7 Best Small Business Loans of 2021

If you recently started a business, you might be wondering whether it’s a good idea to take out a small business loan. Small business loans can make it easier for you to buy equipment, hire…

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Personal Loans After Bankruptcy

Bankruptcy is not the end of the world. In fact, while it is more difficult to acquire loans and credit cards, it’s not impossible. In this guide, we’ll show you how you can get short-term loans and long-term loans even after you have filed for bankruptcy.

Whether you have debt to repay, bills to cover or credit to build, you can get back on track with a personal loan, even if you have recently filed for bankruptcy.

Challenges in Getting a Personal Loan After Bankruptcy

You will face a few issues when applying for an unsecured personal loan after bankruptcy. Firstly, lenders will insist that you wait a while before you apply. The exact timeframe will depend on the individual lender and the type of loan, but generally, you’ll need to give it at least 2 years.

Your credit score is also important. Bankruptcy can reduce your credit score by over 200 points, and it can do all kinds of major damage before you file. Loan companies are not interested in lending to individuals with poor credit scores and recent bankruptcy filings. This is especially true if they filed for Chapter 7, in which case all debts were discharged.

It makes sense—creditors base their activity on statistics and probability. If you have a recent filing and a terrible credit score, statistically you’re much less likely to meet your monthly repayments.

Some lenders will be more willing to take a risk on the basis that an individual who has recently filed is unable to file again for another few years. However, in these cases, they are still taking a massive risk and to offset that they will offer you massive rates. 

What’s more, while it seems like they are doing you a favor by taking a chance when no one else will, they’re actually just taking advantage of your desperation, offering you an unsecured loan when you’re more willing to accept.

Most Common Challenges and How to Overcome

The biggest issue you have when applying for personal loans after bankruptcy concerns your credit score. Your score will likely be very low, and many lenders refuse to offer low-rate loans to consumers with scores less than 660. If you have a score of 550 or less, you may still be offered a loan, but the rates will be high.

The good news is that things get easier with time. A bankruptcy discharge essentially wipes your slate clean, eliminating your monthly payments. This leaves you with more money in your pocket, which means you should have less need for an unsecured personal loan.

If you need a car, try a car loan instead. The fact that it is secured against the vehicle should ensure you receive better rates, even with a low credit score. If you simply need to build your credit score, try a secured credit card instead. Providing you meet your monthly payments on this secured card, you’ll get your security deposit back and your credit score will improve, as lenders report all activity to the credit bureaus. 

How Bankruptcy Affects Your Ability to Get a Personal Loan

A bankruptcy can remain on your credit report for 10 years and do some serious damage to your credit score in that time. The effects will diminish with each passing year and in the final few years, you shouldn’t have any issues whatsoever. However, it will take a few years before your credit score improves to a point where you don’t need to limit yourself to high-rate loans.

Your credit score isn’t the only issue, either. Many home, car, and personal loan lenders refuse all applicants who have filed for bankruptcy within a fixed period of time, often between 2 and 3 years. If you need a loan during this time then your options are limited, to say the least. You will be forced to choose one of the following options for unsecured credit:

  • Bad Credit Car Loans: These loans offer respectable sums and terms, but they have high-interest rates, and these may increase if you don’t meet your monthly payment obligations.
  • Payday Loans: High-rate and low-limit loans offered over a short period. The idea is that you take the loan when you’re struggling to make ends meet and need some assistance before payday. These loans are not as bad as they once were due to restrictions and regulations, but they are still not ideal. They are also illegal in nearly half of all US states.
  • Unsecured Credit Cards: You can also get a revolving line of credit with an unsecured credit card. However, as with bad credit loans, these have high-interest rates and very poor terms.

To trick you into paying a higher APR, lenders won’t always advertise their rates and will instead charge a fixed sum every month. This can be the equivalent of an APR over 20%, much higher than the average, which is around 16%.

Best Installment Loans After Bankruptcy

Before applying for a personal loan, take a close look at your finances. Calculate your debt-to-income ratio, and make sure you can comfortably afford the payments. If you have recently filed for bankruptcy, you can’t apply again for several years which means you’ve lost your get-out clause and can’t afford to fall behind on your payments.

If you struggle to meet your payments, lenders may still offer a repayment plan and financial hardship programs. However, if you’ve already been through debt issues then your options decrease and they may be less willing to lend a helping hand.

Only when you’re absolutely confident in your financial situation and your ability to repay should you seek to acquire additional debt. 

Here are a few providers and options that can help:

  • Upstart: Accepts credit scores as low as 580 with APRs as high as 36%.
  • Lending Club: You need a credit score of at least 600 to apply.
  • OneMain Financial: There is no minimum credit score and monthly payments begin at just over $200.
  • Lending Point: A minimum credit score of 585 is needed for loans of between $2,000 and $30,000.
  • Avant: Get up to $35,000 with an APR ranging from around 10% to 36%.

What Happens if you Get Refused?

If you get refused for a personal loan because you have a poor credit card or have recently filed for bankruptcy, there are a few options:

Wait

Patience is the best policy in this situation. It doesn’t matter how bleak things seem right now, they will improve in time. The longer you wait, the older your accounts will become, the more your payment history will improve (assuming you have active accounts) and the further away that bankruptcy filing will be.

If you don’t have any active accounts, waiting can still help, but you should also look into acquiring a credit card with a security deposit, which can greatly improve your credit score in just a few months 

A credit builder loan can also help, as can lending circles. These options are easy to apply for and don’t require stringent checks, great credit or a clean bankruptcy history. But before you get excited, they don’t give you cash sums in advance and are designed purely to help you rebuild your credit.

Appeal to the Lender

Bigger lenders use a long list of criteria to determine which applicants to accept and which ones to reject. No amount of begging or explaining will change their minds and if you’re rejected, you just need to move on, improve your score, and try again in the future.

However, if a smaller lender rejects you because of your recent bankruptcy filing, it’s worth contacting them to explain your situation. Explain how you have turned things around, show them proof if you have it, and ask them what would be required of you for them to accept. You might not get them to change their minds, but it should give you some valuable insight into their process.

Look for a Co-signer

A co-signer with a strong credit history can back you for a personal loan. However, it’s a very sensitive area and a huge favor to ask of anyone, even someone who loves you. 

If you stop meeting those payments the co-signer will become responsible for them, putting their credit in jeopardy. Choose carefully, don’t place anyone in an awkward position, never assume they should help you just because you need help, and always make your monthly payments so they are never required to cover for you.

Seek Other Options

There are other creditors, other loans, and other options—try a credit card, borrow from a friend or family member, sell an asset, use a pawn shop. We live in a credit hungry society and there are more options than anywhere else. Use these to your advantage and don’t get stuck chasing the same loan.

Personal Loans After Bankruptcy is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

How To Get A Car Loan in 5 Easy Steps

Need a car loan soon? Whether you’re about to buy a car soon or just thinking about it, chances are you will likely finance it (unless, of course, you have the cash to buy it right away). So why not learn a few steps along the way to help you get a car loan. A little knowledge about the process can go a long way; so far as saving you thousands of dollars in the long run!

Ready to start comparing car loan already? Start now… it’s Free.

Step One: Review your credit file

You may need to get a free credit report and make sure you have a good credit score before applying for a car loan. The better your credit score, the higher your chance to get approved and save on interest.

Step Two: Compare interest rates

You should shop around, compare auto rates and fees before you apply for a car loan. The worst thing you can do to yourself is to apply for multiple loans at the same time, as this can affect your credit score.

So, look at multiple rates at one place so you can make the best decision. Also, remember you can choose a fixed rate or variable rate on a car loan.

Whichever you choose depends on what you’re comfortable with. Remember that a fixed rate will stay the same for all of the term of the loan. That means, your repayment will be predictable and you’ll be able to budget for a lot easier than with a variable rate.

Click here to compare car loan rates through LendingTree.

Step Three: Dealer Finance or Car loan?

You should always compare bank/independent loan to dealer finance.

Granted dealer financing may get you a auto loan with a very low rate, but that does not mean you get the best deal. Sometimes dealer financing can be more expensive in the long run. So you may want to compare rates from 2-3 lenders with a dealer finance rate to make sure you get the best rate possible.

Step Four: Get pre-approved

Before you commit to a car you should get pre-approved first. Plus, walking into the car dealership with a pre-approval letter in your hand, gives you greater negotiating power.

Step Five: Gather your documents and go car shopping

Once you decide on an auto loan that you’re happy with, it’s time to go car shopping! So gather your financial documents such as your pay stubs, bank statements, tax returns, and W2s.

Want to explore your car loan options? Visit LendingTree to compare the best car loan rates.

Related: How to save money for a car

Speak With The Right Financial Advisor

You can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post How To Get A Car Loan in 5 Easy Steps appeared first on GrowthRapidly.

Source: growthrapidly.com

5 Tips for Keeping Your Business Afloat During COVID-19

Two people in the foreground discuss ideas for keeping their business afloat during COVID-19. Another person works on their laptop in the background.

Many businesses are laying off employees or shutting
doors, at least temporarily during the coronavirus pandemic. Only you
can make the decision about what’s right for your business—and you should do so
in consultation with business experts such as CPA advisers or business coaches.
You’ll also want to make sure that you are following the guidelines established
by your local government.

But if you’re looking for ways to weather the storm,
consider these five tips for keeping your business afloat during COVID-19.

1. Offer Delivery

For many businesses, a lack of foot traffic is crushing
cash flow. But that doesn’t mean you don’t have products that others want and
need. During this time when many people are unable or afraid to leave their
homes, you can continue to meet consumer demand by offering delivery.

Many restaurants are already waiving delivery fees or
making deliveries when they didn’t previously. This technique could be
especially lucrative if you offer products, such as books, games, movies or
crafts, that can make quarantine life easier for others.

If delivery isn’t an option, consider contactless curbside
service. Let people buy items online or reserve them over the phone or via chat
service and pick them up without getting out of their cars.

2. Create a Subscription Box

Even before COVID-19, the market was enamored with subscription boxes. In fact, 54% of online shoppers had at least one subscription in October 2019, and many shoppers had more than one. Businesses that can put together a weekly, monthly or quarterly box for patrons can create stable cash flow throughout the COVID-19 stay-at-home period—and beyond.

Think about what you offer, what people might need or want
on a regular basis and how you can put it together in themed boxes. Consider
meal, beverage, home salon, self-care, craft, entertainment and education kits.
Such subscriptions can help build customer loyalty and maintain cash flow.

3. Scale Down  

In some states, nonessential businesses have been
required to close their doors. In others, businesses can remain open as long as
they can maintain social distancing or allow no more than 10 people on the
premises at a time. Consider whether you can scale your business down to
accommodate smaller crowds.

One way any type of store can help ensure smaller numbers and social distancing is offering shop-by-appointment options. Invest in an appointment tracking software that lets people make appointments on your website and then arrive at the store during their allotted time period.

Creative tips for keeping your business afloat during
COVID-19 like this can actually have two benefits. First, they allow you to
generate some revenue. Second, they let you get to know more customers better,
which can be a boost for future sales.

4. Review Support Options

Make sure you’re leveraging all potential funding and relief sources. If your company qualifies as a small business, you may be able to seek a small business stimulus loan. Some of these loans are being offered through the Small Business Administration and its partners and others are being offered by traditional banks.

If you have an existing relationship with an SBA Express Lender, you may be able to get an Express Bridge Loan. The SBA is also offering some debt relief for businesses with current microloans or 7(a) or 504 loans.

The Paycheck Protection Program

The Paycheck Protection Program (PPP) was created to provide small businesses with the funds to pay up to eight weeks of payroll costs. The fund—$349 billion—ran out in just thirteen days. The Senate has approved additional funding of $310 billion, which includes $30 billion specifically for community lenders and credit unions. The money must be used to pay employees, rent, utilities or mortgage interest. Approved businesses that use the money as instructed and keep all employees on payroll for eight weeks don’t have to pay back the loan, as it’s designed to provide an incentive for businesses to keep workers on their payroll.

Economic Injury Disaster Loan Emergency Advance

Qualifying small businessowners can get an advance up to $10,000 that doesn’t have to be repaid. You do have to apply for the loan and meet the eligibility requirements, which include financial distress and loss of revenue related to COVID-19. The SBA is not currently accepting new applications, but keep an eye on potential future funding.

5. Take Out a Small Business or Personal Loan

Not everyone qualifies for the stimulus loans, and in some cases, that relief may not keep your business afloat during COVID-19 on its own. You might consider leveraging your business or personal credit history for a loan, especially if you have good credit.

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Find out if you qualify for a short-term personal or business loan. Because these types of loans are rarely secured, you can use the funds for anything—including paying your employees, covering bills and invoices or purchasing inventory and supplies.

If you’re planning to put one of the tips above into
action, you might need the temporary cash flow to fund the pivot in your
business model that helps you stay afloat during the pandemic.

The post 5 Tips for Keeping Your Business Afloat During COVID-19 appeared first on Credit.com.

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Forex Trading Margin: What Is it, and Why Should You Care?

Forex trading and investing

The Forex industry is a very interesting one in that Forex traders have the ability to trade in far more currency than their principal investments would generally allow. This is the result of what’s known as a “trading margin.” So what is this trading margin, and why exactly should you care? Let’s talk about it!

Forex Trading Margin: What Is It?

A Forex trading margin is a ratio that defines the leverage a trader has in the market. Trading margins in the world of Forex range from 10:1 to 50:1 on average. So, when it comes to Forex trading, a $1 principal investment gives the trader the ability to trade from $10 to $50 worth of currency.

Forex Margins Are the Same as Stock Market Margins…Right?

For the most part, Forex margins and stock market margins are about the same. However, there are a few key differences:

  • Margin Interest – A trading margin is essentially a loan. For every dollar the investor puts up, the broker adds a significant amount of money in Forex. However, Forex brokers generally don’t charge interest on the money they put toward your investments. On the other hand, stock brokers generally charge interest on these loans.
  • Margin Size – In the stock market, brokers generally offer 2:1 margins; however, in the Forex market, the minimum margin a trader will generally find is 10:1. Therefore, Forex margins give traders more leverage in the market than stock market margins.
  • Margin Calls – Forex traders generally aren’t susceptible to margin calls. Unfortunately, that’s not the case for stock market investors. A margin call happens when a trade moves against the trader. At this point, brokers will require the investor to add to their cash deposits.

Forex trading and margin trading

Forex Trading Margins: Why You Should Care

Margins can work for you, and they can work against you. To be profitable in Forex, it’s important to understand the advantages added by margins as well as the risks. Here’s how the advantages and risks work:

  • Added Advantage – Think about what leverage really does for Forex traders. With $200 as a principal investment and 50:1 leverage, Forex traders can take advantage of movements on $10,000 worth of currency. That gives traders a big advantage when it comes to realizing gains in the market.
  • Risks – On the other hand, high margins can also work against you. That’s because when trades don’t go in your favor, the size of the loss you take will be increased by the margin.

Final Thoughts

If you’re looking to trade Forex, it’s worth the time to do a bit of research on trading margins and how they can help you as well as hurt you. Leave a comment below if you have any specific questions!

This article was written by Joshua Rodriguez, owner and founder of CNA Finance.

The post Forex Trading Margin: What Is it, and Why Should You Care? appeared first on MintLife Blog.

Source: mint.intuit.com

3 Credit Cards for Retirement Investing

The age of the pension has swiftly declined since the 1980s, and more Americans than ever before must invest in their own retirement. Retirement planning and investing is crucial, as it can help you get through your golden years comfortably.

When you have many other financial obligations, it can be difficult to set aside funds for retirement. But some credit cards can help by earning rewards that can be redeemed directly into an investment account.

Here are three credit cards with retirement or investing rewards.

  1. Fidelity Rewards Visa Signature Credit Card

Rewards: Two points per dollar spent on all purchases.

Sign-Up Bonus: None

Annual Fee: $0

Annual Percentage Rate (APR): Variable 15.24% APR on purchases and balance transfers.

Why We Picked It: You can redeem your rewards directly into Fidelity retirement accounts.
For Your Retirement:
Every purchase earns two rewards points on the dollar. Points can be redeemed as deposits into eligible Fidelity retirement accounts, including a Traditional IRA, Roth IRA, Rollover IRA, or SEP IRA. Every $2,500 you spend is worth a $50 rewards deposit.
Drawbacks:
If you aren’t a Fidelity member, you won’t see much value from this card.

  1. Bank Americard Cash Rewards Credit Card

Rewards: 3% cash back on gas and 2% cash back at grocery stores and wholesale clubs on up to $2,500 in purchases each quarter; 1% back on all other purchases.

Signup Bonus: $150 bonus cash if you spend $500 in the first 90 days.
Annual Fee:
None

APR: 0% APR for 12 months on purchases and balance transfers, then variable 14.24% to 24.24% APR.

Why We Picked It: Merrill Lynch investors can use this card to boost their investments.
For Your Retirement:
If you use a Merrill Lynch Cash Management Account to invest in your retirement, this card can help you increase your contributions. Cash back can be redeemed for an electronic deposit into an eligible Cash Management Account, and those redemption types earn an extra 10% bonus every time you redeem.
Drawbacks:
If you don’t have an eligible Bank of America or Merrill Lynch account, you’ll lose out on the 10% redemption bonus.

  1. Edward Jones World Card

Rewards: One point per dollar spent on all purchases.

Signup Bonus: $100 account deposit if you spend $500 in the first 90 days.
Annual Fee:
None

APR: Variable 14.24% APR on purchases; 0% APR for 12 months on balance transfers, then variable 14.24% APR.

Why We Picked It: Edward Jones members can redeem rewards for account deposits.
For Your Retirement:
Every purchase you make earns one point on the dollar. Your points can be redeemed for cash deposits into an eligible Edward Jones account, including IRAs.
Drawbacks:
You can only access this card if you’re an Edward Jones customer.

Choosing a Credit Card to Help You Save for Retirement

There are many ways to save for retirement: 401(k) plans, IRAs, and more. If you aren’t saving for retirement yet (or you think you need to save more), the time to start is now. The earlier you begin, the better shot you have of reaching your retirement goals. Until you decide on the best investment strategy, credit cards should be a secondary concern at best.

When you set up an investment account, you should understand all the different ways you can contribute, and find out if credit card rewards are an option (some investment accounts are more flexible than others).

Credit cards that let you directly redeem your rewards for an investment deposit are convenient, but they’re not the only way to contribute rewards to retirement. If you have a retirement account that accepts cash contributions, you can simply redeem any credit card’s cash back rewards for a check or bank deposit, then turn around and put that money in your account.

Whether you choose a rewards card with investment redemptions or not, try to find one that fits your spending habits. If you spend the most money at one or two merchant types, you should try to find a card that rewards those purchases. If your spending is unpredictable, you should find a card with a flat rewards rate on every purchase.

What Is Required to Get a Credit Card for Retirement Investing?

The best rewards cards require good or excellent credit. Before you apply, you should check your credit score to see if you’ll make the cut. You can check your credit score for free at Credit.com.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Note: It’s important to remember that interest rates, fees, and terms for credit cards, loans, and other financial products frequently change. As a result, rates, fees, and terms for credit cards, loans, and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees, and terms with credit card issuers, banks, or other financial institutions directly.

Image: iStock

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How to Avoid a Prepayment Penalty When Paying Off a Loan

Look at you, so responsible. You received a financial windfall — stimulus check, tax refund, work bonus, inheritance, whatever — and you’re using it to pay off one of your debts years ahead of schedule.

Good for you! Except… make sure you don’t get charged a prepayment penalty.

Now wait just a minute, you say. I’m paying the money back early — early! — and my lender thanks me by charging me a fee?

Well, in some cases, yes.

A prepayment penalty is a fee lenders use to recoup the money they’ll lose when you’re no longer paying interest on the loan. That interest is how they make their money.

But you can avoid the trap — or at least a big payout if you’ve already signed the loan contract. We’ll explain.

What Is a Loan Prepayment Penalty?

A prepayment penalty is a fee lenders charge if you pay off all or part of your loan early.

Typically, a prepayment penalty only applies if you pay off the entire balance – for example, because you sold your car or are refinancing your mortgage – within a specific timeframe (usually within three years of when you accepted the loan).

In some cases, a prepayment penalty could apply if you pay off a large amount of your loan all at once.

Prepayment penalties do not normally apply if you pay extra principal in small chunks at a time, but it’s always a good idea to double check with the lender and your loan agreement.

What Loans Have Prepayment Penalties?

Most loans do not include a prepayment penalty. They are typically applied to larger loans, like mortgages and sometimes auto loans — although personal loans can also include this sneaky fee.

Credit unions and banks are your best options for avoiding loans that include prepayment penalties, according to Charles Gallagher, a consumer law attorney in St. Petersburg, Florida.

Unfortunately, if you have bad credit and can’t get a loan from traditional lenders, private loan alternatives are the most likely to include the prepayment penalty.

Pro Tip

If your loan includes a prepayment penalty, the contract should state the time period when it may be imposed, the maximum penalty and the lender’s contact information.

”The more opportunistic and less fair lenders would be the ones who would probably be assessing [prepayment penalties] as part of their loan terms,” he said, “I wouldn’t say loan sharking… but you have to search down the list for a less preferable lender.”

Prepayment Penalties for Mortgages

Although you’ll find prepayment penalties in auto and personal loans, a more common place to find them is in home loans. Why? Because a lender who agrees to a 30-year mortgage term is banking on earning years worth of interest to make money off the amount it’s loaning you.

That prepayment penalty can apply if you want to pay off your loan early, sell your house or even refinance, depending on the terms of your mortgage.

However, if there is a prepayment penalty in the contract for a more recent mortgage, there are rules about how long it can be in effect and how much you can owe.

The Consumer Financial Protection Bureau ruled that for mortgages made after Jan. 10, 2014, the maximum prepayment penalty a lender can charge is 2% of the loan balance. And prepayment penalties are only allowed in mortgages if all of the following are true:

  1. The loan has a fixed interest rate.
  2. The loan is considered a “qualified mortgage” (meaning it can’t have features like negative amortization or interest-only payments).
  3. The loan’s annual percentage rate can’t be higher than the Average Prime Offer Rate (also known as a higher-priced mortgage).

So suppose you bought a house last year and then wanted to sell your home. If your mortgage meets all of the above criteria and has a prepayment penalty clause in the mortgage contract, you could end up paying a penalty of 2% on the remaining balance — for a loan you still owe $200,000 on, that comes out to an extra $4,000.

Prepayment penalties apply for only the first few years of a mortgage — the CFPB’s rule allows for a maximum of three years. But again, check your mortgage agreement for your exact terms.

The prepayment penalty won’t apply to FHA, VA or USDA loans but can apply to conventional mortgages — although the penalty is much less common than it was before the CFPB’s ruling.

“It’s more of private loans — loans for people who’ve maybe had some struggles and can’t qualify for a Fannie or Freddie loan,” Gallagher said. “That block of lending is the one going to be most hit by this.”

How to Find Out If a Loan Will Have a Prepayment Penalty

The best way to avoid a prepayment penalty is to read your contract — or better yet, have a professional (like an attorney or CPA) who understands the terminology, review it.

“You should read the entirety of the loan, as painful as that sounds, because lenders may try to hide it,” Gallagher said. “Generally, it would be under repayment terms or the language that deals with the payoff of the loan or selling your house.”

Gallagher rattled off a list of alternative terms a lender could use in the contract, including:

  • Sale before a certain timeframe.
  • Refinance before a term.
  • Prepayment prior to maturity.

“They avoid using the word ‘penalty,’ obviously, because that would give a reader of the note, mortgage or the loan some alarm,” he said.

If you’re negotiating the terms — as say, with an auto loan — don’t let a salesperson try to pressure you into signing a contract without agreeing to a simple interest contract with no prepayment penalty. Better yet, start by applying for a pre-approved auto loan so you can get a pro to review any contracts before you sign.

Pro Tip

Do you have less-than-sterling credit? Watch out for pre-computed loans, in which interest is front-loaded, ensuring the lender collects more in interest no matter how quickly you pay off the loan.

If your lender presents you with a contract that includes a prepayment penalty, request a loan that does not include a prepayment penalty. The new contract may have other terms that make that loan less advantageous (like a higher interest rate), but you’ll at least be able to compare your options.

How Can You Find Out if Your Current Loan Has a Prepayment Penalty?

If a loan has a prepayment penalty, the servicer must include information about the penalty on either your monthly statement or in your loan coupon book (the slips of paper you send with your payment every month).

You can also ask your lender about the terms regarding your penalty by calling the number on your monthly billing statement or read the documents you signed when you closed the loan — look for the same terms mentioned above.

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What to Do if You’re Stuck in a Loan With Prepayment Penalty

If you do discover that your loan includes a prepayment penalty, you still have some options.

First, check your contract.

If you’ll incur a fee for paying off your loan early within the first few years, consider holding onto the money until the penalty period expires.

Pro Tip

If you don’t have a loan with a prepayment penalty, contact your lender before sending additional money to ensure your payment is going toward principal — not interest or fees.

Additionally, although you may get socked with a penalty for paying off the loan balance early, it’s likely you can still make extra payments toward the balance. Review your contract or ask your lender what amount will trigger the penalty, Gallagher said.

If you’re paying off multiple types of debt, consider paying off the accounts that do not trigger prepayment penalties — credit cards and federal student loans don’t charge prepayment penalties.

By using techniques like the debt avalanche, debt snowball and debt lasso methods, you can tackle your other debts while giving yourself time to let a prepayment penalty period expire.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

Late Payments, Credit Scores and Credit Reports

A missed credit card or loan payment can have a seriously detrimental effect on your credit report. The golden rule of using a credit card is to make your payments on time every time, building a respectable payment history, avoiding debt, and keeping your creditor happy.

But what happens when you fall behind with your monthly payments; what happens when you miss a single loan or credit card payment as a result of a mistake, an oversight or a lack of funds? How will your creditor react, how quickly will the credit reporting agencies find out, and what options do you have for getting back on your feet?

How Late Payments Affect Your Credit Score

A late payment can reduce your credit score significantly and remain on your report for 7 years. It won’t impact your score throughout that time and the longer you leave it, the less of an impact it will have. However, the impact could be significant for individuals with good credit and bad credit.

As an example, if you have a credit score of 750 to 800, which is towards the upper end, a late payment could knock up to 710 points from your score. More importantly, it will remain on your payment history for years to come and reduce your chances of getting everything from a student loan to a credit card and mortgage.

How Soon do Late Payments Show on Credit Reports

You won’t be hit with a derogatory mark as soon as you miss a credit card payment. The credit card issuer may charge you a fee, but by law, they are not allowed to market it as a missed payment until it is 30 days due. And this doesn’t just apply to credit card debt, it’s true for loans as well.

Providing you cover the payment within 30-days, you can avoid a missed payment mark appearing on your credit report. But as soon as that period passes, your lender will inform the major credit bureaus and your score will take a hit.

Some lenders wait even longer before reporting, so you may have as long as 60 days to make that payment. Check with your creditor to see when they start reporting missed payments.

What About Partial Payments?

Many lenders treat a partial payment the same as a missed payment, especially where credit cards are concerned. If you’re struggling to meet your payment obligations, contact your creditor in advance, tell them how desperate your situation is and inform them that you can meet part of the payment.

They may offer you some reprieve, they may not, but you won’t know if you don’t ask. However, it’s worth noting that this will only impact your score if you don’t cover the remaining credit card payment before the 30-day period is up.

To avoid confusion, we should also mention that this only applies to the minimum payment. Some credit card users get confused with the difference between a balance and a minimum payment.

Simply put, the balance is what you clear at the end of the month to avoid accumulating debt and paying interest. If you fail to pay that balance on time, your debt will simply roll over to the next month, after which you will be required to meet a minimum payment on your debt. If, however, you miss that minimum payment, then you’re at risk of your credit report taking a hit.

Reporting agencies don’t record the difference between a rolling balance and a debt. If you spend $3,000 on your card every month but pay it off without fail and without delay, you won’t accumulate interest and technically, you won’t have debt. However, at the end of the month, the reporting agencies will show that you owe $3,000 on that card, just as they would show if you had accumulated a balance of $1,000 a month for three months and let it rollover.

How Long Does a Late Payment Stay?

A late payment will remain on your credit report for 7 years. But herein lies another confusion. Just because it reduces your score by 100 points and remains for 7 years doesn’t mean you will suffer a reduction of 100 points for those 7 years. 

It generally stops having a major impact on your score after a couple of years and while it will still have an impact in that 7-year period, it will be infinitesimal by the time you reach the end.

How Many Late Payments Can You Make Before it Reduces Your Score?

One late credit card payment is all it takes to reduce your score, providing that late payment was delayed by at least 30-days. However, that doesn’t mean you can forget about it once the 30-day period has passed and it definitely doesn’t mean that all the possible damage has been done.

It can and will get worse if you continue to avoid that payment. Your credit report will show how late the payment is in 30-day installments. When it reached 180 days, your account will enter default and may be charged-off, which will reduce your score and your chances of acquiring future credit even more.

Your creditor may sell your account to a collection agency. If this happens, the agency will chase you for repayment, seeking to establish a repayment plan or to request a settlement. Accounts are often in this stage when a consumer goes through debt settlement, as creditors and debt collectors are typically more susceptible to accepting reduced settlements because the debt has all but been written off.

How to Remove Late Payments from Your Credit Report

Although rare, it is possible to remove late payments from your credit report. There are also numerous ways you can reverse late payment fees, and we recommend trying these whenever you can as it will save you a few bucks.

Here are a few options to remove late payments and late payment fees:

Use Your Respectable History

The quickest way to get what you want is to ask for it. If you have a clean credit history and have made your payments on time in the past, you can request that the fee/mark be removed. 

Write them a letter requesting forgiveness, explain that it was an oversight or a temporary issue and point to your record as proof that this will likely not happen again. Creditors may seem like heartless corporations, but real humans make their decisions for them and, like all companies, they have to put their customers first.

Request Automatic Payments

Lenders have been known to remove late payment fees if the debtor signs up for automatic payments. It makes their job easier as it prevents issues in the future and ensures they get what they are owed, so it’s something they actively promote.

They may make this offer themselves, but if not, contact them and ask them if there is anything you can do to remove the late payment. They should bring this up; if they don’t, you can. It doesn’t hurt to ask and the worse they can do is say no.

Claim Difficulties

If you claim financial difficulties or hardships and make it clear that a late payment will make those difficulties much worse, the lender may be willing to help. Contrary to what you might think, their goal is not to make life difficult for you and to destroy you financially. 

It’s important to see things from their perspective. If you borrow $15,000 and your balance climbs to $20,000 with interest, their main goal is to get that $15,000 back, after which everything else is profit. If you pay $10,000 and start slipping-up, the risk of default will increase. The worse your financial situation becomes, the higher that risk will be. 

If they eventually sell the account to a debt collector, that remaining $10,000 could earn them just a couple of hundred dollars, which means they will lose a substantial sum of money. They are generally willing to help any way they can if doing so will increase their profits.

How to Avoid Late Payments

A late payment can do some serious damage to your payment history so the best thing to do is to prevent it from occurring in the first place. It’s a no-brainer, but this is a common issue and it’s one that countless consumers have every single year. So, keep your credit card and loan payments stable with these tips.

Set Automatic Payments

Occasionally, consumers forget to pay. Life is hectic, they have a lot of responsibilities to juggle, and it’s easy for them to overlook a single payment. If this happens, it should be caught and fixed before the 30-day period ends and the credit bureaus find out. But even then, fees can accumulate, and problems escalate.

To avoid this, set up automatic payments so your minimum payment is paid in full every month. You can do this for all debt, including student loan payments. Just make sure you have the money in your account to meet this minimum charge, otherwise, you could be paying for debt on one account by accumulating it on another.

Set a Budget

A credit card is designed to encourage you to spend money you don’t have. You’re buying things you can’t afford now in the hope or expectation that you will cover them later, only to realize that you’re struggling so much you can’t even cover the minimum payment.

If you ever find yourself in a situation like this, it’s time to analyze your finances and create a sensible budget. You may feel like you have a good idea of what you’re spending each month and how this compares to your gross income, but the vast majority of consumers seriously underestimate their expenses.

Improve Your Credit by Fixing Your Debt-to-Income Ratio

Calculate your debt to income ratio by comparing your total debt (credit card payments, student loans) to your gross income. The higher this is, the harder you need to work, and the less you need to spend on your credit card. 

Your debt to income ratio should be your central focus when seeking to improve your credit score, because while it’s not considered for loan and credit card applications, it does play a role in mortgage applications and is important for calculating affordability.

Conclusion: It’s Not the End of the World

A late payment can strike a disastrous blow to your credit report, but it’s not the end of the world and you do have a few options at your disposal. Not only do you have up to 30 (and sometimes 60) days to make the payment and prevent a derogatory market, but you can file a claim to have it removed in the event that it does appear.

And if none of that works, a little credit repair can get you back on track. Just keep making those payments every month, talk with your lender when you find yourself in trouble, and remember that nothing is unfixable where credit is concerned.

Late Payments, Credit Scores and Credit Reports is a post from Pocket Your Dollars.

Source: pocketyourdollars.com