 100% of Kelly Retail Bluebook value of cars 2003 or newer, although the rate on model years 2003-2004 is a bit higher.  
  2. How is your credit?  In most cases, your rate will be determined by your credit score.  Applying for a loan is quick and easy, and your loan officer will be able to tell you what your rate and payment will be.  A peek at your credit card statements will show how much you are paying toward interest every month, and they generally indicate how long it will take to pay off the balance if you just make the minimum payment. It can be very discouraging to make payments month after month with little reduction in the principal. An auto loan is usually amortized to pay off completely in two to seven years.  Remember how you paid off that car once?  You can do it again! 
  3. When do you plan to get a new car?  A good practice when paying off a car loan is to put the amount of the former payment into a savings account for maintenance and repairs, and ultimately for a down payment on a new car.  If you haven’t done that, you will need to make sure you can cover maintenance and have the means to get a new car when the time comes.  Chances are, by paying off your credit cards with a car loan, you will lower your payments each month.  Perhaps you can start by putting the difference away into a savings account earmarked for car expenses, whether it’s maintenance or repairs on your current vehicle, or a down payment.  
  4. Get Gap coverage and Mechanical Breakdown Insurance.  The Gap will pay off your loan if your car is stolen or totaled and you owe more than it’s worth.  Plus, with ours you even get $1,000 toward a new car! 

 Mechanical Breakdown Insurance will help you manage repair costs so there are no surprises.  It’s like the extended warranty you get at the dealer, but MUCH less expensive.

To summarize, refinancing a vehicle with a clear title is something to explore.  Call one of our friendly loan specialists and we can help you determine if it makes sense for you right over the phone.  Your pink slip might get you from red ink to black sooner than you think.

Credit 101: How To Improve Your Credit Score

Scary Credit

If your loan officer reacts like this to your credit file, there are things you can do to improve the situation.

In the Dark About Credit Scoring? We’re Here to Shed Some Light on it for You
The affordability of major purchases often depends upon the quality of your credit score. Unfortunately for many people, the recession has taken a high toll on their credit scores, and banks and other loan providers are making it difficult to obtain reasonable interest rates. Unless your credit score is 720 or higher, you are probably paying more in interest charges than you’d like to. If this is the case, here are some suggestions to get you back on track to spectacular credit.

Check Your Credit Report
The first thing you can do to improve your credit score is to request free copies of your credit report from each of the three major credit reporting agencies: TransUnion, Experian and Equifax. You have a right to receive one free copy per year. Your credit report will list all current debt and your debt history, including: student loans, credit cards, mortgages, etc. It will also include information regarding your payment history, how much of the original balance is left, and other important details.

One important reason to check your credit report is to look for any mistakes. Many people find small inaccuracies that could be having a large effect on their credit score. Often, this is a debt that was paid off but is still reported as outstanding. Or, someone else’s debt could be incorrectly listed as yours …especially if you have a common name, or share a name with a family member. Report inaccuracies immediately to the proper reporting agency, which will follow up with the lender to confirm your claim.

Know Your Credit Score
If you don’t know what your credit score is, shelling out a few bucks to get it may be a good idea. Upon receiving your report from the three major reporting agencies, they will refer you to companies that will provide your score for a fee. Be sure to read the fine print, especially if you search for your score yourself online … many will advertise a free score, but unknowingly sign you up for a service that charges a high monthly fee. If you applied for a mortgage after January 1, 2011, the lender will be required to reveal new information about your credit score.

Make Regular Payments
Making regular, on-time payments on your credit cards, loans, and lines of credit will boost your credit score higher. Lenders also review how much outstanding debt you have in your accounts. Balances below 30% of your total available credit could improve your score.

Consolidate Your Debt
While creditors like to see that you have a long credit history, keeping a large number of credit sources available is not a good idea. If you have five cards with a $10,000 limit on each card, creditors will consider you as having $50,000 available in credit. Their assumption is that you may go out and max out your credit cards, adding debt on top of whatever loan they give you. Keep it simple; limit your credit cards and loans. Contact PFCU to ask if you qualify to consolidate your debt to a low-cost credit union credit card, personal loan or line of credit. Be sure to check out the  National Endowment for Financial Education’s free, comprehensive program Smart About Money found at www.smartaboutmoney.org . You’ll gain valuable insight and make a solid plan for the future. No one sees the information but you and no one tries to sell you anything. It’s just a tool to help you.

When You Need a Loan, Search for the Best Deal
PFCU offers competitive rates and flexible terms for car loans. credit cards, signature loans and mortgages.  Do your homework to get the best deal.

PFCU also recommends contacting the National Foundation for Consumer Credit Counseling if you need additional help managing debt and improving your financial education.