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Personal Loans

Secured vs. Unsecured Personal Loans: Understanding the Difference

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

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At one point or another, most people will need to borrow money for a large expense such as college tuition, purchasing or remodeling a home, or buying a vehicle. Although it’s possible to save up enough cash to pay for these big expenses, many choose to finance their purchase and pay it back over a period of time using either a secured or an unsecured personal loan.

Unfortunately, it’s not always easy to determine which type of debt is best for your unique financial situation. For new borrowers, the differences between the two can be confusing. What’s required of a borrower when they take out a secure or an unsecured loan? When might it make sense to use one versus the other?

Secured vs. unsecured personal loans

Secured loans and unsecured loans have several differences, but the most important to remember is that secured loans are literally “secured” against items owned by the person needing the loan, while unsecured loans are not. This collateral could be anything that holds equity and is owned by the borrower.

For example, you might use your car, boat, home or property you own as collateral on a secured loan. Unsecured loans, on the other hand, only look at a borrower’s ability to repay their loan based on their income, current debts and credit score.

However, this isn’t the only way that these two loan types differ. Let’s do a side-by-side comparison to get a better idea of what each of these loans requires from borrowers, and how they work.

 Secured personal loans Unsecured personal loans

Credit check needed?

Sometimes. Secured loans don’t have as strict credit requirements because the lender is already using something of monetary value to secure the loan. So, if you don’t have fantastic credit, but you own a car, lenders may be more lenient.

Yes. Unsecured loans don’t use any collateral to secure the loan. Typically, lenders require a credit check to ascertain your ability to repay the loan.

Typical interest rates

Interest rates will vary on secured loans, but are often relatively low – around 5%. However, some secured loans (like title or payday loans) have much higher interest rates associated with them (often hitting, or exceeding, double digits).

Interest rates can range from 4% to 36% APR. This large range in interest rates is dependent on the type of loan (for example, interest rates for federal student loans are lower than personal loans or lines of credit), down payment made by the borrower and ability for the borrower to pay off the loan (judged by their credit score).

Examples

  • Secured credit card

  • Mortgage

  • Auto loan

  • HEL/HELOC (for home repairs and improvements)

  • Payday loan

  • Title loan


  • Personal loan

  • Business loan

  • Student loan

  • Credit card



Collateral required?

Yes. The collateral provided by the borrower “secures” the loan.

No. Unsecured loans are based entirely on your credit history and ability to repay the loan.

Best for?

Secured loans can help you to complete expensive and necessary purchases if you have poor credit history. However, some secured loans (like payday loans) are predatory in nature, and have high interest rates that could further hurt your credit if you’re unable to repay them.

Borrowers who have good credit and the ability to pay back their loan on a purchase.

What are secured personal loans?

Secured personal loans are offered by a wide range of lenders, and are intended to help borrowers who may or may not have a solid credit history make necessary big-ticket purchases or rebuild their credit.
This debt works in a relatively straightforward way. A borrower applies for a secured personal loan through a bank, credit union or a nonbank lender. The lender then assesses what the borrower has to offer as collateral for the loan. Based on the value of the borrower’s collateral, the lender will approve them to borrow a set amount of money. However, if the borrower fails to keep up with payments on their secured personal loan, the lender is permitted to repossess the borrower’s collateral at any point in time.

For example, if you take out a secured personal loan to pay for a home renovation using the car you own as collateral, your lender can come and take possession of your car if you fail to make payments. If you’re a borrower who can be counted on to make payments on time and to pay the loan off in full within the set time frame, this may not be intimidating.

However, many people seek out secured loans because their credit score alone isn’t enough to obtain an unsecured personal loan from a lender. This might be through no fault of their own, or it could mean they have had trouble repaying their debt in the past for a wide range of reasons. Be cautious when offering collateral for your secured personal loan, and make sure that you’ll be able to afford the loan’s repayment terms (including interest).

One of the benefits of a secured personal loan is that it can be used for nearly anything. Many people, for example, use the equity they already have in their home to finance a home repair loan (HELOC). Others use secured loans to finance vehicle purchases or to fund the launch of a business.

Regardless of what you’re using your secured personal loan for, it’s important to read through your loan terms carefully. Secured personal loans are notorious for being charging high interest rates and can sometimes have predatory rates or practices.

If you’re pursuing a secured personal loan, keep a few things in mind:

  • Whatever you choose to put up for collateral for your loan can be taken by your lender if you fail to make payments.
  • You may be able to get a lower interest rate with a secured personal loan because the lender is taking on less risk when you offer up collateral.
  • Some secured personal loans are predatory, and they come with hefty fees and high interest rates – make sure to shop around and do your research before signing on the dotted line.

What are unsecured personal loans?

Unsecured personal loans are different. They don’t require any collateral from the borrower. However, because there’s nothing to “secure” them, or to protect the lender should you default on payments, they tend to be harder to obtain.

Unsecured personal loans usually require a credit check, and the interest rates associated with the loan are largely dependent on whether or not you have decent credit. If the lender feels they can trust you to repay the loan based on your current finances and you have a history of paying back your debt on time and in full, you may qualify for a lower interest rate. However, if you don’t have a good history of repaying your debt, or you don’t have income available that would support the loan repayment, you could get stuck with a higher interest rate.

That being said, unsecured personal loans certainly serve a purpose. Student loans, for example, are a form of unsecured personal loans. They require no down payment or collateral, often have reasonable interest rates and help students to fund their education. A variety of lenders including banks, credit unions and nonbank lenders (typically found online) offer unsecured personal loans.

It can be frustrating for borrowers to try and obtain an unsecured loan because restrictions (like a minimum credit score, a high income or a cosigner) are often more strict than those associated with secured personal loans. It can be helpful to keep in mind that for a lender, an unsecured loan is a notably higher risk than a secured personal loan. Essentially, they’re taking a chance on the fact that you’ll pay the loan back in full with interest, and have no real way of knowing for sure that you’ll be able to do so. This is also why interest rates for unsecured personal loans are significantly higher than those you can find with secured personal loans.

If you’re pursuing an unsecured personal loan, you should keep a few things in mind:

  • You’ll need to budget for potentially higher monthly payments than a secured loan.
  • You will need to have good credit to obtain an unsecured personal loan.
  • You may not qualify for the loan unless you have a cosigner who can help lessen the amount of risk a lender takes on by lending to you.

If you’re unsure about where to find a personal loan, you can see offers from LendingTree. With it, you’ll input basic personal information and what you’re looking for out of a loan. If you qualify, you’ll get to review personal loan offers from various lenders.

Should you get a secured or unsecured personal loan?

The actual question on most borrowers’ minds is: Which loan is right for me? The truth is, both secured and unsecured personal loans pose some risk for you as a borrower. However, there are several things to take into consideration when deciding which is best for you.

Ability to repay

Consider everything that could impact your ability to repay this loan. Is your job secure? Do you have upcoming expenses that will tighten your budget? If you’re concerned about repayment, putting up something you own that’s necessary for day-to-day survival (like a home or a vehicle) for a secured personal loan may not be in your best interest. Of course, if you’re worried about your ability to repay a loan, there’s a good chance that you should reconsider the loan amount – or whether you should apply at all.

Total interest and fees

Although unsecured loans often have higher interest rates, secured loans may have notable hidden fees if they’re predatory, like a payday loan. Weigh your ability to repay loans each month, taking note of the interest amounts. It usually serves borrowers to shop around before committing, and that may mean looking at both unsecured and secured loans to determine what works best for you.

Future financial goals

Do you plan to pay this loan off quickly? Do you have other financial goals in the near or distant future that this loan could impact? If you want to pay a loan off quickly and are confident in your ability to repay, locking in low interest rates with a secured loan might make the most sense.

Worst-case scenario planning

It always helps to consider the worst-case scenario when applying for a loan. If you fail to repay your loan, what’s going to happen? Whether you apply for a secured or unsecured loan, your credit will take a hit.

If you have a secured loan, you could potentially lose your house, your car or other assets you’ve put up as collateral for the loan. You may also need to take out another loan to cover this debt and end up in a vicious debt cycle. If you can afford to lose what you’ve put up as collateral, this may not be the end of the world. However, if you can’t – it’s likely not worth the risk.

Final thoughts

Applying for a loan can be challenging, but it’s important to know that you have options available to you. Researching the difference between secured and unsecured loans can help you determine which is best for you based on what you can afford, and which loan type fits best into your long-term financial plans. Your relationships with some financial institutions could also positively impact the loan terms you receive.

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LendingTree is our parent company

LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
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Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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Pay Down My Debt

Is Debt Consolidation a Good or Bad Idea? Here’s What to Consider

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

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Even though most people try to stay out of debt, sometimes it’s hard to avoid. Over time, you might start to accumulate a number of different loans that served different purposes. This is commonly seen with student loans. In order to afford an education, students may take out debt each year to pay for tuition and other costs.

However, this problem isn’t exclusive to those who owe student loans: in fact, many people run into the frustrating dilemma of having multiple consumer loans in repayment.

To clean up their repayment process — and to possibly get a better interest rate or repayment term — some people turn to debt consolidation. But is debt consolidation a good idea? And if so, when is it right for you?

What is debt consolidation?

Debt consolidation is a process that rolls all of your existing debt into one, convenient loan. This means you could go from having multiple loan payments from different lenders with different repayment terms, to having one payment each month with a single lender.

The debt consolidation loan (often a personal loan) is used to pay off all of your other loans. This can be viewed much like a balance transfer — you’re transferring the balance of all of your loans to one bigger loan.

The lender providing your loan typically provides you with a lump sum payment to repay all of your debt, or it works directly with your other lenders to pay off your loans for you as part of the consolidation process.

You can consolidate a wide range of debt types, including:

Debt consolidation can only really work if you can secure a personal loan with an interest rate that is lower than what you are currently paying on your debts. That way, you’ll save money on interest over time after consolidating.

Finding a lender can be difficult. You may consider local banks and credit unions. But online lenders may have better rates and terms. To help you shop lenders, consider LendingTree’s personal loan tool. Using the tool, you’ll enter some personal information plus what you’re looking for in a loan. Afterward, you’ll receive loan offers, which you can compare to find the best deal for your credit score.

LendingTree
APR

5.99%
To
35.99%

Credit Req.

Minimum 500 FICO

Minimum Credit Score

Terms

24 to 60

months

Origination Fee

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.

When is debt consolidation a good idea?

Debt consolidation isn’t for everyone, but there are several scenarios where this course of action would make sense for your unique financial situation.

You have a high credit score that could secure you a lower interest rate.

If you’re considering debt consolidation, you’re looking to get a better deal on your new, consolidated loan than what you already have. If you’re paying high-interest debt (such as credit cards or payday loans), consolidating at a lower interest rate could save you money on interest. (Find out how to view your credit score here.)

You have an isolated reason for getting behind on your debt.

Sometimes life happens, and we end up with debts that are unavoidable in the moment. A medical emergency that your savings couldn’t totally cover is an excellent example of this type of unavoidable debt. If you’re working to put a plan in place to stay out of debt in the future and are looking to simplify your debt repayment, consolidation may be for you.

Your consolidated loan offers additional benefits.

This might mean a shorter repayment term or fewer fees to ensure you’re making the most out of a new loan.

You’re exhausted by tracking all of your different loans.

If you have a number of different loans and are running the risk of missing a payment or overpaying due to high interest, it might make sense to consolidate them all to simplify your financial life and help you pay down your debt more quickly.

When is debt consolidation a bad idea?

Although debt consolidation can be a huge help in many cases, there are certain situations where it doesn’t make sense to consolidate your debt.

You have a spending problem.

Debt consolidation shouldn’t be used as a method to free up more cash flow to continue spending. If you find that your debt is largely consumer debt, and that you have no intention of reevaluating your budget or your lifestyle to support your debt repayment journey, consolidation isn’t going to make things better — it’s just going to act as a short term fix to your lifestyle problem.

You’re digging yourself a deeper hole.

Although it’s commonly the case that a debt consolidation loan will come with better interest rates and repayment terms, this isn’t always true. If consolidating your debt is going to force you to repay your loans at a higher interest rate, you’re better off keeping your multiple loans (even if it’s frustrating to juggle them all simultaneously).

You have an average or below-average credit score.

The interest rate you’re able to secure is largely dependent on your credit score. If your score is less than stellar, you’ll have to pay close attention to what interest rate you’re offered, and whether it’s actually a better solution than simply staying the course and paying down your multiple debts.

You’re stuck with new fees.

Sometimes, debt consolidation services have an origination fee of between 1% to 8%. If your ultimate goal is to save money through debt consolidation, this may not work for you.

Don’t just assume that debt consolidation is the answer you’ve been looking for — do your research first. You might find that sticking with your numerous debts and paying them down at their reasonable interest rates makes the most sense until you’re able to get your spending habits in check, or until you’re able to raise your credit score by consistently paying them down.

What are the risks of debt consolidation?

There are several risks and downsides to debt consolidation that you need to be aware of:

It might damage your credit score.

When you first consolidate your debt, you may see a minor dip in your credit score: this is because the lender you’re applying with will do a hard credit inquiry after you fill out your application. If you apply with multiple lenders, multiple hard credit inquiries will push your credit score down. However, you can avoid this problem by getting pre-qualified with multiple lenders, and only filling out an official application with one of them to reduce the number of hard credit inquiries on your credit report.

You may be unable to continue to use lines of credit you previously had available.

By using a debt consolidation service, like a personal loan, your total credit utilization doesn’t go down. So, even though your credit card is magically paid off by your new consolidated loan, that doesn’t mean you get to start racking up more debt. Doing so will cause your credit score to go down, and you may end up in an even stickier situation than you were in before.

You may pay more interest over time.

You’ve likely been paying back your existing debts at a high interest rate for a given length of time. Sometimes, people pay back multiple debts for years before they consider consolidation. Then, when you apply for consolidation, they might extend your repayment term even further — meaning you’re technically paying “extra” interest for the convenience of consolidation. However, you can fix this problem by working to pay your debt back before your repayment period is up and, in turn, driving down your principal (and the total interest you have to pay).

You may have fees.

Some debt consolidation loans have origination fees to process your new loan. Watch these fees closely to make sure they’re not unreasonably high — if they are, consider looking into another debt consolidation method.

You may get a shortened timeline for repayment.

Debt consolidation isn’t usually intended to be a long-term solution. Instead, debt consolidators shorten your repayment timeline. This can be incredibly helpful if you’re looking to get out of debt quickly, but it also may mean higher monthly payments and an increased likelihood that you’ll default on your loan.

3 alternatives to debt consolidation

If you’ve looked into debt consolidation, and have determined it isn’t the right choice for you, you have several alternatives to consider.

  1. Home equity line of credit (HELOC). A HELOC is where you borrow money against the equity you’ve built up in your home. However, if you’re worried about being unable to repay the loan, you may want to select a different alternative option as your home is technically collateral if you’re unable to pay your HELOC. (Learn more about using home equity to consolidate debt here!)
  1. Balance transfer. A credit card balance transfer is often a great option for people looking to consolidate their credit card debt. Many credit card companies offer 0% interest for a set period of time, which means you could potentially knock down a notable portion of your debt principal before having to pay interest each month. Be sure to read the terms and conditions regarding any fees or deferred interest clauses. (Check out our pick for the best balance transfer credit cards.)
  2. Debt refinancing. If you’re more concerned about getting a lower interest rate on your loans but aren’t worried about managing multiple payments, refinancing might be an option to consider. Through refinancing, you’ll be able to apply for a lower interest rate through your existing lenders, based on your previous repayment history.

Make sure you look at all of your options when trying to consolidate your debt — you never know what you might find, or what’s going to work best for your long-term financial goals. If you do choose to pursue debt consolidation, make sure to shop around with different lenders. Being able to compare different interest rates, fees, and repayment terms, can help you ensure that you’re getting the best loan as you start to move toward debt free living.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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Personal Loans

Can I Get a Personal Loan With No Income? Yes, Here’s How

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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According to the Bureau of Labor Statistics, America’s unemployment rate was 3.7% in September 2018. Although this number may seem relatively small in the grand scheme of things, this hasn’t historically been the case. During the market crash of 2008-2009, America’s unemployment rate swung from 4.7% to 10.1% in a matter of months.Long-term unemployment can be emotionally and financially challenging. Although most people actively work to avoid getting into debt, especially while they’re unemployed, sometimes their financial situation leaves them with no other course of action but to take out a personal loan.

Unfortunately, many lenders require that borrowers have some proof of income before they’re willing to pass out personal loans. However, in some cases, you may be able to secure a loan – even without the proof. Let’s walk through the steps you’ll need to take to get a loan when you’re unemployed.

Can I get a personal loan with no income?

Yes, you can get a personal loan without income. At the end of the day, lenders are looking for borrowers who can prove that they’ll make repayments. It’s true that having a consistent source of income certainly helps prove that you’re eligible for a loan, but it’s also true that you can “prove” your worthiness as a borrower in other ways.

If you don’t have a full-time job that’s providing you with a consistent income that would be used to repay your personal loan, you’ll need to meet the lender’s alternative eligibility requirements.

These might include:

  • Proof of alternate income. Any of the following may qualify when you apply for a loan: Social Security benefits, a pension, child support, funds from your retirement account distributions, unemployment benefits, disability, employment offers for a job that starts in the future, housing income, capital gains from your investments, income from a spouse or partner, trust income, savings or cash that you’ve built up, VA benefits or a government annuity.
  • Automatic payments. Your lender might require that you have payments automatically deducted from your bank account to help ensure that you’re always paying in full and on time.
  • Security. If you’re struggling to get a loan while unemployed, your lender might ask for you to provide collateral for the loan. This would mean taking out a secured personal loan. Lenders often accept cars (as long as they’re paid in full), property or any other assets that you own outright as security.
  • Find a cosigner. To get a personal loan while you’re unemployed, you may need to find a cosigner. A cosigner is essentially a third party who applies with you for your loan. If you fail to make your payments, the lender may turn to them for the money they’re owed. A cosigner isn’t always a perfect solution, and asking family or close friends to cosign a loan could potentially cause some tension if you can’t repay it. However, if you’re confident that you have the funds set aside to repay your loan, or that you’ll find employment soon, this may be an option worth considering.

Remember that lenders don’t just look at your current income during the loan approval process. They’re also looking at your credit history and your credit score. If you’ve always been consistent with repaying your debts in the past, you have a good (or better) credit score and you’re not utilizing very much credit in comparison with your current income, you may be able to secure a personal loan with fewer issues – even if you’re unemployed.

Beware these risks of borrowing with no income

Although it’s possible to receive a personal loan when you’re unemployed, that doesn’t always mean it’s in your best interest to do so. Lenders are taking a risk by lending you money that you technically don’t have (and may not have for the foreseeable future). As a result, they’re likely to give you a less attractive loan offer.

Here are a few downsides to loan offers you may see while you’re unemployed and taking out a loan:

  • Shorter repayment terms. Typically, if you don’t have income to prove your ability to repay a loan over a long period of time, your lender will want to lower their risk. One way they do this is by offering loans to the unemployed with shorter repayment terms. This means you’ll get the funds you need, but you’ll be required to pay them back much faster than had taken out a traditional loan while you were gainfully employed.
  • High interest rates. Again, lenders aren’t out to get you if you’re unemployed – they just need to protect themselves against the risk of lending to someone who may not be able to repay the loan they’re offering. One way they do this is by offering you a personal loan with higher interest rates. High rates combined with a shorter term means that you’ll be paying a significant amount of money back to your lender over a short period of time. This ensures that they’ll get the amount they gave back from you (with interest), and they’ll receive it quickly.
  • Automatic payments. Many lenders require that automatic payments be set up when a borrower is unemployed. This could mean that they take funds directly from your bank account every month for payment, but it could also mean that they take funds directly from your other income sources (like your pension) each “pay period” to ensure that they get paid first. If you have the funds to repay your loan and cover your bills, this may not be an issue. But as things get tighter the longer you stay unemployed, this becomes a bigger issue.
  • Hefty fees. Although many lenders already have notable fees attached their personal loan offerings, it’s even more important to look at the fees in your loan offer if you’re unemployed. Fees are another way that a lender can protect themselves against the risk of lending to someone without an income. If you’re not careful, you could end up paying back a high interest loan over a short time period, with extra fees to boot – hardly an ideal situation for someone who’s lacking cash flow.
  • Predatory lending. As much as you may not want to believe it’s true, there are plenty of lenders out there who take advantage of the unemployed. By offering personal loans with egregious repayment terms, interest rates and fees, they could potentially drive you so deeply into debt that you’re unable to pay your monthly bills. Thinking long term, these types of predatory loans could also have a dramatically negative impact on your credit score.

Getting a loan when you’re unemployed isn’t always easy, but it doesn’t have to be a terrifying journey either. As long as you keep a watchful eye out for these non-ideal repayment terms and know what you’re getting into, you’re off to a good start.

Alternative options to a personal loan

Although it’s possible to qualify for a personal loan with no income, that doesn’t mean it’s a given. Many borrowers may run into a situation where they don’t qualify for a personal loan while they’re unemployed, which can be incredibly challenging if their situation is dire and they need cash now.

There are several reasons you may not qualify for a personal loan while you’re unemployed:

  • You have no source of alternate income to show the ability to repay
  • You have no assets (like a well-padded savings account, or a paid-in-full vehicle) to offer as collateral for the loan
  • You have poor credit history
  • You have a low credit score
  • You’re already utilizing a large portion of the total credit you have available to you

Although it’s impossible to guarantee whether you’ll get approved or denied a personal loan while you’re unemployed, these factors will play a large role in the lender’s final decision. If you aren’t approved for a personal loan, you’re not entirely out of options. First, you can look into alternative lending services that can help give you the boost of cash you need rather quickly:

  • Home equity line of credit (HELOC). A HELOC allows you to essentially borrow against the equity you have built up in your home. If you’ve already paid down a significant chunk of your mortgage, this might be an option for you to look into. Typically, you can borrow up to 85% of your home’s value minus what you owe on your mortgage.
  • Secured loan. A secured loan is one where you offer up collateral for loan funds. You may put up your car or other property for this type of loan.
  • Short-term loan from a family member. Borrowing money from family can be uncomfortable and potentially damaging to both your personal and financial life. However, if you’re confident in your ability to repay the loan, and your relative is willing to offer you favorable terms, this may be a path you pursue. You’ll need to discuss the total amount of the loan, what interest rate they’ll charge you (if any) and what the length of the loan’s repayment term will be. It’s wise to draw up a formal contract to protect both of your interests.

Conclusion

You have several options for borrowing funds, even when you don’t have an income to rely on for repayment. However, there are several other options to consider before you seek out a personal loan or alternate lending option.

Consider these other ways to get cash in a pinch:

Going into debt should never be your first course of action. Although you can get a loan without an income, pursuing these other ideas first until you’re able to secure another full-time, well-paying job is usually in your best interest.

LendingTree
APR

5.99%
To
35.99%

Credit Req.

Minimum 500 FICO

Minimum Credit Score

Terms

24 to 60

months

Origination Fee

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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Personal Loans

How to Get a Personal Loan in 5 Steps

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Disclosure : By clicking “See Offers” you’ll be directed to our parent company, LendingTree. You may or may not be matched with the specific lender you clicked on, but up to five different lenders based on your creditworthiness.

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Applying for a personal loan can be both exciting and nerve-wracking. You may be looking to make a purchase or consolidate your debt. But first, you have to go through the personal loan application process. Luckily, getting a personal loan is a fairly straightforward process.

1. Check your credit score and credit reports

It’s critical to check your credit score before you start to search for a personal loan. Your credit score will, in part, determine whether you are able to secure a loan. Often, it will impact what type of interest rate and repayment terms your lender offers you.

You can check your credit score for free from any number of sources. LendingTree, the parent company of MagnifyMoney, offers a free credit monitoring service that will show you your VantageScore. With some banking institutions, you can receive your free credit score by checking your bank or credit card statement.

When you check your score, it’s good to know exactly where you stand. If it turns out that your score is lower than you thought, you can work on some measures to increase your score before applying for a loan. Let’s take a look at the range of credit scores you might have and what those numbers mean. Here are the FICO score ranges:

  • 800-850: Exceptional
  • 740-799: Very good
  • 670-739: Good
  • 580-669: Fair
  • 300-579: Very poor

Typically, most lenders require that you have a minimum credit score to be approved for a loan. But different lenders set their own requirements. The higher your score, the easier it can be to qualify for a loan.

Although consumers with low scores can still qualify for a loan, you can take extra measures to ensure you are approved for a loan or get favorable terms. You might consider:

Keep in mind that if your credit score isn’t in the higher tiers, you’ll need to carefully weigh the pros and cons of pursuing a personal loan. Taking on too much debt could potentially impact your credit score, as would being unable to repay your personal loan.

Improving your credit score

Your credit score is reflective of information found on your credit report. Each of the three major credit bureaus — Equifax, TransUnion and Experian — maintain a credit report that outlines your outstanding debts, your payment history and more. If you have a low credit score, requesting your credit report could be your first step to increasing your score and qualifying for more competitive loan terms.

You can request a free copy of your credit reports once every 12 months from each of the credit bureaus by visiting AnnualCreditReport.com. Carefully review your reports and dispute any errors you find.

If there are no errors on your reports but you have a low credit score, you will need to develop healthy financial habits to raise your score over time.

After reviewing your credit reports and credit scores, you can begin researching lenders.

2. Research and compare lenders

Just as credit requirements may vary, different lenders may offer different interest rates and term lengths on their loans. It’s wise to check different lenders to get an idea of which will best meet your needs.

You can find personal loans from banks, credit unions and online lenders. If you’re not sure where to start, you can use MagnifyMoney’s personal loan marketplace. There, you’ll enter your desired loan amount, credit score range and ZIP code before reviewing lenders.

No matter how you seek out lenders, your goal should be to find a lender that offers:

  • Reasonable interest rates
  • Loan terms that suit your financial needs
  • Few limitations on repayment, such as no prepayment penalties
  • No or few hidden fees

Just because one offer from a lender looks good doesn’t mean you shouldn’t consider other lenders. You’ll want to choose a few of your favorites. In this next step, you’ll apply for preapprovals to get a better idea of what loan terms each of these lenders will offer you. Use our table below to compare personal loan offers to find the best option for your needs!



Compare Personal Loans

3. Go through the preapproval process

To find out which lender has the best offer, you can get preapproved for a loan through different institutions. When you apply for loan preapproval, you may need the following documents and pieces of information:

  • Total amount you want to borrow
  • What your purpose for borrowing is
  • Your name
  • Your home address
  • Your total annual income

To get preapproved, you may not need documents such as tax returns to prove your income, but you will need to be prepared to offer these when you officially apply for your loan.

Next, the lender will perform a soft credit check to determine what type of offer it can give you. A soft check is where a bank or company can access your credit report and score, but it doesn’t affect your credit as a hard inquiry would.

After submitting your application, you’ll receive word whether you’re preapproved. Once you have your preapproval offer, you’ll see the loan amount for which you’re preapproved, plus your rate. This amount and rate aren’t a sure thing – it’s just an estimate provided from the lender based on high-level financial information.

When you apply for your loan, the lender will do a more in-depth look at your finances and consider your ability to repay the loan. This could affect the rate and amount for which you qualify. But a preapproval offer allows you to better compare different lenders to determine which is the best fit for you.

In this step, you’ll want to dig into each of the lenders who have preapproved you. Consider checking each lender for the following:

  • Poor reviews: If you haven’t already checked customer reviews, now’s the time. Knowing how a lender treats its customers could help you avoid getting stuck with a bad lender for several years.
  • Hidden fees: Dig into the fine print with each lender. Keep an eye out for hidden fees.
  • Prepayment penalties: If you want to pay off your loan early to get out of debt, that should be a good thing. Having to pay a penalty for not paying the loan for the full length of your term is something you should avoid.
  • Pre-computed interest. In a nutshell, this means that you end up paying more interest on the front end of your loan, which could result in you overpaying over the life of your loan term (even if it’s paid off early). This is a common personal loan trap.

4. Finalize your application

When you decide on an offer that works for you and your unique financial situation, you’re ready to finalize your application. Although you’ve already received preapproval, you’ll still need to fill out your official application for final approval.

This typically only requires a few additional steps:

  • Proving your identity, such as with a driver’s license or passport
  • Verifying your address through a copy of your lease or a utility bill
  • Proving that you have steady income through bank statements, an offer letter or contract from your employer

Remember: If you’re not happy with the loan offer you receive, you can always negotiate with your lender. This is a particularly viable option if you’ve already built up a relationship with your bank or local credit union and are seeking a loan from it. Many lenders will have some wiggle room on their offer, especially if you’re able to point to another preapproved loan offer you received with better interest rates or repayment terms. Once an institution has all the details it needs, it should only take a couple of days for it to process its decision, and another week to send you a notification by mail (if applicable). Funds can be available as soon as the next business day.

5. Know what you’re getting into

Regardless of what type of loan you end up selecting, it’s important to read and understand the fine print. No loan is going to be perfect in every way, and weeding through the final loan offer you receive can set you up for future success.

For example, knowing whether your lender takes automatic withdrawals is important information as you build a new monthly budget that includes your loan. It’s also important to fully understand the expected monthly payment on your new personal loan, and whether you can pay off your loan early without penalty.

Applying for a personal loan can be daunting. Taking on debt in any capacity can be a financial risk, and you need to be prepared for the potential consequences. After you receive your loan funds, you should work diligently to pay them back. To do this, you can set up automatic loan payments and regularly pay extra toward your loan when possible to speed up your repayment process.

If your budget doesn’t support additional payments on a consistent schedule, you might consider dedicating yourself to putting any windfall toward your loan. This would include a quarterly bonus, money you receive as birthday or holiday gifts or any other funds you receive that weren’t already included in your annual or monthly budget.

Finally, think about why you took out the loan in the first place. Is there a way to avoid accumulating debt like this in the future? It may make sense to add extra savings into your budget once this loan is paid off to put money toward future big-ticket financial goals. It would also help to avoid taking on additional debt while you work to pay down your existing personal loan.

Final thoughts

Taking out a personal loan can be stressful, but the application process doesn’t have to be. Organizing your documents ahead of time, checking your credit score and doing your research on different lenders can help you ensure that you’re getting the best possible loan available for your unique needs and financial circumstances.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
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Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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Pay Down My Debt

What You Should Know About Time-Barred Debt

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

time-barred debt
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If you owe funds that are overdue, you may be concerned that a debt collector will sue you to reclaim the money. However, depending on how old the debt is, this may not occur.

Every debt collector has a certain number of years (a statute of limitations) that they can pursue you in a court of law to legally obligate you to pay back the money. However, each state has its own laws on how long this statute of limitations period is. After that period passes, though, your unpaid debt is considered “time-barred,” and debt collectors can’t sue you over it.

Here’s a deep dive into time-barred debt and the rules surrounding it.

4 things to know about time-barred debt

1. The rules for time-barred debt vary by state

The rules for time-barred debt depend on two things:

  • What type of debt you’re dealing with
  • Which state the debt is being collected in

Each state has different laws regarding the statute of limitations for outstanding debts. Typically, it ranges from three to 10 years. Different debts have different statutes of limitations. You can review your state’s statutes of limitation on debt here.

Keep in mind that if your debt collector continues to contact you about debts that are owed past their statute of limitations, they’re within their rights. A collector can contact you to collect the debt as long as they have it on their books.

2. You can’t be sued for time-barred debt — but debt collectors may try

A collector can’t sue you for time-barred debt. A collector, as defined by the Fair Debt Collection Practices Act, is anyone who is attempting to collect on your debt. This might be your original lender or creditor, debt collection agency or an attorney assigned to collect your debt.

Debt collectors are legally obligated to tell you whether the debt is beyond the statute of limitations and whether they can sue you. If they don’t say this explicitly, they have to confirm that your debt is within the statute of limitations if you request verification and formally dispute the debt.

Formally disputing your debt can be challenging. To do so, you’ll need to write a letter requesting verification that the debt is still within its statute of limitations. Your debt collector can’t continue to try to collect on your debt, or attempt to take you to court over it, until they resolve the verification you’ve requested. You can request for your debt collector to verify:

  1. When your last payment was made on the debt. Technically, your debt starts “counting down” toward being outside of statute of limitations after you make your last payment.
  2. Whether the debt is within statute of limitations. Debt collectors legally can’t lie to you about whether or not your debt is within statute of limitations. However, they can decline to respond.

If your debt is outside the statute of limitations but a collector decides to pursue legal action anyway to collect your time-barred debt, you can legally defend yourself in the court of law. If this is your situation, seek legal help as soon as possible to contest the lawsuit.

A consumer advocacy attorney can help you navigate the lawsuit and confirm that your debt is outside of the statute of limitations. Although you can always choose to go to court without an attorney, it’s not advisable. If you choose to not show up in court, the court will likely rule in your creditor’s favor by default.

3. You can be tricked into repayment

Dealing with old debts can be emotionally exhausting, and knowing that they’re outside of the statute of limitations can be a welcome relief. But you’re not out of the woods yet. Your creditor’s sole job is to collect payment from you, and they can do so in a few different ways – even if you believe that your debt is time-barred.

  1. Resurrecting your debt. If your creditors pressure you into making another payment on your time-barred debt, you’ll automatically resurrect your debt and send it back into repayment-mode (and out of its previously time-barred status). At this point, your creditors can take you to court.
  2. Agreeing to a repayment plan. In some cases, even an oral indication that you’re willing to agree to a repayment plan or reach a settlement will “restart” your time-barred debt.

4. Failing to repay time-barred debt hurts your credit

Just because your debt is time-barred doesn’t mean that you shouldn’t pay it back. After all, you did take out the debt and, presumably, you didn’t repay it in a timely fashion.

Debt collectors can continue trying to collect the debt you owe for the rest of your life. The only difference with time-barred debt is that a collector can’t sue you for the money. If you choose not to repay your time-barred debt, you won’t encounter any legal ramifications.

However, failing to repay your debt could come with other consequences. For example, you might find it harder to get new lines of credit, or your insurance premiums might be higher, because the unpaid debt is hurting your credit score.

4 ways to handle time-barred debt

If your debt is time-barred, you can choose to handle it in several different ways. How you choose to do so could potentially have an impact on your credit score, so it’s important to weigh the pros and cons of each option carefully.

1. Pay it off

First, you can consider paying off your time-barred debt. With debt collectors contacting you frequently, paying off a time-barred debt might feel like a pressing task to check off of your to-do list. However, if you have to prioritize debts to pay off, you should focus on newer debts first.

Once an existing debt goes to collections (as most time-barred debts have), paying it off won’t dramatically improve your credit score. Instead, focus on paying down current debts first, then refocus your attention to outstanding time-barred debt.

2. Ignore your debt collectors

Another option you can pursue is to ignore your debt collectors. This is a tempting course of action, especially if you don’t plan to pay back the time-barred debt. However, this may not be your best option. Creditors won’t stop contacting you, so ignoring them won’t make the debt (or the collectors) go away.

Additionally, if you ignore the creditors, you’ll be unable to dispute the debt or request that they verify whether or not it’s within the statute of limitations. They could potentially take you to court over the debt, which could be avoided through communication with them.

3. Request that debt collectors stop contacting you

If you’ve confirmed that your debt is outside of the statute of limitations, you can write a formal cease and desist letter to your creditor. You can use these templates from the Consumer Financial Protection Bureau to help you put together your letter. Once your creditors receive this letter, they should stop contacting you.

4. Declare bankruptcy

Bankruptcy is a legal proceeding in which the court determines whether you should be discharged of your debts. With a Chapter 7 bankruptcy filing, this essentially gives you a chance to start over.

If you feel that it will take you five years or more to pay off your debts, filing for bankruptcy might be something you consider, but declaring bankruptcy isn’t easy. Contrary to popular belief, bankruptcy isn’t free – you have to pay for an attorney and the filing fees associated with declaring bankruptcy.

If you’re considering filing for bankruptcy, you should consider speaking with a lawyer who specializes in such cases to ensure you go through the filing process correctly.

Remember that filing a Chapter 7 bankruptcy will help you restart with a clean slate – but it doesn’t automatically rebuild your credit. In fact, a bankruptcy stays on your credit report for seven to 10 years. Finally, bankruptcy isn’t a cure-all solution as not all debt can be erased by declaring bankruptcy.

The following debts can’t be discharged through bankruptcy:

  • Alimony
  • Federal student loans
  • Child support
  • Taxes
  • Debts incurred as a result of a personal injury while drinking and driving

Avoiding future debts

Although having a time-barred debt can be a positive thing as you won’t necessarily be sued for not paying it back, it doesn’t necessarily reflect well on your finances. The debt will continue to bring down your credit score, and you may have problems getting additional lines of credit in the future as a result.

Seek guidance in the form of credit counseling services. You can reach out to the National Foundation for Credit Counseling or the Financial Counseling Association of America for help managing your debt – time-barred or otherwise.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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Personal Loans

Personal Loans in Las Vegas, NV

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Company
APR Range
Minimum Credit Requirement
Terms
Fees
LendingTree

5.99% - 35.99%

Minimum 500 FICO

24 to 60

months

Origination fee

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

Disclaimer

One Nevada Credit Union

4.00% - 9.75%

No minimum credit requirements

60

months

Origination fee

No fees

Apply Now Secured

on One Nevada Credit Union’s secure website

Clark County Credit Union

10.00% - 21.00%

No minimum credit requirements

24 to 48

months

Origination fee

No fees

Apply Now Secured

on Clark County Credit Union’s secure website

Nevada State Bank

8.49% - 16.49%

670

36

months

Origination fee

$50-$150 documentation fee

Apply Now Secured

on Nevada State Bank’s secure website

Bank of Nevada

-

Contact Lender

Not Available

Origination fee

No fees

Apply Now Secured

on Bank Of Nevada’s secure website

LendingTree is not a lender, but is a marketplace for personal loans where you can compare loan offers from multiple lenders.

One Nevada Credit Union

One Nevada Credit Union has a wide range of personal loan offerings; this includes advance pay, credit builder loans, lines of credit, saving secured loans, signature loans, and calculators. Their offerings cover up to $25,000 for borrowers, and their online application system has been simplified to three steps to help ensure a quick application evaluation.

Additionally, One Nevada Credit Union has several notable member benefits. Their Financial Fitness Program partners with BALANCE to offer members free access to financial education resources such as counseling, budget management, and advice on how to handle your debt.

Bank of Nevada

Bank of Nevada offers business checking and saving, business loans and credit, personal banking and loans, treasury management, and more. Bank of Nevada has offices in Las Vegas, Henderson, North Las Vegas, and Mesquite. Loans can be secured through assets owned by customers or as an unsecured personal loan.

As a local subsidiary of Western Alliance Bank, Bank of Nevada incredibly involved in various Las Vegas, Nev. initiatives. It supports education through the (BE) Engaged summit, which encourages the business community to bolster improvements to the public education system.

Clark County Credit Union

To become a member of Clark County Credit Union, you must maintain minimum account balances at all times. Online banking and bill-pay is free, but Clark County Credit Union does require balance inquiry fees, coin processing, close account early, dormant account, IRA annual fee, incorrect address, and more.

However, there are no notable fees attached to personal loans; the interest paid by borrowers are the only expenses that CCCU members experience with their loan. Clark County Credit Union offers a fixed-rate signature loan with flexible rates, dependant on a customer’s credit history.

Like One Nevada Credit Union, Clark County Credit Union has partnered with BALANCE to offer free financial counseling services to members. They also offer membership feedback options and member discounts at the mobile network Sprint to people living in the Las Vegas area.

Nevada State Bank

Nevada State Bank offers savings and CD secured loans, unsecured loans, and prime credit lines to borrowers. They also have an easy-to-follow guide on all consumer loan rates that are based on your FICO score. Although they have locations near Las Vegas, Nev., they also have an online personal loan application. Nevada State Bank also offers an online loan comparison tool that allows you to compare rates and loan options without needing to go to a branch and speak with a representative.

Additionally, Nevada State Bank offers a grant application process to support organizations local to Las Vegas, Nev. They also involve themselves in the Las Vegas community through donation and volunteerism.

How to compare personal loans online

Many people visit banks and credit unions in-person to gather information about personal loan availability and to submit applications. While this can be useful to get a feel for your lender, or ask questions face to face, it can also be time consuming. When you shop online for personal loans, you can compare multiple loans at once. On MagnifyMoney, we have an online marketplace where you compare options from many lenders at once.

When you shop for personal loans online, you want to make sure you’re getting the amount you need while balancing that with ideal interest rates and repayment terms. The kind of interest rates and repayment terms you qualify for will often depend largely on your credit score. Each lender you look at will likely have a different set of requirements.Although many online loans have different requirements for borrowers to apply, the same general process is followed.

Submit Your Information
The first thing you’ll do is submit your personal and financial information. This can include proof of employment, bank statements, and a report of your existing lines of credit so they can determine your debt-to-income ratio. This information is used by a lender to determine whether you qualify for a loan through them and your potential repayment terms.

Choosing an Offer
Once you submit your information, a lender processes your application, and you’ll receive an offer. When you compare offers, look at APR, loan fees, loan length and minimum monthly payment. This will help you to determine whether the loans you’ve been approved for fit into your short-term budget and long-term financial plans.

Receiving Money
Once you accept a loan offer, the money is disbursed to you. The length of time you’ll have to wait to receive your money largely depends on the individual lender.

LendingTree
APR

5.99%
To
35.99%

Credit Req.

Minimum 500 FICO

Minimum Credit Score

Terms

24 to 60

months

Origination Fee

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

LendingTree is our parent company. LendingTree is unique in that you may be able to compare up to five personal loan offers within minutes. Everything is done online and you may be pre-qualified by lenders without impacting your credit score. LendingTree is not a lender.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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Identity Theft Protection

How to Freeze a Credit Report After Someone Dies 

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Dealing with the death of a loved one is never easy. While loss is a natural part of life and we may expect it, death often overwhelms us with shock, depression and confusion. Sadly, when you’re in this vulnerable state, there are identity thieves looking to prey on your dulled awareness. They do so by stealing the identity of the deceased and fraudulently opening credit card accounts, applying for loans and obtaining service contracts.

This concept, called “ghosting,” is a widespread problem. There hasn’t been a lot of research on the issue, but one study estimates that, the identities of approximately 2.5 million deceased Americans are used fraudulently each year. Of those, almost 800,000 are deliberately targeted cases.

Why it’s important to freeze someone’s credit after they die

Many identity thieves are practiced in using the dead’s information for their own financial gain. Coping with the loss of a family member is difficult, but it can be exacerbated by dealing with the fallout of identity fraud.

Criminals who deliberately target the departed know that it takes time for financial organizations and credit reporting agencies to process death notices and update their records, leaving open a window of opportunity for fraud.

With the recent Equifax breach, people may be more aware of their credit situation than in the past. However, a survey taken shortly after the Equifax breach by CompareCards.com (which, like MagnifyMoney, is a subsidiary of LendingTree) shows that approximately 78 percent of people did not freeze their credit after the breach. People are largely aware of the negative impact that identity theft can have, but a large portion of the American population neglects to take the next steps necessary to protect themselves.

Luckily, the steps to take to protect your loved one’s identity are clear and relatively simple to follow.

How to report a death to the credit bureaus

The Social Security Administration (SSA) states that, in most cases, the funeral director will notify the administration of a person’s death. To ensure this, you must give the deceased’s Social Security number to the funeral director. From there, credit reporting agencies and lenders will be informed of the person’s passing, and they’ll automatically put a death notice or alert on their credit.

To expedite the process, it is suggested that loved ones who are close to the deceased (typically a spouse or child) take matters into their own hands to get a death notice placed on their departed family member’s credit reports at the three major credit bureaus — Equifax, Experian and TransUnion. This will involve submitting a death certificate, and the Identity Theft Resource center recommends requesting 12 copies of the certificate for such purposes (some institutions may require an original, rather than a photocopy).

Carrie Kerskie, an identity theft expert and director of the Identity Fraud Institute at Hodges University says you should contact the credit bureaus, but knowing the right verbiage is key. “Instead of requesting a freeze, one would request a death alert,” she said. “It is similar to a freeze, except a freeze could be lifted with a PIN. A death alert cannot.”

The easiest way to update that person’s credit account is to have a relative or executor send letters to each of the three credit national reporting agencies, according to Equifax.

The writer should include the following information about the deceased in their letter:

  • Legal name
  • Social Security number
  • Date of birth
  • Date of death
  • Copy of death certificate or letters testamentary

They’ll also want to include:

  • The letter-writer or executor’s full name
  • Their address for sending final confirmation
  • Proof you’re the executor, if applicable

David Blumberg, director of public relations for TransUnion, added, “Our industry policy is that the receiving credit reporting company will notify the other two so they can update their records as well.”

Still, to be safe, mail this information to each of the three credit reporting agencies. Their mailing addresses are:

TransUnion
P.O. Box 2000
Chester, PA 19016

Experian
P.O. Box 2002
Allen, TX 75013

Equifax
P.O. Box 105139
Atlanta, GA 30348-5139

Kerskie advises that people going through this process prepare to provide proof of relationship along with the death certificate they’re submitting. “This could be a marriage license or court papers,” she said.

What’s the fastest option?

When speed is of the essence in beating potential fraudsters, mailing is certainly not your fastest option. Experian offers a solution: Submit the death certificate and death notice request online by uploading the documents directly to its system. Once it receives the information, Experian will add the deceased indicator and permanently remove the person’s name from any future mailing lists for preapproved offers.

Equifax also offers two speedier options – email a copy of the death certificate to customer.care@equifax.com or fax your records to (888) 826-0727. It should be noted that email isn’t a secure way to submit this personal information (especially in light of the fact that you’re working to prevent identity theft).

While TransUnion doesn’t have a streamlined online tool or fax offering, they do advise family members or executors to call (800) 680-7289 for more assistance. If you need any help requesting that a death alert be placed on a deceased’s account, your first action should be to contact the bureaus directly.

Other things to do besides reporting the death

Although going through the process of contacting credit reporting agencies may seem like a hassle, your to-do list doesn’t end here. In addition to notifying the credit bureaus of the death, you should also request a copy of the person’s credit report. The Identity Theft Resource Center provides a form you can use to request the reports.This will help you to better understand what accounts are open, and it can help you spot suspicious activity. Should you face the worst-case scenario and your loved one’s identity is stolen, this will also help you to prove what charges the thieves have incurred.

Additionally, while it’s common for funeral directors to assist you in reporting a loved one’s death to the Social Security Administration, it behooves you to ensure this has been done. The easiest way to contact the SSA is online, but you can also call them toll-free at 1-800-772-1213 or at their TTY number, 1-800-325-0778.

Other items for your list:

  • Be proactive and let the deceased’s various financial institutions and account holders know about their death. Reach out to banks, insurers, brokerages, lenders, mortgage companies and credit card companies by mailing them copies of the death certificate. Kerskie recommends sending these things by certified mail and request a return receipt to ensure the safety of the personal information you’re sending.
  • Limit the amount of personal information that’s released to the public. Identity thieves often gain access through obituaries that list dates of birth, death, full legal names and addresses.
  • Consider changing the deceased’s address to forward to a loved one’s home or an executor’s place of business. Identity thieves sometimes steal personal information out of a deceased person’s mail box.
  • Don’t forget to file the deceased’s final tax return.

How to resolve identity theft of a deceased person

Resolving identity theft of a deceased person follows many of the same steps you would proactively take to prevent it: Request a copy of the credit reports from the three major credit bureaus, request a death notice on that person’s credit and notify creditors of the person’s death. If fraud has occurred, there’s an extra step: The Identity Theft Resource Center advises you to contact the police in the jurisdiction of the deceased with evidence of fraud. This might be a collection notice you’ve received on the deceased’s behalf, or a credit report showing fraudulent activity.

It’s important to remember that you should not be held accountable for fraudulent debt that’s racked up in the name of your deceased relative. While this may not provide any emotional consolation as you’re going through this process, it should help to relieve some of the money-related stress you’re experiencing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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College Students and Recent Grads, Life Events

How to Properly Fill Out a W-4

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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You and a co-worker earn the same amount, contribute the same percentage to a 401(k), but someone she’s getting more deposited into her bank account? What gives? The answer lies in one of the many pieces of paper you filled out during the first day on the job: the W-4.

What is a W-4?

When you start working for a company, they have to determine how much of your paycheck to withhold for taxes. While the company has basic tax withholding guidelines they need to abide by, paychecks can be customized to employee’s situations. This done by filling fill out a W-4 form. Your HR department keeps this IRS form on file, and uses it as a guideline on how much to withhold and send to the IRS every payroll period.

Sounds simple enough, what can go wrong?

The main culprit is caused by not claiming enough, or too many, dependents. On the form, you can state how many people in your household depend on your income (in tax language, a “dependent”). If you are married and have two kids, then this number would be four. You can then advise HR that you want to claim four dependents. In doing this, you will receive a larger paycheck so you can support your family. However, in selecting a larger number, you may not be having enough taxes withheld, which will lead to you owing money with your tax return in the Spring.

The opposite is also true. For those people who do not have anyone to claim as a dependent or do not want to owe taxes, they claim zero dependents and receive a smaller paycheck. In doing this, their tax bill in the spring is minimal, or they even receive a refund. In some cases, this refund can be thousands of dollars.

Why wouldn’t you want a big tax return?

Getting unexpected money is great. Even if it’s expected, not knowing the amount can be a great surprise. But the thing that gets overlooked when discussing tax refunds, is that this money was yours all along. By overpaying in your taxes – by not claiming enough dependents – you have been loaning money to the government, and they pay it back to you in the spring – with no interest included. It’s like putting extra money in an investment that pays 0% interest; with the only time you can draw it out being in the spring when you file your taxes.

For some, it can be forced savings to receive that money in a lump sum versus spread out over the year. They then put that money into their investments or savings account, and don’t have to worry about monthly savings. However, they miss out on investment growth over the entire year. For the most part, it’s not a good strategy to get a big tax refund at the end of the year. 

So how should I file, or revise, my W-4?

Every situation is unique. You’ll want to look at your last year’s tax return, and how much money you are making compared to last year. If you are making a similar amount, then this is an easy exercise. See how much you received in a refund / amount owed divide that by 12. Then approach HR and ask them to withhold, or give you, this amount every paycheck (if you get paid monthly).

For example, let’s say that Andrea earns $50,000 as a medical resident but owed $1,200 in tax payments when she filed her taxes. She should go to HR and ask them to withhold an extra $100/month from her paycheck, and then her liability at tax time would be minimal.

For another example, let’s say Chelsea got a raise at work and then be conservative until she goes through her first tax season with her new income. Let’s say she went from $37,500 to $55,000 in her promotion. As a single individual in Nevada, she doesn’t have to worry about state income taxes, but she did jump from the 15% to the 25% Federal tax bracket. She should be asking HR to withhold 25% of her increased pay, not 15% in order to adequately cover her increased liability. She may find that this will be too much come tax time, but she’ll receive a small refund. It will also allow her to fine-tune her withholding for the following year.

There’s nothing worse than getting a promotion and then paying taxes in the spring to remind you that you got paid more!

Confused? Here’s where to find help

It can be tricky, especially when your situation changes, to understand what numbers to use. The IRS understands this, and wants your situation to be accurate, so they have provided a calculator: https://apps.irs.gov/app/withholdingcalculator/. While it is quite detailed, it will give you an accurate estimate of whether you will be owe money, or receive a refund.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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College Students and Recent Grads, Life Events

Maximizing Special Benefits for Teachers

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Maximizing Special Benefits for Teachers

As James was driving to school to start another day of teaching, he had a sinking feeling in his stomach that things weren’t supposed to be this way. As he shopped last night at Target for pens and notebooks for his students who couldn’t afford them, he fought the demon on his shoulder that told him, “This isn’t your responsibility, stop spending your money on people who should be buying these things themselves.” 

It wasn’t that he minded buying supplies for his students – they needed them to learn – but it stretched him financially. He had just bought a house and the mortgage was higher than the old rent payments; his credit card balances had an interest rate that was climbing for reasons unknown to him; his student loans weren’t going away fast enough; and things he knew he should have – like life insurance – didn’t make the cut. There wasn’t enough money left at the end of the month. 

Would things ever change, or was this the way life was going to be from now on? 

­­­­­­­­­

James is feeling the pinch, but he’s not alone. Many teachers who try to manage spending in the classroom along with their personal finances have to be careful to make sure they don’t derail financially.

Even teachers who don’t have buy supplies for their students need to keep a close eye on their finances.

But there are some benefits available – only to teachers – that may relieve the burden of this financial situation.

Educator Expenses Deduction

For those teachers who find themselves buying supplies for their classroom or students, and do not get reimbursed by their school, relief comes during tax season.

This relief comes in the form of a $250 tax deduction (a reduction used in lowering the amount of income used to calculate your tax bill), each teacher in the family can claim $250 of unreimbursed expenses that they have incurred throughout the year. If both spouses are teachers, then this can total $500, but not more than $250 per person.

It doesn’t just have to be pens and notebooks like James experienced – this can be used for books, computer programs and services, and other learning materials. Even if this amount goes over $250, then the remainder can be used in another section of your tax return to further reduce your tax liability (called Unreimbursed Employee Expenses).

Teacher’s Credit Union

As James is seeing his credit card rates climb, a bank that understands his situation probably isn’t serving him. That’s where teacher-focused credit unions can be an advantage. Credit Unions are different from banks in that they are member-owned (not publicly traded) and, in this case, are only available for teachers and their families. By restricting access and not having to worry about profits to shareholders, these credit unions offer lower rates, have less fess on their accounts, and are more lenient in their underwriting of certain products. Just Google “teacher’s credit union” and you’ll be able to see all the choices available.

Teacher-focused Insurance

James, like many others, decided to forgo life insurance when his budget got tight. But instead of just sacrificing a major need in his financial life, he should be educating himself on the options. If he’s a member a teaching organization (like NEA or one of its state affiliates), then there are insurance options available through those organizations. These are sometimes priced lower than what he may find on the market, given that it is just serving a certain class of people (teachers). Even if they are priced a little higher, then underwriting standards (i.e. blood work, urine samples, health exam) are more relaxed as the insurance is only being offered to teachers.

Car Insurance, Just for Teachers

Some teacher organizations are now providing car insurance, but many insurance companies have been offering “teacher’s auto insurance” for a while. This insurance is able to provide lower rates and more customized insurance to meet the needs of educators. As teachers are believed to be a more conservative class of people (own it – you are!), they are less likely to get into accidents, and can therefore be offered cheaper rates on car insurance. (As companies will limit the school boundaries and teachers they offer this to, it is essential to research companies to make sure they offer coverage in your area.)

Student Loan Forgiveness for Teachers 

Knowing how much it costs to get a degree, but also how little some teachers get paid, there are Federal programs in place to forgive some student loans held by teachers. If a teacher teaches in a Title 1 school in a certain subject area (often math, science or special education) for a period of 5 complete and consecutive years, then up to $17,500 of certain loans can be forgiven.

It gets better for school counselors – should they still be paying their student loans 10 years after graduation, and meet certain criteria, then the balance of their federal loans will be cancelled and forgiven.

If you’re like James and struggling to make ends meet each month, take a few hours to do some research and see if teacher benefits could help lighten your financial burden.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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College Students and Recent Grads, Life Events

Decoding a Teacher’s Benefits Package

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Depressed man slumped on the desk with his hands holding credit card and currency

Written by Dave Grant of Finance for Teachers

Suzie was exhausted. She had not been this tired since getting used to the social scene as a freshman in college. 

But this was a different kind of tired. The “I earned this Netflix binge” kind-of tired. After finishing her first week of teaching 4th grade, she collapsed on the couch in her dimly lit apartment and eagerly started spooning the Chinese take-out into her mouth.

As the TV screen flickered across the room, she barely saw the characters moving about the screen. The piles of papers on her coffee table distracted her eyes.

“Oh crap.” She muttered under her breath. The papers were those thrown into her lap by the HR Director during her new teacher orientation. Health insurance, teachers union, retirement savings, and pension details – it was so overwhelming when all she wanted to do was teach eight and nine year olds about the world.

Determined to finish her food before diving into this world of confusion, she savored every last bite of her chow mein. But the bottom of the carton came too soon, and she did the responsible thing, and grabbed the looming stack in front of her. 

Suzie’s plight is not unlike those of new teachers I work with every year.

As if starting a job in teaching wasn’t overwhelming enough, deciding what benefits package are right for you when you’re not versed in “Employee Benefits” is enough to push anyone over the edge.

So let’s go through some common benefit choices you can be faced with, and take you through how to evaluate which one could be right for you.

Health Insurance

The first thing you need to determine is whether you are eligible to stay on your parent’s health insurance plan. If you’re under 26, then this is a good possibility and if your parents are willing to still pick up the tab, then that is great news for your wallet.

But if you need to choose a plan for yourself, see if you can find a summary of what your district provides. All districts should provide a PPO, HMO and HSA plan.

Not sure what makes these different from one another?

PPO = Preferred Provider Organization. This is coverage that is typically more expensive in it’s premiums and benefits but gives you the most flexibility in which doctors you use for health care. You can choose which dermatologist, OBGYN, or foot doctor you see without anyone saying that you can’t. They have to be in your insurance’s network, but that’s pretty much the only barrier.

HMO = Health Maintenance Organization. This coverage is cheaper every month, and caps out quite quickly in how much you have to pay, but there are trade offs. Before going to see any type specialist, you have to get a referral from your general practitioner, and only use those on a list of preferred HMO specialists. If the dermatologist your Mom recommends is not on the list, then you insurance won’t cover you paying them a visit.

HSA = Health Savings Account. This account accompanies a health insurance plan that has high deductibles, but the lowest premiums of the three plans. The account that goes along with this plan (the HSA) allows you to save money pre-tax to pay these deductible costs later on.

Determining which plan you use depends on how often you go to the doctor, if your current doctors are in your network, and how much money you can afford to spend on health insurance premiums. Before you decide, check with your district. While they may list premiums, if you’re single and not covering anyone else, they may provide health insurance as a free perk.

Retirement Savings

It’s not every day that you get to choose which account to use to save money for the rest of your life. But, unfortunately, choosing the wrong one can shave thousands off the amount you have to your name when you reach retirement.

You’ll no doubt have been told about the 403(b) plans during orientation. You may have one provider / vendor in your district or you may have as many as 15. Too much choice can be a bad thing!

Let’s explore what a 403(b) is before jumping on the bandwagon. A Traditional 403(b) is used to save for retirement with contributions that have not been taxed. While you won’t pay taxes on the money you contribute now, you’ll pay taxes on it, and the amount it’s grown to, when you withdraw it in retirement.

For those with big paychecks, avoiding taxation now is a great thing to do. But what about those with a first year’s teacher salary? Probably not. You just aren’t paying enough in taxes right now for it to make a big enough impact.

You should be using an account where you pay taxes on your contributions now, but where everything the account grows to can be withdrawn tax-free in retirement. This is called a Roth account. It can either be a Roth 403(b) or a Roth IRA.

If you’re going to use a 403(b) through your school district, use a company that doesn’t sell annuities as a 403(b). Look for a company – and ask them to show you – that has a wide selection of investments to choose from – less than 50 investment choices are providers that aren’t worthy of your time.

Keep in mind that you probably don’t want to walk away from an employer match, unless the options are just truly terrible. If your employer offers to match your retirement contribution, it’s best to at least contribute enough to get the free money. Just know when that contribution vests (when you’ll actually get the money).

Hint: If the company has “Insurance” in the name, then avoid them altogether. Better still, use a company not tied to your district – like Charles Schwab, Vanguard or Fidelity – and open a Roth IRA to save for your retirement. It will be a lot cheaper, you’ll have more flexibility, and if you decide to leave teaching, it’s not an account that is tied to your job. This fact alone can cause problems and further expense down the road.

Paycheck Deductions

When that first paycheck comes, stand out amongst your peers – study and understand it. There’s a high likelihood that there’ll be lots of acronyms on your check and you should be trying to understand what all of things mean.

Play a game of elimination:

  • Find the line of your pension deduction and strike it out. Determine how much of your paycheck goes into funding your pension so you’re aware of how much retirement savings you may already be doing. (That will come in handy when you calculate how much to save later on.)
  • Find the amounts that you pay in Federal and State taxes, and strike them out. Understand if you are contributing to Social Security, or if you live in a state that doesn’t allow you do this along with a teacher’s pension. Medicare will be on there as well, which you are paying now to subsidize your premiums when you enter retirement.
  • There will likely be union dues (if you’re part of a union) – these are to pay for representatives to bargain on your behalf during contract negotiations, help represent you during trial hearings, and other expenses. Strike these out once you find them.
  • You will be left with some that you don’t understand. When you have time, send HR an email and ask them to explain what these acronyms mean and what they pay for. They could be to subsidize retiree health care, pay for early retirement options, or for other district activities. Being aware of this and how much they typically cost will give you peace of mind as to where your money is going.

Never be afraid to ask about where your money is going and what you’re getting in return. It’s your money and you have a right to know!

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Dave Grant
Dave Grant |

Dave Grant is a writer at MagnifyMoney. You can email Dave at dave@magnifymoney.com

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