Borrowing

Borrowing

We don’t want to borrow if we don’t need to.  But most likely you may have to borrow for a new home, car, college, or home improvement at some point.  Take the time to understand the elements of each type of Loan. How much interest are you paying? Is  the rate competitive? Is there a down payment? Is there any sort of pre-payment penalty? It’s up to you to understand the fine print, no one else.

FICO Score

Our FICO Score is our credit score, and it is what is used by lending companies to measure the risk of lending to you.  Three companies somehow profit from this thing.  They have credit reports on us and together come up with a credit score.  There are tons of factors that affect the score.

ficoYou are legally entitled to a free credit report from each of these institutions every year by going to annualcreditreport.com . (Warning on that link: do not supply any credit card info, and prepare to click no to many ads.)  There is no need to pay for credit score monitoring.  I addition to checking it once a year, if some company pulls it when you ask for a credit, they will usually give you a copy or tell you the score.

Auto

Don’t ever think someone has more money or income because of the car they are driving. About 85% of consumers borrow some amount of money to get their car.   Think about that for a minute. An industry selling products almost no one can afford to pay for.

junkyard2Cars depreciate in value and die.  However, many of us need them to get around.  You can get a new car, a used car, or lease a car.  There are pros and cons to each.  Auto Loans are usually offered by Auto sellers directly.  Not many people walk in and pay for a new car in full.  Always check with a credit union or a site like bankrate.com for the best rates on auto loans.  Its usually very easy to join a credit union.

A car will cost you an average of about $3000 a year no matter what. Wether it is through a down payment,  monthly payments,  or maintenance.  If you love cars and prefer to pay extra for them, enjoy!

Home

Buying your first home is a huge deal.  A dream to some.  There are lots of resources out there to learn more about this.  Bankrate.com is a good resource for shopping.  Here are some basics.

  • You need a down payment. At least 3 – 5%
  • If your down payment is under 20% you also have to pay PMI (Private Mortgage Insurance, a few hundred dollars)
  • You need to account for closing costs 3 – $6,000
  • You want a fixed rate. A variable rate is, well, variable. So your huge monthly mortgage payment will be fluctuating. No fun.
  • If you have a budget you know what you can afford each month.
  • Consider not owning a home and really compare to renting.  For a single person it is a lot to take on.   Taxes, insurance, and water bills add up.  You don’t get that back.

Tiny homes have become a new trend. Guess why 🙂

tinyhome