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Earning Interest, Reviews, Strategies to Save

Review of Chase Bank’s CD Rates

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Review of Chase CD rates
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Chase Bank is a consumer and commercial bank operated by JPMorgan Chase & Co., an international business firm dating back to 1799 that currently has $2.6 trillion in assets and operations worldwide. The bank, insured by the Federal Deposit Insurance Corporation (FDIC), has 5,100 branches and 16,000 ATMs across the United States. Its products include credit cards; checking, savings and CD accounts; and auto and home equity loans.

But Chase’s CDs are the subject of this article; they can be opened at a branch or completely online at term lengths ranging from one to 120 months.

How Chase CD rates compare with those of other banks

We compared Chase’s CD offerings with entries on our current list of the Best CD Rates for December 2017. On the positive side, you’ll need less money to qualify for a Chase CD than you might at other banks. Chase allows customers to open their CDs with a minimum deposit of $1,000, which is slightly lower than qualifying amounts at some other institutions. Chase CDs are also open to applicants who do not bank with Chase, in contrast with the practices of some banks and credit unions that require member checking or savings accounts.

However, Chase CD rates are far from the most competitive rates out there. You can easily get find better APY rates at other institutions, particularly for one-year CDs. If you decide to go with Chase, look into so-called “relationship rates” with a higher APY. Relationship rates are offered to customers who link their CDs to a Chase personal checking account.

On a 12-month CD for under $10,000, for example, you’ll currently draw twice the percentage rate offered on the standard CD.

As mentioned, a minimum of $1,000 is required to open a Chase CD account, and interest is compounded daily. Depending on the term, your earned interest may be paid monthly, quarterly, semi-annually, annually — and at maturity.

Here’s an overview of the rates Chase currently offers on its CD products. All rates were reviewed at Depositaccounts.com, another LendingTree-owned company, and are current as of Dec. 5, 2017.

CD term

APY

Min. deposit amount

1-Month

0.01%

$1,000

2-Month

0.01%

$1,000

3-Month

0.01%

$1,000

6-Month

0.01%

$1,000

9-Month

0.01%

$1,000

12-Month

0.01%

$1,000

15-Month

0.01%

$1,000

18-Month

0.05%

$1,000

21-Month

0.05%

$1,000

24-Month

0.05%

$1,000

30-Month

0.05%

$1,000

36-Month

0.05%

$1,000

42-Month

0.10%

$1,000

48-Month

0.10%

$1,000

60-Month

0.25%

$1,000

84-Month

0.25%

$1,000

120-Month

0.70%

$1,000

Source: DepositAccounts.com, Dec. 5, 2017

Chase CD relationship rates

Chase CD relationship APY rates are extended to customers who have a linked Chase checking account. You can apply online and if you use a transfer from your account to open the CD, the account can be opened the same day. The minimum deposit is, again, $1,000.

CD term

$0 - $9,999

$10K - $24,999.99

$25K - $49,999.99

$50K - $99,999.99

$100K - $249,999.99

$250K+

1-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

2-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

3-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

6-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

9-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

12-Month

0.02%

0.02%

0.02%

0.02%

0.05%

0.05%

15-Month

0.05%

0.15%

0.15%

0.15%

0.20%

0.20%

18-Month

0.15%

0.25%

0.25%

0.25%

0.30%

0.30%

21-Month

0.15%

0.25%

0.25%

0.25%

0.30%

0.30%

24-Month

0.15%

0.25%

0.25%

0.25%

0.30%

0.30%

30-Month

0.15%

0.25%

0.25%

0.25%

0.30%

0.30%

36-Month

0.40%

0.60%

0.60%

0.60%

0.65%

0.65%

42-Month

0.40%

0.60%

0.60%

0.60%

0.65%

0.65%

48-Month

0.50%

0.70%

0.70%

0.70%

0.75%

0.75%

60-Month

0.60%

0.80%

0.80%

0.80%

0.85%

0.85%

84-Month

0.60%

0.80%

0.80%

0.80%

0.85%

0.85%

120-Month

1.15%

1.25%

1.25%

1.25%

1.29%

1.29%

Source: DepositAccounts.com, Dec. 5, 2017

Here’s a sample comparison between the APY on standard and relationship CDs on new accounts. To calculate on earnings at maturity, we assumed an account balance of $5,000.

Chase standard CD APY

Earnings at maturity

Chase relationship CD

Earnings at maturity

12 months at 0.01%

$.50

12 months at 0.02%

$1.00

24 months at 0.05%

$5.00

24 months at 0.15%

$15.01

48 months at 0.10%

$20.03

48 months at 0.50%

$100.75

120 months at 0.70%

$361.23

120 months at 1.15%

$605.69

Important information about Chase CDs

Fees

There are no monthly service fees, however there are $15 fees for inbound domestic and international wire transfers (waived if from another Chase account) and outbound domestic wire transfer fees. Accounts can be opened online. Deposits of more than $100,000 must be opened at a Chase branch office.

Non-Chase customer access

You do not need to have a Chase checking or savings account to open a standard Chase CD account. You’ll need to provide a Social Security number, driver’s license and contact information. Deposits must be made from a checking or savings account through your existing bank.

Maturity date and grace period
Law requires banks to alert consumers before the maturation date on CDs. Chase considers the maturity date as the last day of the term. It offers a 10-day grace period on all CDs with terms 14 days or longer. During the grace period, you can withdraw the funds without penalty or roll over the account to another term.

Automatically renewable CDs versus single-maturity CDs

Account holders have the option of opening an automatically renewable or single-maturity CD account.

With an automatically renewable CD, the account renews on the maturity date for the same term as the original one, making the new maturity date the last day of the new term. The standard rate will apply unless the owner qualifies for a relationship CD.

The single-maturity CD does not automatically renew and earns no interest following the maturity date. You may want to see if Chase is offering any promotional rates during the 10-day grace period if you plan to invest in another Chase CD using a ladder strategy.

Earning interest on a Chase CD

Interest on Chase CDs begins to accrue on the first business day of deposit into your account and is calculated on a daily balance, 365 days a year. Paid or credited interest can be withdrawn during the term or at maturity without incurring penalties. For maturities of more than one year, interest will be paid at least annually, according to the bank. If the CD matures and automatically renews, the interest in the account is rolled over into the new principal.

Early-withdrawal penalties and fees
According to Chase, early-withdrawal penalties are deducted from your principal and do not exceed the total amount of earned interest. The penalty is 1 percent of the amount withdrawn if the term of the CD is less than 24 months. The early-withdrawal penalty is 2 percent for terms of 24 months or more.

Chase CD early-withdrawal penalties can be waived upon:

  • Death of a CD owner
  • Disability of a retirement CD owner
  • Retitling of a CD
  • A court ruling that the CD owner is incompetent

The bottom line:

Chase’s CD rates are likely best for customers who link the CD to their personal checking accounts because they can qualify for those juicier relationship rates. The rates improve for longer terms and larger deposit amounts. Chase’s online tools allow you to apply for relationship CDs and track your investments. The minimum amount to open a standard CD account ($1,000) is on par or slightly lower than those required by other institutions. Overall, the APY rates are not as good as you can get from some competing banks and credit unions.

LEARN MORE Secured

on Chase’s secure website

Gabby Hyman
Gabby Hyman |

Gabby Hyman is a writer at MagnifyMoney. You can email Gabby here

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Best of, Earning Interest

The Top 6 Month CD Rates for December 2017

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

The top 6 month CD rates
Source: iStock

Short-term certificate of deposit (CD) accounts offer investors a safe opportunity to squirrel away money for a future expense. If you’re looking for a brief solution for storing your cash and want to earn more interest than a typical savings account will offer, a 6 month CD can make a lot of sense. (It’s also a good place to start if you’re building a CD ladder.)

Using information from DepositAccounts.com, another LendingTree company and a database of offerings at more than 17,100 banks and credit unions, we found the five banks and five credit unions with the top 6 month CD rates. If there was a tie, we chose the institution with the smaller minimum-deposit requirement. We pulled these rates on Dec. 4, 2017, and we excluded promotional offerings. The national average APY on 6 month CDs (among banks and credit unions) is 0.41%, according to the DepositAccounts.com database. These options outperform that average by a long shot. (You may also want to view our picks for the overall best CD rates.)

Banks with the best 6 month CD rates

M.Y. Safra Bank

M.Y. Safra Bank

6 month CD APY: 1.42%
Bank information: M.Y. Safra Bank has been around since 2000, offering a wide variety of banking products to their customers. Although their physical location is in New York, they provide online banking to customers located outside of New York.
Where to open CD account: Online
Minimum balance to open: $5,000
Maintenance fees: $0
Early withdrawal penalties: Credited interest or 90 days’ interest — whichever is greater

Certificates of Deposit

First Internet Bank of Indiana

6 month CD APY: 1.41%
Bank information: A subsidiary of First Internet Bancorp, this online bank founded in 1999 has no branch locations, but offers service online in all 50 states.
Where to open CD account: Online
Minimum balance to open: $1,000
Maintenance fees: $0
Early withdrawal penalties: 90 days’ interest

Security State Bank

Security State Bank

6 month CD APY: 1.36%
Bank information: Security State Bank is located in Scott City, Kan., but anyone can open an account online.
Where to open CD account: Online
Minimum balance to open: $25,000
Maintenance fees: $0
Early withdrawal penalties: 90 days’ interest

ConnectOne Bank

ConnectOne Bank

6 month CD APY: 1.31%
Bank information: ConnectOne Bank opened its doors in 2005 in Englewood Cliffs, N.J. ConnectOne Bank serves customers all over New Jersey and recently expanded to New York City. It also serves all U.S. residents and citizens online.
Where to open CD account: Online
Minimum balance to open: $500
Maintenance fees: $0
Early withdrawal penalties: 90 days’ interest

eCD Accounts

VirtualBank

6 month CD APY: 1.29%
Bank information: VirtualBank is a subsidiary of Louisiana-based IBERIABANK Corp., offering 24/7 digital or telephone access on eCDs, open to applicants anywhere in the U.S.
Where to open CD account: Online (paperless account options)
Minimum balance to open: $10,000
Maintenance fees: $0
Early withdrawal penalties: 30 days’ interest

Credit unions with the best 6 month CD rates

Share Certificate

Service Credit Union

6 month CD APY: 1.30%
Credit union information: Founded in Portsmouth, N.H., in 1957, Service Credit Union originally served employees of Pease Air Force Base. Today, it has grown to serve over 200,000 people throughout New Hampshire, North Dakota, Massachusetts, and even Germany.
Membership details: To become a member, you must live or work, or have family members that live or work in New Hampshire or Falmouth, Bourne, Mashpee, and Sandwich, Mass. Current members of the military, veterans, retirees, and reservists of the U.S. Armed Forces along with their families are also eligible for membership.
Where to open CD account: You can open an account online or at one of their many branches.
Minimum balance to open: $250
Maintenance fees: $0
Early withdrawal penalties: Determined by credit union.

Certificates

Evansville Teachers Credit Union

6 month CD APY: 1.10%
Credit union information: Headquartered in Evansville, Ind., Evansville Teachers Credit Union was created in 1936 by teachers who wanted to help their colleagues get back on their feet after the Depression. Decades later, this credit union has continued to live by their “People Helping People” philosophy by extending their financial services to groups and organizations outside the educational realm.
Membership details: If you are employed, retired from, or have a relationship with someone affiliated with their eligible groups, you are eligible for memberships.
Where to open CD account: Open an account online or one of their branches.
Minimum balance to open: $1,000
Maintenance fees: $0
Early withdrawal penalties: The credit union imposes penalties based on withdrawals made before maturity.

Certificates

Chevron Federal Credit Union

6 month CD APY: 1.05%
Credit union information: Founded in 1935, the Chevron Federal Credit Union is a private, nonprofit institution with branches in California, Louisiana, Mississippi, Texas, and Utah.
Membership details: Membership is open to Chevron Corp. employees, retirees and affiliates, residents of San Francisco, and residents in Frederick County, Md.
Where to open CD account: Branch locations and online
Minimum balance to open: $500
Maintenance fees: $0
Early withdrawal penalties: 90 days’ interest

Certificates of Deposit

Northwest Federal Credit Union

6 month CD APY: $250,000+, 1.05%; $100,000-$249,999, 0.95%; $1,000-$99,999, 0.85%
Credit union information: Founded 70 years ago, Northwest Federal Credit Union currently serves approximately 200,000 members.
Membership details: Government employees, retirees and household members affiliated with the National Reconnaissance Office, Office of the Director of National Intelligence, the Department of Homeland Security, the National Geospatial-Intelligence Agency, and member companies.
Where to open CD account: Online banking, branches, or phone: 703-709-8900 (844-709-8900 toll-free).
Minimum balance to open: $1,000, $100,000, and $250,000.
Maintenance fees: $0
Early withdrawal penalties: The credit union uses an APY calculation that reduces interest earnings based on the amount withdrawn prior to maturity.

PenFed Credit Union CDs

PenFed Credit Union

6 month CD APY: 6 month Sapphire, 0.90%; 6 month Gold, 0.65%; 6 month Silver, 0.40%. (Interest-rate rewards — Sapphire, Gold and Silver — are calculated based on length of membership.)
Credit union information: PenFed is a credit union that serves military and government personnel as well as individuals willing to support the military. It was established in 1935 and currently serves people in the U.S., Guam, Puerto Rico, Okinawa, and Portugal.
Membership details: With a $17 donation to Voices for America’s Troops or the National Military Family Association, anyone is able to join PenFed. Membership is also available to active or retired Military personnel, employees of the U.S. government, family members or roommates of eligible individuals, as well as employees, affiliates, and residents of several locations and organizations. Check their application page to see the organizations and locations that are eligible for free membership.
Where to open CD account: Over the phone or in person at a PenFed branch.
Minimum balance to open: $1,000
Maintenance fees: $0
Early withdrawal penalties: 60 days’ interest

Pros and cons of using 6 month CDs

Pros:

  • The CD rates offered by banks and credit unions are generally higher than those on savings accounts.
  • The rates are fixed and guaranteed for the length of their term.
  • The discipline of keeping the funds in the CD means the money will be available upon maturity. (Note: Most banks offer a seven-day grace period to reinvest or withdraw the investment, after which the funds will roll over into a new CD. However, you are not guaranteed the same rate.)

Cons:

  • Six-month CD rates are lower than those offered on longer CD investment terms.
  • To tap into the CD funds — even for emergencies — consumers must accept a loss through penalties, which can include a percentage of the funds, a percentage of the earned interest, or a combination of both. A typical penalty on a short-term CD is between 30 and 90 days’ worth of interest earnings.
  • If you’re not confident you can do without access to the funds for six months, you may be better off putting your money in a traditional savings account, which is likely to earn less interest than a CD.
  • Since CD rollovers may reset at a different percentage rate, consumers must speak with the bank before the grace period ends to ensure they are getting the best deal.

Using a 6 month CD for laddering

A CD ladder comprises small-amount CDs with varying terms and respective interest rates that contribute to a long-term investment strategy. After the 6 month CD matures, investors can withdraw the funds for a predetermined expense. Or, they can reinvest the money into a longer-term CD with a better rate. By staggering the maturity dates on short-term CDs, consumers have access to their cash on a regular, predictable basis.

Where can you open a CD account?

Consumers can open 6 month CD accounts (or longer) from banks and credit unions. Bank and credit union CD rates are based on Federal Reserve rates, and there may be strategic times to pursue these short-term instruments following a rate increase.

Gabby Hyman
Gabby Hyman |

Gabby Hyman is a writer at MagnifyMoney. You can email Gabby here

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The Best Business Savings Account Rates in 2017

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Are you looking to start or grow a business? Opening a business savings account can offer federal protection for the funds you deposit (up to $250,000) and provide a source of liquidity should inevitable expenses arise. You can earn interest while setting aside money for capital improvement or income taxes. A commercial savings account can add credibility to your business, arm you with a business debit card and help your cash flow.

The best way to choose an account that fits your needs is to start by comparing the annual percentage yield offered by banks and credit unions. Then look for benefits that might make the account attractive based on your needs. Is there a monthly maintenance fee or a minimum deposit to open? Does the bank provide ample access to ATM and online account services?

Deciding which business savings account is best for your needs can be a difficult process, but hopefully this roundup of our picks for best savings accounts will help give you a head-start.

The best business savings account rates — December 2017

Institution

APY

Minimum balance amount

Live Oak Bank

1.05%

None

BofI Federal Bank

1.01%

$25,000

First Internet Bank of Indiana

1.00%

None

Digital Federal Credit Union (DCU)

1.00%

$25,000

Community Bank of Pleasant Hill

0.98%

None

Community Bank of Raymore

0.98%

None

Presidential Bank (Maryland)

0.50%

$5,000

UniBank

0.35%

$2,500

Andrews Federal Credit Union

0.31%

$100

SaviBank

0.30%

None

Source: Deposit Accounts, Dec. 1, 2017

1. Live Oak Bank, 1.05% APY, No minimum balance

Live Oak Bank claims the 1.05% APY rates on its business accounts are eight times the national average. There is no minimum opening balance or deposit required to open a business savings account.
The business savings account is open to deposits of up to $5 million and is free of monthly maintenance fees. You may make up to 6 withdrawals from your Live Oak Bank Savings account per statement cycle, including preauthorized, automatic and telephone transfers. After that there’s a $10 fee per withdrawal. Live Oak Bank, established in 2008, holds assets of $2.12 billion.
The bank is in Wilmington, N.C., and is a member of the FDIC. Learn more about business savings at Live Oak Bank.
Small Print: The bank may verify credit and employment history at its discretion, meaning you may receive a pull against your credit report.
Restrictions on joining: none.

LEARN MORE Secured

on Live Oak Bank’s secure website

2. BofI Federal Bank: 1.01% APY, $25,000 minimum balance, ATM access

BoFI Federal Bank offers the top APY rate in the DepositAccounts nationwide survey of business savings accounts. The bank’s Business Premium Savings Account with a high-yield 1.01% APY can be opened with a $25,000 minimum deposit.

There is no monthly maintenance fee for the account and no average daily balance requirement.

BoFI also makes it easy to access your funds when you need it. Customers have ATM access to their accounts along with free online banking. However, ATM withdrawal limits are $1,010 per day and there’s a daily purchase limit of $5,000. BofI is an FDIC-insured bank based in San Diego and publicly traded online. Other products include Business Interest Checking and Business Money Market accounts.

LEARN MORE Secured

on BofI Federal Bank’s secure website

3. First Internet Bank of Indiana, 1.00% APY up to $250,000, ATM services

First Internet Bank offers an FDIC-insured savings option for businesses with a relatively good 1.00% APY. However, if you have more than $250,000 to put in their business savings account, they’ll award you with a 1.26% APY. Unfortunately, the FDIC only insures up to $250,000. So, if you deposit more than $250,000 into the savings account, the excess deposit amount will not be insured by the FDIC.

It costs $100 to open your business account and you must maintain an average daily balance of $1,000 to avoid a $2 monthly maintenance fee.

There is no minimum balance to open or maintain the account. Unlimited deposits can be made each month and six transfers or withdrawals are allowed without charge.

The First IB ATM cards are offered to sole proprietors only. There is no charge for ATM transactions or electronic statements. Founded in 1999 by the First Internet Bancorp, First IB offers remote banking in all 50 states.

Fine print: Only six preauthorized, automatic, PC, or telephonic transfers are allowed each month. This restriction is common among most of these institutions, however, First Internet Bank will charge you $5 per item if you go beyond the allotted six.

Restrictions on joining: none.

LEARN MORE Secured

on First Internet Bank Of Indiana’s secure website

4. Digital Federal Credit Union (DCU), 1.00% APY, $25,000 minimum balance

Digital Federal Credit Union offers a solid 1.00% APY rate through its Business DCU Ltd Savings Account with a minimum $25,000 balance.

Businesses participating in the DCU Ltd Savings Account receive 24/7 online banking, mobile banking through the DCU Mobile Banking App, access to DCU ATMs, deposits, transfers or balance verification. Watch out for their ATM fees, though. They charge $0.75 per withdrawal from a non-DCU ATM, which will surely add up if you make regular withdrawals. Created by the Digital Equipment Corporation in 1979, DCU is the largest credit union in Massachusetts by assets. Federally insured by NCUA, DCU is based in Marlborough, Mass.

Restrictions on joining: To join, you must meet eligibility requirements within the field of membership for employers, organizations, participating communities or condominium associations.

LEARN MORE Secured

on Digital Federal Credit Union (DCU)’s secure website

5. Community Bank of Pleasant Hill, 0.98% APY, No minimum balance

With its 0.98% APY, the Business Premier Money Management Account at Community Bank of Pleasant Hill offers highly competitive rates to explore. You need only put down $25 to open the account and maintain a minimum balance of $10,000 to avoid a $10 monthly service charge and $4 paper statement fee.

ATM access is offered surcharge-free when using ATMs in the MoneyPass® network. Community Bank began operations on Dec. 6, 2006, and is a member of the FDIC. Members can search for partner ATMs online or through mobile access.

Fine print: Just watch out for hefty withdrawal fees. You can make free withdrawals on the second and fourth Wednesdays of the month; on other days, there’s a $25 withdrawal fee. If you plan to make regular in-person withdrawals, this probably isn’t the best account for your needs.

Restrictions on joining: none.

LEARN MORE Secured

on Community Bank Of Pleasant Hill’s secure website

6. Community Bank of Raymore, 0.98% APY, $25 minimum deposit to open

The Community Bank of Raymore created its Premier Money Management Account specifically for business customers who carry high balances and are looking for security. It costs $25 to open your account but you’ll earn a solid 0.98% APY.

You must maintain a balance of at least $10,000 or you’ll be assessed a monthly $10 charge. You may only make free withdrawals on the second and fourth Wednesdays or face a $25 fee.
Electronic statements are free of charge. Nationwide ATM service without charge is available through the MoneyPass® network.

The Community Bank of Raymore was chartered in Missouri in May 15, 1979. According to the bank website, the idea of the bank originated at a community meeting at Raymore Elementary School in 1976.

Fine print: You’ll be restricted to two days a week for making free withdrawals in Raymar, too, on the second and fourth Wednesdays of the month. Other days, you’ll have to cough up $25.

Restrictions on joining: none.

LEARN MORE Secured

on Community Bank Of Raymore’s secure website

7. Presidential Bank (Maryland), 0.50% APY, $5,000 to open, ATM services

Presidential Bank’s Commercial Premier Savings account offers a 0.50% APY, making it a decent — if not extraordinary — bet for business owners.

Business customers are not required to maintain a minimum balance on the account in order to receive all ATM privileges. So long as you use one of their ATMs you won’t incur fees, but there is a $0.75 ATM fee for non-network ATMs. Free online banking, mobile banking and ATM card come with the account.

Established in 1985, Presidential Online Bank was one of the first lenders to offer online banking. Located in Bethesda, Md., it currently lists assets in excess of $550 million.

Restrictions on joining: none.

LEARN MORE Secured

on Presidential Bank’s secure website

8. UniBank, 0.35% AYP, $25,000 minimum balance, $500 to open, ATM services

The Business Regular Savings account at UniBank currently pays out 0.35% AYP for all accounts starting at $2,500. It costs $500 to open your business account and the monthly service fee is $12.

You can have that service fee waived by maintaining a $2,500 minimum daily balance. Customers have online, telephone and ATM access to their business accounts. There are more than 25,000 surcharge-free UniBank ATMs available through the MoneyPass® network.

Established in 2006, the bank is located in Lynnwood, Wash. While its business savings account rates leave much to be desired, the bank’s strength may lie in its current money market rates, which Deposit Accounts says are 70 percent higher than the national average.

Restrictions on joining: none.

LEARN MORE Secured

on UniBank’s secure website

9. Andrews Federal Credit Union, 0.31% APY, ATM banking

The Business Base Share Savings account at Andrews Federal Credit Union offers a 0.31% APY. You can open the account with as little as $5 and there is a $100 minimum balance requirement to earn the APY.

The account comes with free online banking, free eStatements and a debit card. Transactions are free at Andrews Federal & CO-OP ATMs. However, there is a $25 charge for withdrawals that result in overdrafts.

Founded in 1948 in Suitland, Md., Andrews Federal Credit Union has assets over $1.5 billion and offers a range of banking services to 120,000 members worldwide.

Restrictions on joining: $5 fee to join the credit union. Open to field of membership including nationwide membership eligibility through the American Consumer Council.

LEARN MORE Secured

on Andrews Federal Credit Union’s secure website

10. SaviBank, 0.30% APY, $250 minimum daily balance, $100 to open, ATM services

Rounding out the top 10, the business savings accounts at SaviBank offer a decent 0.30% APY. It costs $100 to open the account. If you keep a minimum daily balance of $250, the bank dismisses a $5 monthly service charge.

Checks and third-party withdrawals are limited to six for each calendar month.

Established in Burlington, Wash., in 2005 as Business Bank, SaviBank offers 24-hour access to accounts through online banking and surcharge-free ATM locations nationwide over the MoneyPass® network.

Restrictions on joining: none

LEARN MORE Secured

on SaviBank’s secure website

Learn more about business savings accounts

How we ranked the best business savings accounts

To come up with this list, we first used data from DepositAccounts.com, which tracks rates on a range of deposit accounts across thousands of banks in the U.S. Note: DepositAccounts is also owned by MagnifyMoney’s parent company LendingTree.com.

We eliminated any institutions that were given a health rating below a B by DepositAccounts. We also weeded out any credit unions that have very restrictive membership requirements. From there, we chose the top 10 business savings accounts with the highest APY. And lastly, all the banks on our list offer FDIC or NCUA insurance.

Business savings accounts vs personal savings accounts

Business and regular savings accounts may offer many of the same features ,such as 24/7 online banking, free electronic reporting, debit cards, fund transfers and ATM machines.

The trade-off in choosing a business account is that you’ll get services focused on business planning and spending in exchange for a less-desirable APY.

When you compare the interest earned on a business savings account with the best APY rates offered on savings accounts, it may not look like opening a business account is a wise strategy. The top business savings account APY right now is 1.05%. The top APY among personal savings accounts is 1.50% with no minimum deposit and ATM access. You can weigh the services, charges and minimum account fees between the top business and top personal savings accounts to decide which is best for you.

There are other benefits to offset any differences in earnings, particularly if your business is incorporated. It’s considered sound business practice to separate your personal saving and checking accounts from your business saving and checking accounts. A business account can help you manage cash flow, accounting, recordkeeping and working capital. At income tax time, separate accounts can help you differentiate business from personal expenses.

Paired with a business checking account, your business savings account can add professional branding, since all payments and correspondence with clients will bear your business name.

Or you can create savings in your business account to pay quarterly income taxes or purchase equipment.

Finally, business savings accounts are secure when you open accounts with banks and credit unions that are insured up to $250,000 per account by the FDIC or the NCUA.

North Shore Bank of Brookfield, Wis., says that a business savings account can boost your credit ratings and make it easier to obtain a business loan, since the lender can see you have an account dedicated to your company.

Choosing the right business savings account

When evaluating a financial institution for your business, there’s more than just finding a good APY.

Many of the banks on our Top 10 list look great on the APY front but carry fees that can eat into any of the returns you might make. Particularly, watch out for fees for ATM or bank withdrawals, monthly service fees and ATM fees.

The Small Business Administration (SBA) has identified the key factors to consider when searching for the right bank or credit union. These include:

  • Customer service reputation
  • Access to branches or no-surcharge ATMs
  • Benchmarks to have fees waived
  • Automatic FDIC insurance
Gabby Hyman
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Gabby Hyman is a writer at MagnifyMoney. You can email Gabby here

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Mortgage

FHA Mortgage Insurance: Explained

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Mortgages with the Federal Housing Administration (FHA) can be especially attractive to credit-challenged first-time homebuyers. Not only can your down payment be as little as 3.5 percent, but FHA loans also have more lenient credit requirements. Indeed, you can qualify for maximum funding and that low percentage rate with a minimum credit score of 580.

On the negative side, the generous qualifying requirements increase the risk to a lender. That’s where mortgage insurance comes into play.

FHA mortgage insurance (MIP) backs up lenders if you default. It’s the price you pay for getting a mortgage with easier underwriting standards. If you put down 10 percent or more, you’ll pay MIP for 11 years. If you put down less than 10 percent, you’ll pay for MIP for the life of the loan. But there are ways you can get MIP removed or canceled, which we’ll also explain in a bit.

MIP can be bit confusing, so we’ll break down exactly how it works and how much it can add to the cost of a mortgage loan in this post.

Upfront and ongoing MIP: Explained

All FHA borrowers have to pay for mortgage insurance.

MIP is paid upfront, when you close your mortgage loan, as well as through an annual payment that is divided into monthly installments. Not all homebuyers have to pay MIP forever, and we’ll get into those specifics, so hang tight.

When you make your upfront MIP payment, the lender will put those funds into an escrow account and keep them there. If you default, those funds will be used to pay off the lender. As for your ongoing MIP payments, they get tacked onto your monthly mortgage loan payment.

How long you have to pay MIP as part of your mortgage payments can vary based on when the loan was closed, your loan-to-value (LTV) ratio, and the size of your down payment. Your LTV is simply how much your loan balance is, versus the value of your home, which our parent company LendingTree explains in this post.

Upfront Mortgage Insurance Premium (UFMIP)

UFMIP is required to be paid upon closing. It can be paid entirely with cash or rolled into the total amount of the loan. The lender will send the fee to the FHA. The current upfront premium is 1.75 percent of the base loan amount. So, if you borrow a FHA loan valued at $200,000, your upfront mortgage insurance payment would be $3,500 due at closing.

UFMIP is required to be paid by the FHA lender within 10 days of closing. The payment is included in your closing costs or rolled into the loan. A one-time late charge of 4 percent will be levied on all premiums that aren’t paid by lenders within 10 days beyond closing. The lender (not the borrower) must pay the late fee before FHA will endorse the mortgage for insurance.

With ongoing premiums, your lender will collect your MIP and send it to HUD. The lender, not you, be penalized for any late MIP payments.

Annual MIP payments are calculated by loan amount, LTV, and term. To help estimate your cost, the FHA has a great What’s My Payment tool.

Here’s an example of monthly charges based on a $300,000, 30-year loan at 4 percent interest, with a 3.5 percent down payment and an FHA MIP of 0.85 percent. (This does not include any money escrowed for taxes and insurance):

  • Principal and interest: $1,406.30
  • Down payment: $10,500
  • Upfront MIP at 1.75 percent: $5,066
  • Monthly FHA MIP at 0.85 percent: $203.42
  • Total monthly payment = $1,609.72

Penalties and interest charges for late monthly payments are similar to those levied on the UFMIP.

Base Loan Amount

LTV

Annual MIP

Less than or equal to $625,500

≤ 90.00%

0.80%

> 90.00% but
≤ 95.00%

0.80%

> 95.00%

0.85%

Greater than $625,500

≤ 90.00%

1.00%

> 90.00% but
≤ 95.00%

1.00%

> 95.00%

1.00%

Source: HUD

Base Loan Amount

LTV

Annual MIP

Less than or equal to $625,500

≤ 90.00%

0.45%

> 90.00% but
≤ 95.00%

0.70%

Greater than $625,500

> 90.00% but
≤ 95.00%

0.45%

> 95.00%

0.70%

> 90.00%

0.95%

Source: HUD

How long does MIP last?

The length on MIP requirements also depends on when you closed the loan and the size of your down payment. The rules changed dramatically in July 3, 2013. Until then, you could cancel your MIP after your LTV ratio dropped to 78 percent. Under the new rules, the MIP on loans closed after June 3, 2013, will last either the life of the loan or for 11 years, based on the amount of the down payment.

For loans that were closed before June 3, 2013, you can still request that MIP be dropped after your LTV ratio drops to 78 percent — after five years of payments without delinquencies.

Here’s the breakdown:

Loan Term

Original Down Payment

MIP Duration

20, 25, 30 years

Less than 10%

Life of loan

20, 25, 30 years

More than 10%

11 years

15 years or less

Less than 10%

Life of loan

15 years or less

More than 10%

11 years

Source: FHA

 

Loan Term

Original Down Payment

MIP Duration

20, 25, 30 years

Less than 10%

78% LTV based on original purchase price
(5 years minimum)

20, 25, 30 years

10-22%

78% LTV based on original purchase price
(5 years minimum)

20, 25, 30 years

More than 22%

5 years

15 years

Less than 10%

78% LTV

15 years

10-22%

78% LTV

15 years

More than 22%

No MIP

Source: FHA

How to Eliminate MIP

NOTE: About endorsements

According to the MIP Refund Center, the HUD endorsement on FHA loan is the date your MIP is approved. When you pay your upfront MIP with the lender, the loan is closed.The clock starts ticking on your MIP on the endorsement date.

More on MIP cancellation:

Most of today’s FHA borrowers will have but a few options to end their insurance payments. If you’re hoping to get out of paying FHA mortgage insurance, you’re going to either have to pay off the loan or do some refinancing. The FHA policy allowing borrowers to cancel annual MIP after paying for five years and reaching 78 percent LTV was rescinded with the new regulations in 2013 requiring payments for the life of the loan.

The good news about the FHA policy is that you can retire your loan earlier by making additional payments. If you closed your loan after June 2013, you can cancel MIP by refinancing into a conventional loan once you have an LTV of at least 80 percent.

Here are two strategies to get your MIP canceled:

Replace/refinance with a Streamline FHA Mortgage

If you have a current FHA mortgage and have no late payments, you may qualify for a Streamline FHA mortgage to refinance your existing loan with a better rate. You’ll still need to pay MIP but the savings generated by the lower interest rate can offset your insurance costs.

Replace/refinance, with conventional PMI

Want to switch to conventional refinancing? Credit requirements are tougher and interest rates may be higher on conventional PMI. The minimum qualifying credit score for conventional fixed-rate loans is 620.

PMI is similar to MIP in that both protect the lender’s investment. The MIP is determined by the LTV and term. The PMI is calculated on the size of your down payment.

A minimum of 5 percent down is required and the PMI can be paid in a lump sum or monthly installments — not both. If you put down 20 percent or more, the requirement for PMI on conventional financing can be waived. In conventional refinancing, you may be required to have an appraisal to determine property value. This is essential since the PMI insurance requirement on conventional loans ends once the borrower’s LTV drops to 78 percent. The Consumer Financial Protection Bureau says that the lender is required to cancel PMI once your payments reach the “midpoint of your loan’s amortization schedule” — no matter the LTV. That’s if you’re current on your payments.

A good way to determine the value of refinancing is to complete an analysis through LendingTree’s Refinance Calculator.

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FHA announcements and changes

HUD announces changes in MIP requirements from time to time in reaction to risks such as foreclosures, deficits in the Mortgage Insurance Fund or downturns in FHA lending.

For example, in January 2015, HUD reduced the annual MIP insurance rate by 50 basis points. Another announcement was released this year after President Trump took office when HUD canceled a plan to lower MIP premiums proposed by the Obama administration. According to the National Association of Realtors, the cancellation of lower rates means “roughly 750,000 to 850,000 homebuyers will face higher costs, and 30,000 to 40,000 new homebuyers will be left on the sidelines in 2017 without the cut.”

Consumers should check with lenders or with HUD to stay up to speed on changes that could affect their mortgage.

Am I eligible for a HUD refund?

If you acquired your loan prior to Sept. 1, 1983, you may be eligible for a refund on a portion of your UFMIP. Or, if you refinance your home with another FHA loan, the insurance refund is applied to your new loan.

HUD rules specify how long you have to refinance before you lose your refund:

  • For any FHA-insured loans with a closing date prior to Jan. 1, 2001, and endorsed before Dec. 8, 2004, no refund is due the homeowner after the end of the seventh year of insurance.
  • For any FHA-insured loans closed on or after Jan. 1, 2001 and endorsed before Dec. 8, 2004, no refund is due the homeowner after the fifth year of insurance.
  • For FHA-insured loans endorsed on or after Dec. 8, 2004, no refund is due the homeowner unless he or she refinanced to a new FHA-insured loan, and no refund is due these homeowners after the third year of insurance.

The refund process goes into motion when the mortgage company reports the termination of your insurance on the loan to HUD. You may receive additional paperwork from HUD or receive a refund directly in the mail. You can find out if you’re owed a refund by entering your information at the HUD refund site. If you’re on the list, call HUD to get the ball rolling at: 1-800-697-6967.

Final thoughts

If you’re trying to get into a home with less-than-optimal credit, an FHA-backed loan could be your best option. You’ll pay for the benefit of landing the mortgage through MIP over much of the loan’s lifetime, if not all of it. You may save money after you’ve built some equity (or improved your credit) by refinancing to a conventional mortgage that drops the mortgage insurance requirement after you reach the 78 percent LTV milestone.

Gabby Hyman
Gabby Hyman |

Gabby Hyman is a writer at MagnifyMoney. You can email Gabby here

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Auto Loan

How Often Can You Refinance Your Car Loan?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Refinancing your auto loan can be a wise decision, especially if you do the math and realize you have something to gain. You may find more attractive interest rates, have improved credit, or be struggling to afford your payments and want a way to ease your monthly auto bill. The real issue is whether a new loan and its attendant fees will result in savings during the time it takes to own the car outright.

But what happens if you’ve refinanced before and you’re looking to refinance your auto loan yet again?

How long to wait before refinancing your auto loan

Good news: Consumers can refinance their car as many times as they want and as often as they can find a lender willing to approve them for a new loan.

You can even refinance your car loan the moment you get it home from the dealership if you realize you can land a better loan. There are no legal restrictions on financing a car later on, although it may be harder to find a willing lender as the years and miles accrue on the vehicle. Each lender has its own set of requirements. At Bank of America, for example, the car must be less than 10 years old and have fewer than 125,000 miles on it to qualify for refinancing.

Just because you can refinance doesn’t necessarily mean it’ll be easy.

Look at your original loan contract to see if you have to jump through any hoops first. The Federal Trade Commission (FTC) warns that finance companies and banks can impose “prepayment penalties” on their contracts, which are fees they charge if you decide to pay off your loan earlier than planned. And, of course, by refinancing with a new lender, you are doing exactly that.

According to online auto retailer Cars Direct, prepayment penalties are allowed by the government in the District of Columbia and 36 states.

7 Reasons It Makes Sense to Refinance an Auto Loan

There are many cases in which it might be a good idea to refinance your auto loan.

Perhaps you need a lower monthly payment to offset a tight budget, or you need to save the total amount the car financing will ultimately cost. We’ll break down a few factors that can make it profitable to refinance now.

1. You qualify for a loan with a lower interest rate

Many car shoppers never shop around or compare auto loan offers, and that can be a costly mistake. If you’re in that group, then you may walk off the lot with a terrible rate and realize late that you could have gotten a much better deal. That’s a good reason to refinance.

In another scenario, if interest rates have dropped a few percentage points since the car was originally financed, there’s a chance auto rates might be lower as well. You may save money on refinancing the vehicle. Consumers can search for auto refinancing rates at competitive lending sites like LendingTree, the parent company of MagnifyMoney, which may offer interest rates as low as 1.99% APR on terms of two, three, four and five years. Lenders may offer the best rates to consumers with good-to-excellent credit scores (700-800).

2. You want a lower monthly payment

Even consumers with clear credit histories and top scores may not like the cost of their current monthly payments. You might find that you can get a longer term loan (and, thus, a lower payment) by getting pre-approved financing from a bank, credit union or private lender. You should compare a new loan with the terms and rates of your existing financing. LendingTree’s Auto Refinance Calculator crunches monthly payment figures, allowing buyers to type in different interest rates and loan terms to find the sweet spot.

Just beware of choosing a loan with a longer term. It may save you money on your monthly payment, but you will ultimately pay more interest over time.

Here’s an example to show you how much more you’ll pay with a longer-term loan.

For those who can increase their monthly payment without too much stress, shortening the term may be a good strategy. Monthly payments will be higher, but the car will be paid off sooner, lowering the total amount of paid interest. The bottom line: If you’re considering changing the term in refinancing, be sure the interest rate and refinancing charges are low enough to make it worthwhile.

3. You want to remove or add a co-signer

There may be business or personal reasons to add or remove a co-signer from the original auto financing. In a divorce, the primary owner may want to remove the ex-spouse co-signer from the loan and title. Or someone may want to add a co-borrower with better credit to qualify for a lower refinancing rate. Either way, those modifications are going to require refinancing.

Unfortunately, it’s going to be difficult to remove yourself as a co-signer if the person who financed the car stops making payments. So if that’s your case, check out our guide on how to get out of a bad car loan.

4. Your credit score has improved and you can qualify for a lower rate

Congrats on improving your score! According to our parent company, LendingTree, if you raise your credit into the next tier in the FICO Score range you may see appreciable savings. Auto lenders rank consumer credit into Tiers A, B, C, D and F. Financing to applicants with D- and F-tier scores may only be offered as subprime or bad credit loans:

  • Tier A: 781 – 850
  • Tier B: 661 – 780
  • Tier C: 601 – 660
  • Tier D: 501 – 600
  • Tier F: 300 – 500

Borrowers falling into the D and F tiers should review MagnifyMoney’s guide on bad credit loans.

5. You earn a lot less or a lot more than you used to

There may be two key financial reasons supporting car refinancing:

  • You earn more than you did when you bought the vehicle and want to pay it off sooner
  • You earn less than you did and cannot meet the monthly payments

Those who have improved finances may choose to refinance to shorten the loan term, increasing their monthly payments but slashing the amount of total required payments to pay off the car. Owners who have experienced a financial setback (change or loss of income) can refinance their vehicles to a longer term, lowering the amount of their monthly payments. Refinancing your loan to a lower rate with the same or more favorable interest rate will lower the total cost of the car.

6. Your car is worth less than what you owe

If a consumer owes more money on their car than it’s worth, they have an “upside-down” loan. This can happen if you buy a car with a very low down payment and finance the rest. Your car simply loses value over time and you wind up paying on a loan that was determined based on its value months or even years earlier. If your car loan is underwater, you don’t have a good chance of getting refinanced since the lender will take a hit on the collateral if you default. A way to stave off disaster is to make extra payments on the original loan or take out a home equity or personal loan to pay off the vehicle.

7. Your car is getting older

If you want to refinance before your car gets too old to qualify, you should.

Lenders set their own limits on how many miles and years on the road qualify cars for refinancing. For example, Nationwide Bank will not refinance vehicles that are 20 years or older, or 150,000 miles on the odometer. Bank of America will not refinance cars 10 years or older and won’t touch vehicles with 125,000 miles or more.

Risks To Consider Before You Refinance

Impact on credit

When you apply for refinancing, a “hard inquiry” is reported to the credit agencies. Multiple hard inquiries on refinancing (and other loan requests) can drop credit scores by a few points, but the impact can be offset if you make consistent payments on time, which will help boost your score.

Also, you won’t get dinged if you shop for an auto loan over a short period of time — say two weeks or so. In that case, credit bureaus should treat all those hard inquiries as just one inquiry.

Long-term loans can cost more in the long run

Today, you can get auto loans for as long as 84 months. Extending terms through a refinance may look good when the monthly payment comes due. But the added interest over the term can cost you more in the end. Term and APR sit on opposite sides of the seesaw.

Doing the math, compare these costs when the terms are extended:

  • A $30,000 car financed at 6% for five years: $34,799
  • Financing the same car and rate for seven years: $36,813

If you drag out your loan term, you could wind up upside down on the loan

During the first years of ownership, financing on a new car is already upside down. That’s because the monthly payments are largely paid on interest rather than on the principal. Meanwhile, the new car is losing value. If the consumer has a downward turn in finances, the loan can go off the deep end. With an older vehicle, there’s still a risk with a long extension. By the time the refinancing is paid off, the car will have amassed high mileage that can diminish its use as a trade-in.

Fees

Each state charges a titling fee when a new loan is made on the vehicle. Check your state’s Department of Motor Vehicles (DMV) to find out the fees. In New York, for example, the titling fee is $50. It’s unlawful for the dealership to make a profit on the titling. Remember, frequent refinancing customers pay for titling each time.

There are no requirements or charges for an appraisal when refinancing, but the borrower may be assessed lender fees for loan originations and processing. Get all charges — in writing — in your contract. Some lenders may be open to negotiations on some fees. Be wary of upfront fees that may be charged with any loan application at the bank, credit union or finance company.

How To Compare Auto Refi Offers

Always shop around for the best auto loan deal before you head to the dealership. If you walk in the dealership with an offer in hand, they will have to negotiate with you if they want your business — and they will, because they do.

Here’s what to compare when you’re looking at different loans:

  • Price
  • Down payment requirement
  • Amount financed
  • Annual percentage rate
  • Finance charges
  • Term length in months
  • Number of payments
  • Monthly payment amount

Try comparing loans with the same term to find the best APR. Or view the same APR across multiple terms to see the financial impact on monthly payments. Take your comparative checklist when visiting lenders or bank and credit union websites. Our parent company LendingTree serves up free offers on auto refinancing in a comparative format.

Pre-approvals on a car loan are good from 30 to 90 days, depending on the lender.

What if I can’t get approved for an auto refi?

The first step in responding to a loan denial is to learn why you were turned down. The Equal Credit Opportunity Act requires lenders to notify borrowers in writing the reasons the application was denied. Reasons for denial may involve the credit score or red flags in your credit history. Too many hard credit inquiries might indicate that you’re desperate for a loan. Turn-down letters provide an opportunity to view the credit report that the loan underwriters evaluated.

You may have to wait awhile before applying for refinancing again, since it will result in another ding on your credit. Or, if you’re in the subprime and bad credit tiers, look at options of getting financing from banks, credit unions or financing companies that specialize in loans for Tier D and F categories. Learn more about the subprime options at MagnifyMoney.

Finally, you could take time out from refinancing while you report errors on your credit report and set about improving your credit score. MagnifyMoney has sound advice on building the highest credit scores. Steps include:

  1. Get a line of credit
  2. Keep a low credit utilization rate
  3. Pay your creditors in full and on time with each monthly statement
  4. Avoid or reduce credit card debt
  5. Protect your score

Helpful resources

The following links offer a wealth of financing information that can keep you out of trouble:

Auto Loans

The Consumer Financial Protection Bureau offers answers to frequently asked questions on car financing, including a section on how to avert repossessions.

Auto Loans Modification Scams

The FTC warns about companies that claim to change the loan to avoid repossessions and fines. They may charge significant upfront fees and do nothing on your behalf.

Auto Loans Advice, LendingTree

This collection of LendingTree articles on car loans covers a range of issues, including financing options, bad credit, financing a classic car, bankruptcy, car ownership, certified pre-owned cars, and more.

Credit Repair: How to Help Yourself

The FTC’s Consumer Information division has published an extensive guide to repairing credit, including information on credit report disputes, finding legitimate credit counselors, and consumer rights.

How to Get a Car Loan with Bad Credit in 2017

View MagnifyMoney’s comprehensive guide to refinancing bad-credit loans, getting a co-signer, and tips for avoiding financing scams.

National Auto Lending Study

Last year, a study by MagnifyMoney and Google Consumer Surveys found that seven-year terms can be a ticket to the horror upside-down loans, especially for subprime borrowers. Read the rest of the findings.

Understanding Vehicle Financing

The American Financial Services Association Education Foundation (AFSAEF), the National Automobile Dealers Association (NADA), and the Federal Trade Commission (FTC) have prepared this 16-page brochure to help consumers understand financing terms, laws regulating dealership financing, and strategies for visiting dealerships.

Gabby Hyman
Gabby Hyman |

Gabby Hyman is a writer at MagnifyMoney. You can email Gabby here

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Personal Loans

Your Guide to Navigating New and Used Boat Loans

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Bankrolling a new or used boat can shock borrowers straight out of the water if they don’t understand the lending process. There are ample financing options to find a good deal. Loans are available from manufacturers, dealers and financial institutions – each source with distinct advantages and drawbacks.

PART I: How to finance a boat

boat loans
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When you apply for boat financing, the application process involves a written application (or telephone screening), followed by verification of income and submitting details on the watercraft make, year, model and features. Similar to underwriting on auto loans, the lender will review the applicant’s credit history, debt to income ratio, and the market value of the boat.

Experian reports that terms on auto loans average 69.7 months, with higher subprime terms up to 72 months. In contrast, boat loan terms at Essex Credit, a 30-year-old boat lender and division of Bank of the West, go as long as 360 months on loans of $250,000+.

, consumer finance consultant and former president of the National Marine Lenders Association (NMLA), says banks and credit unions allow the use of cosigners in a boat loan. Each lender has their own sets of requirements for cosigners. For boat financing companies that do not accept cosigners, there’s a simple way around this limitation: applicants can instead apply for a personal loan that allows a cosigner and use that loan to pay for the boat.The pros and cons of financing a boat depend almost entirely on the kind of loan used to buy the watercraft. Here are some general considerations:

The Pros and Cons of Boat Financing

Pros:

  • You’ll have predictable monthly payment amounts (with fixed-rate loans)
  • You’ll know exactly how long it will take to pay off the loan
  • So long as you make on-time payments, financing can help build credit
  • The boat can be used as loan collateral

Cons:

  • Variable interest rate loans can blindside your budget
  • Unsecured loans may cost more than those using a boat or home as collateral
  • Subprime boat loans can carry double-digit interest rates
  • Loan payments can tie up cash reserves

Boat loan interest rates — what can I expect?

The interest rate on a boat loan will depend on the type of boat financed and the total amount you’re looking to borrow. But there are three other key factors to keep in mind that are directly in your control.

You creditworthiness. Plain and simple, the better your credit score is, the better your boat loan rate will be. That being said, lenders have no problem extending loans to “subprime” borrowers — even those with credit scores under 550, Coburn says— but they will charge a hefty price for doing so. Borrowers with poor credit can easily face double-digit interest rates ranging from 10-20%, per Coburn — which means your boat loan APR could be higher than the APR on some major credit cards. Furthermore, borrowers with poor credit will also likely face limitations in how much they can borrow and for how long. Repayment terms are typically shorter than those offered to customers with good credit, he says.

Your debt-to-income ratio. Just like a mortgage, a key factor for determining interest charges is the applicant’s debt-to-income (DTI) ratio. Your DTI simply tells the lender how much of your income is being spent on debt payments. To get your DTI, simply add up your total monthly debt payments and divide it by your gross monthly income. A low DTI can help you secure a lower interest rate, while a high DTI may indicate the borrower has maxed out their credit. According to boat lender SeaDream, a DTI above 40% can disqualify loan applicants.

Your down payment. The amount of your down payment will depend largely on the type and age of the boat you’re looking to finance. Some lenders will require a minimum down payment based on the amount you wish to borrow and the type of boat. Essex Credit cites its required down payments by price range as:

  • $10,000 – $150,000, 10 percent down
  • $150,001 – $250,000, 15 percent down
  • $250,001 – $500,000, 20 percent down
  • $500,001+, 25 percent down
  • Boats constructed from 1919 to 1996, 30 percent down

Other factors include the borrower’s assets, the cost of the boat, the boat’s age, current value and the amount of the down payment.

Boat loan terms

Terms for boat loans are generally pegged to the total amount the borrower finances – not on the current value of the watercraft. For example, boat loans by BoatUS that are financed for more than $100,000 have terms available up to 20 years. According to the NMLA, lenders who only offer boat loans may offer longer terms than those offering multiple loan products.

When considering terms, loan applicants need to recognize that the term directly affects the total cost paid for interest on the boat and the amount charged for monthly payments. A longer term can deliver a schedule of lower monthly payments, but you’ll pay more interest on the boat overall. However, a short-term loan may strap the buyer to payments that put their monthly cash reserves on a perilous edge. Boat loan calculators (more on these later) can be instrumental in finding an affordable balance of terms, interest rates and payments.

What type of boat is eligible for a boat loan?

Financing is available for most of today’s range of new and used boats, including:

  • Human-powered craft
  • Sailboats
  • Motorboats
  • Powerboats
  • Cabin cruisers
  • Sailboats
  • Fishing boats
  • Open-bow craft
  • Houseboats
  • Classic wooden boats
  • Yachts
  • Catamarans
  • Canal cruisers
  • Wakeboard and ski boats
  • Runabouts
  • Personal watercraft
  • Cuddy boats
  • Kayaks
  • Trawlers
  • Runabouts
  • Pontoon boats
  • Center-console boats
  • Dinghies

Types of boat loans

Banks, credit unions, and financial service companies are the more-common sources of loans for boat buyers. Many boat loan providers are members of the NMLA. Applicants have a choice of loan types that best-suit their finances and credit. The three major types include

Let’s examine each in order:

Fixed-rate collateral loans

How they work: When consumers take out a fixed-rate collateral boat loan, they can expect to make a predictable monthly payment over the life of the loan, with an unfluctuating interest rate. The collateral used on boat loans typically is the watercraft itself, which can be plucked out of the water by the lender without notice following a missing payment. Borrowers should check their contract to see if there is a grace period for delinquencies. Repo laws vary by state.

The security against the loan is evaluated during the application process. The lender may require a market-value assessment by a professional marine surveyor to determine the value of the security. The larger the boat, the larger the cost for a survey, according to Coburn. “Pricing for marine surveys vary widely for recreational boats and may cost for anywhere from $10 to $25 per foot,” he says. He recommends that consumers choose a qualified surveyor who is an accredited member of the Society of Accredited Marine Surveyors, Inc. (SAMS), an organization of marine surveying professionals that evaluates standards and practices.

Penalties for defaulting: According to Coburn, each lender has its own policy on when a default takes place. “Most lenders we deal with consider foreclosure (boat repossession) more in the sixty days [late] or greater range,” he says.

Who fixed-rate collateral loans are best for: A fixed-rate collateral boat loan is a good option for buyers who don’t have other assets to apply toward the loan. Fixed-rates offer protection from fluctuations in national interest rates. They’re a good choice for consumers who cannot secure a collateral-free loan because of their income, outstanding debt, or low credit score.

Home equity loans

How they work: A home equity loan can provide a borrower a source of cash for buying their boat. The amount you can borrow depends on your current loan-to-value (LTV) ratio and current market value of the home. The LTV represents how much the borrower owes on the mortgage compared to the home’s current market value.

According to Wells Fargo’s lending department, consumers with 621-699 credit scores should expect to pay higher rates on a home equity loan. The amount you borrow and the existing debt on the home, combined, cannot exceed 85 percent of current home value. And your current debt may not exceed 43 percent of your monthly pre-tax earnings.

Pros: The interest rate on a home equity loan is fixed, meaning stable, predictable monthly payments over the term. And the rate will be lower than the interest charged on unsecured personal loans. The lump-sum of the equity loan can be more than the total cost of the boat, which can be a blessing given the insurance and operating costs of maintaining a safe watercraft. Plus, interest paid on a home equity loan may be tax deductible.

Cons: On the negative side, home equity loans come with initial fees and closing costs. In a worst-case scenario, a borrower uses up home equity and, if they default on their loan, they lose their house.

Personal loans

Unsecured or secured personal or “signature” loans can let boat buyers pay for their boat if they can afford the higher interest associated with these loan products. The good thing about personal loans, is that lenders don’t care how you spend the money.

With a secured personal loan, the borrower puts up the boat as collateral. They usually offer higher loan limits than unsecured signature loans. Current rates on a personal loan are as low as 3.24% APR.

Based on the applicant’s creditworthiness, unsecured personal loans are usually extended with fixed rates.

Variable rate vs. balloon payment loans

In addition to fixed-rate boat loans, consumers can also choose variable-rate or balloon-payment loans. A variable-rate lender may extend a low introductory rate on their loan product that adjusts following the initial rate period. These loans reset according to interest rate indexes, so borrowers need to ensure that they can afford monthly payments after the attractive introductory rate expires.

With a balloon payment loan, borrowers agree to pay off the balance on a specified date. The NMMA advises that balloon-payment loans may be best suited for borrowers that intend to own the boat a short while and sell it off prior to the due date of the balloon payment.

PART II: Shopping for Your Boat Loan

Credit score and credit history are the key variables lenders examine when it comes to approving an affordable boat loan. Don’t sail into the application process blindly. Is your credit good enough to land a favorable interest rate and term? Should you improve your credit score prior to searching for financing?

Know your credit score

Credit scores directly impact loan approvals and rates in a similar way that they affect home mortgages and car loans. Good credit scores are considered optimal for securing a boat loan at a favorable rate. You can check your credit score for free using the Discover Scorecard.

The credit-reporting firm Experian defines an “excellent credit score” as 750 or higher. Boat lender Lightstream offers loans to excellent credit applicants with rates from 3.24 percent to 10.69 percent.

Bad credit will severely impact the interest rates on a boat loan, although there are mid-tier credit and subprime loans available. Applicants with credit scores in the 500-550 range can anticipate rates from 10 to 20 percent, according Coburn.

Know how much boat can you afford

The National Marine Manufacturers Association (NMMA), an organization that represents more than 80 percent of today’s boat and marine engine makers, recommends that new owners consider more than the asking price of the watercraft. Consider costs for insurance, equipment upgrades, maintenance, and storage as well.

A good way to begin assessing the affordability is to use the free NMMA Boat Loan Calculator or LendingTree’s free Boat Loan Calculator [Disclaimer: MagnifyMoney is a subsidiary of LendingTree]. Enter the loan amount (sans the down payment), the interest rate and the length of the term. The calculator will crunch the numbers and estimate the monthly payment on the loan. Compare the monthly payment to your income and financial cushion.

One way to constrain the monthly payments is to alter the term or the down payment. A longer term may make monthly payments more affordable, but the total price of the loan will increase accordingly. The size of the down payment can also reduce the monthly payments. Consider the size of a down payment you can make without toppling your finances.

How to get pre-approved for your boat loan

Getting a pre-approval for a boat loan is a solid way of determining the ceiling of your budget. The pre-approval (or pre-qualification) process for a boat loan is similar to other types of loans. The lender does not have to look at the prospective boat contract. The underwriter calculates the amount the applicant can spend based on the loan amount and allows consumers to go boat shopping knowing their limits.

Once the lender grants a pre-approval, the shopper has more leverage with the dealer, who knows the buyer can afford the boat and is ready to buy if it meets their requirements. A pre-approval can provide a hedge against unfair seller mark-ups or long delays in waiting for the loan to go through.

Pre-approvals are acceptable during a specific time frame, typically up to 60 days.

New vs. used boat loans

There’s an age-old argument over whether buying a new or used boat makes more sense. Financing options are much the same for each. Banks, credit unions and dealers can help buyers into fixed-rate collateral, home equity and personal loans to pay for the watercraft. Buying a used boat may be a good option for first-time owners who want to decide on the kind of watercraft they’re after and whether they will use it enough to justify the expense. The NMMA cites the benefits of buying new vs used, which we’ve summarized below:

New boats

In purchasing a new boat, there’s no reason to consider depreciation, wear and tear, and why the boat was put up for sale in the first place. New boats often come with warranties to cover repairs at local dealers. And owners can outfit their new watercraft with exactly the features they need.

Used boats

A marine survey can detect any or all items of concern with a used boat on the market. Buying a boat that’s five years old can stave off much of the depreciation. The NMMA reports that in buying a used boat, the new owner avoids the “25 to 33 percent depreciation” that occurs in the initial five years.

Where to shop for your loan

Boat loans are made by banks and credit unions, boat dealerships and financial service companies and consumers may benefit by comparison shopping among lenders. Each type of lender source comes with a unique set of considerations.

Banks and credit unions

Banks and credit unions may offer the widest selection of options for boat loans, from personal loans and home-equity products to collateral loans. They may also be more lenient on credit scores than other lenders. On the negative side, many of the largest banks in the country do not offer boat loans. The formal application procedure of traditional lenders can take longer than it does for online institutions. It’s wise to compare interest rates as well when it comes to bricks-and-mortar institutions vs. online lenders.

Boat dealerships

One plus of working with a dealership is that it may be able to offer discounts or rebate programs provided by manufacturers. The NMLA claims that specialized marine lenders can approve a loan in as little as “a few hours”.

Dealer-lenders may also allow financing that includes funds for electronics, navigation gear and extended warranties. On the downside, consumers may be restricted to the type of loan product offered by the dealer, rather than the wider options offered by banks or other lenders.

Like car buyers, boat customers should try to negotiate prices from dealers based on their own price research. “[Negotiating with dealerships] is occurring more and more in recent years,” Coburn says.

Financial service companies

Whereas banks and credit unions are savings and loan institutions, financial service companies just offer loans. NMLA membership is made of banks and credit unions, but also of major financial service companies offering financing on new and used boats. The NMLA claims its members provide applicants with faster credit decisions, longer financing terms and specialized help in securing used boat loans. A potential downside of some financial service companies lies in the variation of loan rates and terms based on location. They are licensed by the states in which they do business. However, financial service companies are regulated by The Consumer Financial Protection Bureau (CFPB).

What to expect on a boat loan application

Lenders establish their own guidelines for underwriting a boat loan. Depending on the type of loan, the lender and the total loan amount, applications may be made in person, online or over the telephone. Borrowers must give verbal (for telephone applications) or written authorization for the lender to pull a credit report. Be prepared to offer thorough information about the borrower, any cosigners and details about the boat. A customary application includes:

Borrower

  • Borrower’s name and address (owner or renter)
  • Driver’s license
  • Employment status and proof of income (may require immediate past two years of tax returns)
  • Financial assets and liabilities (cash on-hand, investments, outstanding debt and other loans)

Cosigner (for personal loans or with boat dealers accepting co-signers)

  • Name and address
  • Monthly house payment
  • Driver’s license
  • Employment status and proof of income

Boat information

  • Manufacturer, model and year
  • Length and hull number
  • Engine make/horsepower (if applicable)
  • Optional equipment
  • Intended use (pleasure, residence or charter)
  • Years of boat experience and/or previous ownership
  • Total cost to finance (price, sales tax, title and registration)

Part III: Understanding Your Boat Loan Contract

The Boat Owners Association of The United States (BoatUS), representing half a million members, recommends borrowers scrutinize potential sales contracts carefully since they are legally binding. A contract may only consist of written terms and agreements on a sheet of paper (for private sales) or a lengthy legal document prepared by attorneys representing a dealership. Here are key items commonly included in the sales agreement:

Boat description

Manufacturer’s Statement of Origin or a listing of the boat and engine, hull-identification number (HIN), complete listing of all equipment. It should also provide a seller’s statement that the boat has no existing liens and encumbrances.

Price

Listing of the purchase price including any down payments and/or trade-in credit.

Contingencies

For buyers without pre-approval on a loan, the contract should spell out contingencies that can include the buyer’s ability to secure financing and insurance. Other contingencies affecting the sale may call for satisfactory findings through a formal marine survey.

Watercraft condition on delivery

The seller should itemize all the features of the boat upon delivery. For a used boat, the seller should itemize add-on equipment/gear and remedies for any shortcomings that are discovered during the marine survey. Who is responsible for amending the condition: seller or buyer?

Delivery

The contract should set a delivery date and location upon completion of the sale.

Warranties or service plans

BoatUS recommends that the contract stipulate warranties on new boats or service contracts for used watercraft. Buyers should be meticulous in examining the details on the boat condition if there is no warranty and it is sold “as-is”.

Watch out for boat loan scams

Charles Fort, director of the BoatUS Consumer Protection Bureau, the nation’s largest organization representing recreational boaters, identifies red flags that indicate the seller may be engaged in a scam. Many scams, he says, are represented by bold-face lies and delivered via email.

Common red flags include:

  • Abysmal use of grammar and poor spelling
  • Vague language that doesn’t identify the boat for sale (current location and HIN number)
  • Absence of other forms of contacting the seller (especially no personal or business address)
  • Offer to sell the boat located abroad or nationally without offering an inspection
  • Request for payment via Western Union, PayPal, or MoneyGram
  • Request for a long-distance purchase secured by payments via a fictitious escrow service

Potential buyers sniffing out a scam should walk away from the seller immediately and file a complaint with the FTC’s Bureau of Consumer Protection.

Boat Financing FAQs

Daylong or vacation boat rentals are easy. Long-term boat leasing is offered by dealerships, boat charter clubs and through shared-leasing businesses. But leasing a watercraft over the long term can be costly since consumers rarely enjoy rate reductions based on boat depreciation.

Depending on the lender, using a cosigner can be advantageous if the buyer has less than good credit. Read about cosigner’s obligations at the Federal Trade Commission.

Live-aboard boats are financed through boat loans. If the craft is stationary and is not self-propelled, it can be considered a houseboat, requiring its own form of marine loan. Learn more about houseboat financing.

Dealers and lenders can include the cost of maintenance, liability insurance, electronics and specialized gear in the total loan amount.

Lenders base loan amounts on variables including income, credit and type of craft. Essex Credit, for example, has a $10,000 loan minimum on pleasure boats and $25,000 minimum on a live-aboard craft. Essex maximums are $5 million. At LendingTree, loan amounts range from $1,000 to no upper limit.

One score does not fit all. Better rates, lower down payments and affordable loans typically go to applicants with at least a 690 FICO score. A high credit score is not a requirement for all lenders. According to Coburn, people with scores from 500-550 can receive subprime loans strapped to a 12-19-percent interest rate.

Comparing rates and terms from multiple lenders is one way to find an affordable boat loan. The age of the boat also affects the cost of the loan. For instance, Essex publishes online rates for boats manufactured from 2007 to current models. For financing boats older than 2007, buyers need to contact the lender. Applicants can negotiate for the best cost for a loan by considering shorter terms that typically come with lower rates. At LendingTree, buyers can receive free competitive bids for new and used boats, or for refinancing.

Gabby Hyman
Gabby Hyman |

Gabby Hyman is a writer at MagnifyMoney. You can email Gabby here

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