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Michael Cohen Used a New HELOC to Refinance an Existing One — Should You?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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home with change stacked in front of it
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During his testimony in front of the House of Representatives on Feb. 27, Michael Cohen, the former attorney to President Donald Trump, said he used one home equity line of credit, known as a HELOC, to pay off another one. The funds were then used to make a $130,000 payment to Stephanie Clifford, the adult film star known as Stormy Daniels, allegedly on Trump’s behalf.

Cohen was involved in a series of real estate loan transactions, according to a Wall Street Journal article. Cohen and his wife, Laura, received a $500,000 HELOC from First Republic Bank in February 2016. A few weeks later the couple was able to pay off a previous HELOC for $255,000 with TD Bank, the article said.

While Cohen’s need to free up extra cash is certainly unique, refinancing a current HELOC with another one is not a new concept.

When should you use a HELOC to refinance?

HELOCs, which allow people to borrow money against their houses through a line of credit, can be used for any purpose, including home repairs, college tuition or paying down high-interest credit card debt.

HELOCs typically have two phases: a draw period for when you can pull funds, and a repayment period. Once your repayment period starts, you begin paying down your principal along with accrued interest. And while there are many reasons to refinance, you may face a bit of sticker shock when you start looking at your interest and principal monthly bills.

Refinancing with a new HELOC essentially resets the clock, meaning you’re once again in a draw period instead of a repayment period. Younger homeowners may benefit from this strategy because they have more potential for increased income in the future. Upfront costs are also lower than a home equity loan.

But is it a good idea?

Here’s the catch: most HELOCs have variable interest rates making it hard to set and stick to a regular budget. There’s also the potential for your rate to be higher when you enter your new repayment period. Plus, you’re still accruing interest on any of the funds you borrowed.

“Without financial discipline, HELOCs can easily put homeowners in greater debt and potentially leave them with no equity when home prices decline,” said Richard Liu, a mortgage consultant for C2 Financial Corp., a San Diego-based mortgage brokerage. “There’s the danger where a borrower may not be able to qualify to refinance later on due to their income, credit or valuation issues.”

It also doesn’t make sense to maintain a HELOC if you don’t really need the extra funds, he added. Liu said homeowners in that position should consider converting to a fixed-rate mortgage to reduce their monthly payments and avoid any future pitfalls.

If you decide to refinance because you’re struggling with your current HELOC payments, consider a regular home equity loan instead. A home equity loan has a fixed interest rate, gives you a lump sum of money and offers fixed payments and a longer term for repaying the loan, making it more affordable, said Jackie Boies, a senior director of housing and bankruptcy services for Money Management International, a Sugar Land, Texas-based nonprofit debt counseling organization.

The bottom line

Whether you need the funds for potential hush money or for funding your child’s college tuition, choosing whether to refinance a HELOC with another one can be complicated and confusing. Discussing your options with an HUD-approved housing counseling agency is a good way to make sure you’re getting all the necessary information.

“Our certified housing counselors are available at no charge,” Boies said. “Equity in a home is a precious asset and worth protecting.”

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This Is What You Should Know About Private Party Auto Loans

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

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Buying a used car can be a tricky process, from getting approved for financing to checking out the history and maintenance of the vehicle. But what happens when you want to buy a used car from a person rather than a dealership?

Before you purchase the car you’ve been eyeing, it’s helpful to learn the ins and outs of private party auto loans, where to shop around for them and how to make sure you are getting your best deal.

Here are some guidelines on how to navigate the used car industry and get the most competitive interest rate for your private party auto loan.

What is a private party auto loan?

A private party auto loan is one option for would-be car owners purchasing a used vehicle from an individual rather than a dealership. Those who don’t have the savings to pay for the car may need to seek financing from a lender who offers private party auto loans.

Your car will serve as collateral like it would with a regular auto loan.

Where can you find a private party auto loan?

There are many lenders who offer private party auto loans, including banks, credit unions and online lenders. Some examples include Bank of America, First Credit Union and LightStream.

Requirements. Lenders have their own specific requirements to qualify for a loan, such as a minimum credit score, income and down payment. They could also have a maximum limit on the age of the vehicle and/or the number of miles it has accumulated.

Rates. You can expect a higher rate on a private party loan used for a used vehicle versus a loan used for a new car. For example, LightStream offers private party auto loans at APRs as low as 4.99%, but it offers new auto loans at APRs as low as 2.49%.

With used cars, the lender is taking on more risk and, in turn, charges a higher interest rate. Used cars depreciate more in value because there is more mileage on the vehicle, along with more wear and tear on the engine, tires and other parts.

Terms. The length of a private party auto loan is similar to that of loans for new and used cars that have been purchased directly from a dealer. For example, LightStream offers loan terms between 24 and 84 months for both private party and regular auto loans.

Steps to take before you buy

Compare rates from multiple lenders. After you’ve narrowed your search to the vehicle you want to purchase, you should start shopping around on how to finance it if you find you need a private party auto loan.

You’ll also be able to find out which lender offers the lowest APRs by comparing them online. You can go to LendingTree and fill out an online form. Based on your creditworthiness, you could be matched with up to five different loan offers from lenders.

APR

As low as
2.49%

Terms

24 To 84

months

Fees

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

Disclosure

LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple, auto loan offers within minutes. Everything is done online. LendingTree is not a lender, but their service connects you with up to five offers from auto loan lenders based on your creditworthiness.


Advertised rate is for new and used auto loans for an offered loan amount of $10,000 with a 36 month term.

Still, one important thing to remember is that each time a lender checks your credit score, your overall score will be impacted. Coordinate your searches for private party auto loans only when you are ready to make the purchase so that they occur within a 14- or 45-day period, which has less of an impact to your credit score.

Shop at a credit union first. Another important factor to look out for is the APR for your potential loan — a lower APR means that more of your money goes toward the principal of the loan. Make sure you compare auto loan rates from various lenders, including banks and credit unions. Banks will sometimes give a better rate if you are already a customer, though the lowest rates are often offered by credit unions — see if there is one in your neighborhood that you qualify for if your employer does not belong to one. For example, you could get a private party auto loan through First Credit Union at an APR as low as 3.84%.

Consider trade-in options. Since you’re purchasing the vehicle from an individual rather than a dealership, you should check with a business like Carvana or CarMax if you have a vehicle to trade in.

Be sure you’re getting a good deal. The way to determine your best price for a particular brand and model of a vehicle is to compare selling prices from industry standards, including the National Automobile Dealers Association, Kelley Blue Book and Edmunds. These guides are also helpful if you’re trading in your car and want to use the proceeds for a down payment.

Until you are ready to purchase a vehicle, continue to shop around on auto marketplaces or dealer websites. They could offer a discount for cars in different colors and features that may not be a priority for you.

Save your online research and show an individual car owner what other dealers are offering. Show them what their competitor’s price is and see if they are willing to lower their price.

Alternatives to a private party auto loan

Obtaining a personal loan is an option, especially for car owners with lower credit scores or shorter credit histories. Personal loans are typically used by consumers to pay off high-interest debt, like credit cards. An individual could use a personal loan for the purchase of a used car — along with a down payment — instead of seeking a private party auto loan. With a personal loan, your car also wouldn’t be used as collateral.

However, while personal loans allow an individual to borrow a set amount of money for a fixed period with a fixed interest rate, their interest rates are often higher than an auto loan that has collateral (the car itself). These loans usually range between 24 and 60 months.

Another option is a home equity loan. You can qualify if you have enough equity in your house, which is used as collateral. These loans, available from lenders including banks and credit unions, can be used for various purposes. Once you are approved, the lender will give you a lump sum of money, which can be used toward the purchase of a vehicle.

You’ll make monthly fixed payments when you receive a home equity loan, similar to how a traditional auto loan works. Beware, though, that you’ll likely have to pay closing costs and other fees with this type of loan. It’s always important to know all costs associated with a loan before comparing options.

The bottom line

Car buyers have several loan choices they can make before committing to a major purchase. Private party auto loans are another common option to finance your vehicle. Once you’ve chosen the vehicle you want to buy from another individual, you should check your credit history and consider whether you have a vehicle to trade in.

Start shopping around for private party auto loans to get your best interest rate and a lower monthly payment.

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Auto Loan

No Money Down Car Loans: Do They Exist?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been previewed, commissioned or otherwise endorsed by any of our network partners.

Written By

No-money-down car loans
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Buying a car can be a frustrating experience, but it can be even more frustrating when you don’t have money for a down payment.

There are options, even for someone with poor credit who needs a no money down car loan, but you need to be cautious. You will likely pay a much higher interest rate, and your monthly payments will be larger than if you provided a down payment.

We’ll talk about how to negotiate and start your search for a no money down car loan.

How to negotiate for a no money down car loan

Even if you have good credit, never settle for the first auto loan you’re offered, especially when you don’t have the money for a down payment. This could make you a target of a subprime lender looking to charge you a sky-high interest rate.

A down payment helps protect buyers from finance charges. Without one, negotiations are even more important because you don’t have the leverage that putting down a few thousand dollars could provide.

You should know what’s on your credit report and what your credit score is before looking for a no money down car loan. If your credit score is very poor — which FICO defines as between 300 and 579 — you can make the case that you are a good candidate by talking up other factors:

  • Consistent employment history: Explain how long you have been at your current job. Lenders need to know you can make on-time payments each month. Staying with one company for an extended period could show that you are reliable and highlight that you have no income gaps.
  • Reliable residence: Again, lenders are looking for proof of your reliability — a steady address for a year or longer could show stability.
  • Low debt: Even if your credit is poor, what outstanding debts do you have now? A low debt-to-income ratio may help make your case that you can afford a car payment.

Through AnnualCreditReport.com, you can check your credit report for free every 12 months from each of the three main credit reporting bureaus — Equifax, Experian and TransUnion. You can get your free credit score monthly from LendingTree, which owns MagnifyMoney.

Also, if you can get preapproved for more than one no money down car loan, this could help at another dealership or lender.

Shop around for a no money down car loan

Do your homework for the right loan — and the right car. Start by comparing auto loan rates from lenders online, or talking to your credit union or bank where you have a checking or savings account.

Shopping around for a no money down auto loan is the only way to know which lenders offer the best APRs.

You can go to LendingTree, fill out an online form and — based on your creditworthiness — possibly be matched with up to five different auto loan offers from lenders. It’s important to remember that while some lenders conduct a hard pull on your credit, getting multiple hard pulls will count as just one if within a 14- or 45-day span, depending on the FICO scoring version.

APR

As low as
2.49%

Terms

24 To 84

months

Fees

Varies

SEE OFFERS Secured

on LendingTree’s secure website

LendingTree is our parent company

Disclosure

LendingTree is our parent company. LendingTree is unique in that they allow you to compare multiple, auto loan offers within minutes. Everything is done online. LendingTree is not a lender, but their service connects you with up to five offers from auto loan lenders based on your creditworthiness.


Advertised rate is for new and used auto loans for an offered loan amount of $10,000 with a 36 month term.

After you have multiple loan offers, you can choose the one with the best APR to save money during the life of the loan.

Know, though, that the best APRs typically are given to people with higher credit scores who have a down payment or trade-in. Individuals who have a poor credit score because they do not have a long credit history or did not pay their bills on time in the past will most likely be offered a higher APR from a lender.

Now, shop around for your car

Once you have an idea of rates, you can get more specific on your search. You may have had your eye on a certain brand and model of a vehicle for several months, but make sure you are getting a fair price by comparing selling prices, like through Kelley Blue Book, Edmunds and NADAguides. You can use these guides if you are trading in your vehicle.

Don’t just go to the auto dealership where you bought your last car or the one you drive by often. It’s easy to look up dealers online and see the prices for which cars are being sold. Being flexible can help you save more money. Even a different color could save you.

Dealerships want to sell you a car, so show them what their competitor’s price is and see if they will match or beat it.

Other tips

If you have a family member or friend who would let you borrow the money for a small down payment, you could negotiate for a better interest rate. Lenders prefer receiving even a few hundred dollars as a show of good faith toward a new loan.

If you’re seeking a $15,000 vehicle at a 6% APR for five years but you don’t have a down payment, you would pay $289.99 a month — and that’s before taxes and fees are included. This would be $17,399.40 after five years, or $2,399.40 in interest.

If you’re able to put $1,000 down, you’d pay $270.66 a month, or $16,239.60 total, a difference of about $1,160. The savings could be minimal once you include the money you need to repay to the family member or friend, but you may have longer to repay that person — and without interest.

If you can’t provide a down payment, a trade-in could be just as good. If you’re seeking that same vehicle with a $15,000 purchase price but you have a $3,000 trade-in, you’ll just need a $12,000 loan. If at that same 6% APR for a five-year term, you’d pay $231.99 a month, which is a big per-month savings over our previous scenarios.

Repair your credit first. We’ve also talked about how important your credit score is in getting a good APR. Through Experian, you can boost your credit score by allowing your cellphone, cable and utility payments to be included on your credit report. If you don’t have the money for a down payment, you could try boosting your score before applying.

Separately, you can show a positive payment history by obtaining a secured credit card. Paying off your balance in full each month — and on time — can put you on the right path.

The bottom line

Even though purchasing a car can be a complicated experience, doing some research can make the process easier and faster, especially if a buyer can’t put any money down on a loan.

You can avoid some major headaches by knowing your options on no money down car loans. You, as a car buyer, have several choices before committing to a major purchase.