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College Students and Recent Grads

Can’t Pay Your Student Loans? You Can Lose Your License in These 16 States

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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In many states, failing to repay student loans could cost one a professional license to perform a job, and in the case of Iowa and South Dakota, even losing a driver’s license.

Sens. Elizabeth Warren (D-Mass.) and Marco Rubio (R-Fla.) in June introduced legislation that would prevent states from suspending, revoking or denying state licenses because borrowers default on their student loans, in the hopes of alleviating some of the financial burdens on Americans who are already saddled with student loan debt.

Americans owe a whopping $1.53 trillion in student loan debt, and almost 11 percent of the debt was at least 90 days delinquent or in default at the end of the first quarter of 2018, according to the Federal Reserve Bank of New York. Meanwhile, almost 30 percent of workers in the United States need a professional license to perform their job, according to The Brookings Institution.

In recent years, six states — North Dakota, Washington, New Jersey, California, Oklahoma and Virginia — have repealed laws that allowed states to suspend or revoke professional licenses as a penalty for student loan default. The Warren-Rubio bill exercises such efforts at the federal level.

After reading state laws, MagnifyMoney found that as of Aug. 24, 2018, at least 16 states deny, suspend or revoke state-issued professional or driver’s licenses if loan borrowers default on their student loans. In some states, such laws impact a wide range of professions requiring a state license, such as teachers, nurses and barbers; in others, only certain jobs are affected. Here are the states where these penalties exist and may be enforced:

Alaska

Overview of the law

When borrowers default on student loans (payments are 180 or more days past due) made by the Alaska Commission on Postsecondary Education, the state’s higher education agency may order licensing entities to not renew the debtors’ licenses. The licensing authority can take action to stop granting a license renewal once they receive notice of unpaid student loans.

Jobs affected

All jobs that require state-issued professional licenses, certificates, permits to perform, including teachers, nurses, pharmacists, security guards and pesticide applicators.

If you lost your license because of student loan debt

The licensing agency will notify you of the refusal of non-renewal. Within 30 days of receiving the notice, you may request a review by the commission. However, in order to have your license renewed after the review, you have to prove that: 1) you have paid off the entire loan, including interest and principal, along with all the collection costs; or 2) you have entered into a payment plan with the commission and have made on-time payments in full for the four most recent and consecutive months under the plan.

Arkansas

Overview of the law

The Arkansas State Medical Board may revoke or suspend a license, impose penalties or refuse to issue a license when a physician in this state has breached a Rural Medical Practice Student Loan and Scholarship contract. Recipients of rural medical practice loans are obligated to practice medical care in rural Arkansas full time and follow the terms in the contract they signed with the state’s student loan and scholarship Board.

Jobs affected

Physicians on Rural Medical Practice Student Loan and Scholarship contracts.

If you lost your license because of student loan debt

The loan recipients who get their medical licenses suspended won’t be able to practice for a period of time equivalent to the time they failed to follow their loan obligations. They can’t get their licenses back until they pay off their loan and penalties.

Florida

Overview of the law

In Florida, the Department of Health may suspend a state-licensed health care practitioner who has failed to repay a student loan issued or guaranteed by the state or the federal government. The borrower will be fined 10 percent of the defaulted loan amount.

Jobs affected

More than 50 professions that require state health department licenses, including nurses, medical physicists, body piercers, septic tank contractors and dentists. See the full list here.

If you lost your license because of student loan debt

To lift the suspension, the borrower has to enter a new payment term agreed by all parties of the loan and pay the fine within 45 days after he/she was notified of the suspension.

Georgia

Overview of the law

A professional licensing board can suspend the license of anyone who has defaulted on any federal education loan. Authorities may also suspend licenses of people who failed to comply with service obligations under any service-conditional scholarship program.

Jobs affected

More than 40 professions that require state-issued professional licenses. A few examples: chiropractors, dietitians, librarians and physical therapists. See a full list on this page, under the drop-down menu “Boards and Licensed Professions.”

If you lost your license because of student loan debt

When the licensing board receives written notification that you are making payments on the loan or satisfying the service, it can restore your license.

Hawaii

Overview of the law

Hawaii licensing authorities can deny a license application or a renewal or suspend a professional license if you default on a student loan made or guaranteed by the state, state agencies or the federal government. License suspension can also occur if you are not complying with obligations under a student loan repayment contract or a scholarship contract. Your license could also be in jeopardy if you are at least 60 days past due with payments under a repayment plan.

Jobs affected

Jobs that require professional licenses issued under 25 state licensing boards.

If you lost your license because of student loan debt

Your license can be renewed or reinstated when the licensing authority is notified that you are making payments or satisfying the terms of the student loan, student loan repayment contract or scholarship contract and are no longer in default or breach of the loan or contract.

Illinois

Overview of the law

The Division of Professional Regulation of the Department of Financial and Professional Regulation can deny licenses or renewals to those who have defaulted student loans or scholarships provided or guaranteed by the Illinois Student Assistance Commission, any governmental agency of the state or any federal government agency. Your license can also be suspended or revoked if you are proven to have failed to make satisfactory repayments for a delinquent or defaulted loan after a hearing.

Jobs affected

Jobs that require state-issued professional licenses. The professions include physicians, nurses, pharmacists, physical therapists, dentists, barbers, accountants and more. Check out the full list of state-licensed occupations in Illinois here.

If you can’t apply for a license because of student loan debt

If you have established a “satisfactory repayment record,” the department may issue a license or renewal.

Iowa

Overview of the law

Any license authorized by state laws, including a driver’s license, can be denied, revoked or suspended if a borrower has defaulted on a loan owed to or collected by the Iowa College Student Aid Commission.

Licenses affected

Professional licenses issued by the state that workers need to engage in a trade, profession or business. There’s no single, full list of affected licenses, but such licenses include those for massage therapists, social workers and interior designers; those who drive; and recreational licenses for hunting, fishing, boating or other activities.

If you lost your license because of student loan debt

You can get a license approved or reinstated if you schedule a conference with the commission to enter into an agreed on a repayment plan or pay off the debt within 20 days after you receive a mailed notice about your alleged loan default or a notice of suspension, revocation, denial of issuance or non-renewal of a license.

Kentucky

Overview of the law

In Kentucky, licensing agencies may not issue or renew a professional or vocational license to someone who’s in default or has failed to meet any repayment obligation under any financial assistance program administered by the Kentucky Higher Education Assistance Authority.

Jobs affected

Jobs that require state-issued professional licenses, including home inspectors, athlete agents, alcohol and drug counselors and more.

If you lost your license because of student loan debt

You should receive a notice either from the Kentucky Higher Education Assistance Authority or from a relevant licensing authority giving you a deadline to respond to the notice and enter into a “satisfactory” repayment agreement. Assuming you do, the authority will send the licensing agency a notice certifying that you are no longer in default and have made satisfactory repayments, repaid the loan in full or have been waived from repaying the debt. At that point, you may resume your professional or occupational license.

Louisiana

Overview of the law

The state of Louisiana can deny an application for or renewal of any professional or occupational license to anyone who has defaulted on a federal student loan guaranteed by the Louisiana Student Financial Assistance Commission (LOSFA).

Jobs affected

Jobs that require state-issued professional licenses, which include dentists, nurses, physical therapists, insurance agents and more.

If you lost your license because of student loan debt

LOSFA has entered into a contract with the Educational Credit Management Corp. (ECMC) for the servicing its LOSFA-guaranteed federal student loans. LOSFA advises borrowers to contact ECMC to enter a payment arrangement with ECMC or repay the loan. LOSFA needs to confirm compliance with your loan obligations for your license to be released.

Massachusetts

Overview of the law

A professional or occupational license can be denied for any applicant who is in default on an educational loan under any program administered by the Massachusetts Education Financing Authority (MEFA) or the Massachusetts Higher Education Assistance Corp. (MHEAC). MEFA offers loans to students who are residents of or attend college in Massachusetts. MHEAC, known as American Student Assistance, provides federal student loan programs.

Jobs affected

Nearly 170 jobs that require state-issued professional licenses from 39 boards of registration. The professions include architects, psychologists, physicians and more. See a full list of state licensing boards here.

If your license is denied because of student loan debt

You should receive a notice of denial and can then ask your loan agency for a review of the alleged default within 30 days of receiving the notice. If you enter into a repayment agreement or other arrangement with the loan agency, or if the agency determines that the notice of default was in error, the educational loan agency will notify the relevant licensing authority, which will then issue the license to you.

Minnesota

Overview of the law

In Minnesota, health professionals who have defaulted on a federally secured student loan or failed to fulfill a repayment or service obligation can face denial of a license by a health-related licensing board. The board can also take disciplinary action against the debtor.

Jobs affected

Health-related professionals, including physicians, nurses, dentists, therapists and barbers. See a full list of the state’s health licensing boards here.

If your license application is denied because of student loan debt

A licensing board has to consider the reasons for the default. It cannot impose disciplinary action against anyone with total and permanent disability or long-term temporary disability lasting longer than a year.

Mississippi

Overview of the law

When certain health care practitioners and hospital employees fail to comply with an educational loan contract obtained through a state-paid educational leave program, their professional licenses can be revoked. Grantees of the paid education leave program entered a contract with a state health institution, where they agreed to work in a health care profession, such as a physical therapist, or as a licensed practical nurse in the same sponsoring institution for a period of time equivalent to the amount of time when the applicant receives paid leave compensation.

Jobs affected

Health-related professionals and hospital workers who earned their licenses through educational paid leaves offered by state health institutions. This includes nurses, nurse practitioners, speech pathologists, psychologists, occupational therapists, physical therapists and any other needed professions determined by the sponsoring state health institution.

If your license is revoked because of student loan debt

A revoked license will be restored if you can prove that your contract is no longer in default.

New Mexico

Overview of the law

Under the state law, New Mexico barbers and cosmetologists may face denial of issuance or renewal, suspension or revocation of their occupation licenses if they have defaulted on a student loan. The state statute doesn’t specify what kind of student loans they are. (Repeal of this rule was scheduled in 2014 but delayed to 2020.)

Jobs affected

Barbers and cosmetologists.

If your license is denied renewal because of student loan debt

Before the Board of Barbers and Cosmetologists takes any action against your license, you can request a hearing within 20 days after being served a written notice about the default. After the hearing, the board will take steps to impose a fine up to $999 or take other disciplinary actions, which may include suspension, revocation or refusal to renew a license. The state statute doesn’t offer information about resolutions for those who’ve lost their licenses because of student loan default. The New Mexico Board of Barbers and Cosmetologists has not responded to MagnifyMoney’s inquiry regarding the remedies.

South Dakota

Overview of the law

South Dakota established the Obligation Recovery Center in 2015 to recover debts owed to the state, including unpaid university tuition or fees. The state law demands a number of licenses, registrations and permits, including a driver’s license, be withheld from anyone who owes money to the state. While South Dakota is not in the student loan business, students have reportedly had their driver’s licenses suspended because their unpaid student debt got transferred to the Obligation Recovery Center, which at that point became debt owed to the state.

Affected licenses

Driver’s licenses, a hunting or fishing license, a state park or camping permit, a registration for a motor vehicle, motorcycle or boat.

If you lost your license because of student loan debt

In order to restore the license or permit, the debtor has to either pay the debt in full or has entered into a payment plan with the center and be current on payments.

Tennessee

Overview of the law

State licensing authority may suspend, deny or revoke the license of anyone defaulted on a repayment or service obligation under any state or federal student loan or service-conditional scholarship program.

Jobs affected

Jobs that require government-issued professional licenses, including teachers, dentists, massage therapists, nurses, barbers, geologists, accountants and many more. (There is no single, full list of affected licenses.)

If you lost your license because of student loan debt

Within 90 days after you receive notification of the alleged default, you can keep your license if you pay off the debt, enter into a payment plan or service obligation or comply with an approved repayment plan.

Texas

Overview of the law

Licensing agencies in Texas can deny a renewal for a license to anyone who has defaulted on a student loan or a repayment agreement guaranteed by the Texas Guaranteed Student Loan Corp.

Affected jobs

All professions that require state-issued professional licenses. The rule applies to auctioneers, electricians, midwives, physicians and many more.

If you can’t renew your license because of student loan debt

Your license can be renewed if the Texas Guaranteed Student Loan Corp. issues a certificate to clarify that you have entered a repayment agreement or the loan is not in default anymore.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Earning Interest

APY vs. Interest Rate on Savings and CD Accounts — Explained

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.

apr vs interest rate
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When you’re signing up for a checking or savings account, the first thing you are likely to review is the account’s APY and interest rate. They may seem similar but they are actually two very different terms.

An interest rate is the percentage of your deposit that banks pay you in order to hold your money with them. APY is an acronym that stands for for annual percentage yield. It refers to the total amount of interest you earn on your savings over a year, and it factors in compounding interest. APY gives a truer picture of how much money you will make from your certificate of deposit (CD), savings or money market account, than by looking at a simple interest rate alone.

The higher the APY, the more money you can expect to earn from your deposit in your CD, money market or savings accounts.

Understanding the various types of interest rates

For deposit accounts, there are two types of interest rates you need to know: simple interest and compounding interest.

Simple interest

Simple interest is easy to calculate — it’s calculated only on the principle you deposit in your bank account. It means if you invest $10,000 at an interest of 2%, for instance, you will earn $200 in interest at the end of the year.

Simple interest rates are typically used with brokered CD accounts purchased through brokerage firms like Fidelity, Vanguard or Charles Schwab, said Ken Tumin, founder and editor of DepositAccounts.com, a fellow LendingTree-owned site. Instead of receiving compounding interest, holders of brokered CDs normally get paid simple interest monthly, quarterly, semi-annually or annually.

Compounding interest

Compounding interest is more complicated, because it takes into account the interest you earn on both the interest and principle. When you leave the interest you earn in a bank account instead of taking it out, the overall interest paid is calculated based on the total balance, including the interest you’ve earned over time. So as each month passes, you are earning interest on an increasingly larger pool of money.

That’s why compounding interest can be such a powerful tool and why you’ll hear many experts encourage folks to save as early and often as they can so that they have more time to enjoy the power of compounding.

Here is how compounding interest works. Let’s say you put $10,000 in savings account that earns an interest rate of 2%. After one year, you will have earned $200. So you’ll start year two with a total balance of $10,200. Now, you’ll earn the same 2% but you’ll be earning it on a higher balance (your original deposit plus $200 in earned interest). At the end of year two, the total interest on your deposit will be $204 — ($10,000+$200) x 2% = $204 — and you’ll be left with a total of $10,404.

Annual Percentage Yield (APY) vs interest

Most deposit accounts where you earn the interest use APY.  It is a number that accurately represents how much you will make from a deposit in a given year, factoring in both the interest rate and compounding period.

If interest is paid on an investment once per year, which means it has an annual compounding period, as shown in the above-mentioned example, the APY and interest rate are the same.

But in reality, most banks offer more frequent compounding periods, which could be quarterly, monthly, weekly or even daily. In these situations, the compounding effect occurs on a much smaller scale but more frequently. As a result, the returns are higher.

Most banks offer an APY, so that account holders don’t have to calculate on their own. But if you are curious to know how an APY is calculated, the Federal Deposit Insurance Corporation (FDIC) provides the mathematical formula on its website.

Read more about the difference between APR and interest rate when it comes to mortgages here.

How to calculate APY

You can use DepositAccount.com’s compound interest calculator to calculate how much return you will eventually get on your investments over certain time periods. But if you’re someone who likes to see how the math works out, we’ll cover the formula as well.

APY = 100*[(1 + (interest rate/compounding cycles)^compounding cycles)) – 1]

Compounding cycles is the number of times a year your interest compounds.

Now if the 2% interest on that investment of $10,000 compounds daily (365 times of a year), at the end of the year, you will earn $202.01 in interest on that deposit. In this case, the APY is 2.0201%.

Here is how we arrived at the result:

APY = 100 * [(1 + (.02/365) ^ 365) – 1]

APY = 2.0201%

If the deposit compounds monthly, meaning it has 12 compound cycles:

APY = 100 * [(1 + (.02/12) ^ 12) – 1] = 2.0184%

Blended APY

Blended APY comes into play when there are rate tiers in accounts. That means depending on how much you’ve invested, a portion of your balance earns one interest rate, while another portion earns a different interest rate. A blended APY averages the different interest rates and also factors in compounding.

Some financial institutions reward low balance savers by placing the highest rate with the lowest deposit, but if the balance grows they start using a reverse tier system where they blend the APY as the balance grows, Tumin explained.

These tiered rates are typically applied in money markets, savings and reward checking accounts, Tumin said. There can be more than two rate tiers, which it can make it more complicated to determine the final amount of interest you’ll earn over time.

Banks and credit unions that offer products that apply blended APYs usually list the rate tiers for different ranges of deposits. In this example, the blended APY is neither 1% nor 2%. The exact blended APY is calculated based on how much you have invested.

The formula that you can use to calculate the blended APY is:

Blended APY = (Amount1 * Rate1 + Amount2 * Rate2) / Total Amount

For example, let’s say you open a savings account that gives you 2% APY on your investments below $10,000 and 1% APY on deposits above $10,000.

You have $20,000 to deposit.

So, what we get from the $20,000 is:

Blended APY = ($10,000 * 2% + $10,000 * 1%) / $20,000 = an effective APY of 1.5%

Blended APY vs fixed APY:

Would you be better off picking an account with the blended APY or another account with a fixed APY of 1.5% on your entire balance?

It depends on your total balance.

Let’s say you put $15,000 in that same two-tiered account (2% on your first $10,000; 1% on deposits above $10,000).

Using the same formula from above, your blended APY would be 1.67%, beating a 1.5% APY.

But if you dump $50,000 into this account, your blended APY then would be 1.2%.

In this case, a fixed 1.5% APY would be a better deal for you.

When looking for savings accounts, you should shop around and compare the expected returns based on your initial investment.

Understanding the difference between APY, interest rate and APR

In the family of interest rates, APY has a sister called APR, which stands for annual percentage rate.

APR is often used to describe the interest rate you pay on loans and credit card debt. However, once in a while, you’ll see APR mentioned for deposit accounts, which essentially means a simple interest rate in that context, Tumin said.

When you are shopping for a loan, instead of looking at the interest rate, you should focus on APR, which provides a clearer picture of how much the loan will cost you.

An interest rate is the percentage of a loan amount that it costs to borrow money.

Essentially, APR reflects the amount of interest you pay on the money you borrow from a lender every year, and it also factors in how the interest is applied to your balance and associated fees and other costs. But unlike APY, APR does not take compounding into account.

If a lender charges no additional fees, the loan’s APR and interest rate are identical. But if you have to pay an origination fee for a loan, for example, it will increase the APR on that loan, making it higher than a simple interest rate.

Although lenders often advertise the interest rates, the Federal Truth in Lending Act requires that every lender to disclose the APR, so you can use the APR as a good basis to compare the true costs of loans. However, your monthly payment is calculated based on the interest rate, not APR. Here’s an example that shows how monthly payments are calculated using a loan calculator from LendingTree, the parent company of MagnifyMoney. The fees and other costs, such as discount points and origination fees are often paid at the closing of a loan or will be calculated into your loan balance.

This article contains links to DepositAccounts.com. Like MagnifyMoney, DepositAccounts.com is a subsidiary of LendingTree.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Ebates for Groceries: 4 Grocery Rebate Apps Reviewed

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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People who frequently use rebate websites may have wondered if there are equivalent sites for grocery shopping — sure there are, and plenty of them.

As a quick refresher, popular sites like Ebates offer coupons and cash rebates to customers who shop at partner retailers such as Macy’s or Walmart. San Francisco-based Ebates is owned by Rakuten Inc., one of Japan’s largest online shopping malls. When you click on an Ebates link through the website or app, an email, or by installing its browser extension to start shopping, you’re eligible to receive cash back. You can also receive cash back at the store by linking a credit or debit card to your Ebates account.

Grocery store rebate apps work much the same way, with an extra step of submitting your receipts after you shop. There are a slew of such apps including Checkout 51, SavingStar and Receipt Pal, plus the four we’re reviewing below. Each of these turns your grocery receipts into cashback awards and each has its own special features, strengths and limitations.

Ibotta

Ibotta allows users to earn cash rewards for everyday purchases, both in-store and online. Partnering with almost 200 grocery store chains in the country, the Denver, Colo., based company offers rebates on a wide variety of fresh produce, liquor, processed foods and personal care products and household supplies.

How it works

Step 1: Find offers

Before your trip to the grocery, find offers on products from that particular grocery store listed on the app, and claim the ones you’ll need. Each deal is worth between 25 cents and $5. Some deals are only valid for items at selected stores, but there are also offers applying to products sold at any partnering grocery store. From time to time, there are rewards worth 25 or 50 cents just for submitting a receipt, even though you didn’t purchase anything eligible for cash back.

Step 2: Go shopping

You go buy groceries, including items that you’ve claimed cashback offers on. Keep the receipt.

Step 3: Redeem awards

Redeem your offers by taking a photo of your receipt via the Ibotta app. The app will match the items on the receipt to the offers previously claimed and deposit the cash into your account within 48 hours.

Note: your receipts are valid for rebates within 7 days of purchases, so don’t wait too long to submit your receipt.

You can also link your loyalty card or account with Ibotta, so that the app receives an electronic submission of your receipt to be automatically reviewed for cash rewards.

Step 4: Receive cash

Ibotta will deposit your credit within 48 hours. You can withdraw the funds from your account and transfer them to your Venmo or PayPal account every time once you’ve accumulated $20 of cash credit. Another option to use your earnings is to buy gift cards from stores partnering with Ibotta.

Where it works

Ibotta partners with nearly 200 grocery stores, drug store and wholesale markets. To name a few: Whole Foods Market, CVS, Walmart, Kroger and Costco. Find the entire list of stores where you can use Ibotta here.

Extra bonus

Beyond regular offers, you have opportunities to earn additional credit through special offers. A few examples below:

  • Once you redeem your first in-store offer, you earn an extra $2 cash from Ibotta.
  • You get a $5 bonus when a friend signs up through your referral.
  • When you reach $10 in credit, Ibotta will match the earnings with an extra $10.

Pros and cons

Pros

  • Cash rewards are straightforward and are deposited to your account within 48 hours.
  • Deals are available on a variety of groceries — it’s the only app we reviewed that offers rebates on fresh foods.
  • You can use Ibotta in some of the biggest grocery chains in the country.
  • Beyond groceries, you can earn cash credit from purchasing electronics, clothing, gifts, home and office supplies, restaurant dining both online and in-store.
  • Ibotta is the most outstanding among the four apps we reviewed when it comes to interface and design.
  • Ibotta offers generous bonus awards.

Cons

  • It takes time to browse deals every time before you go grocery shopping.
  • You can’t cash your rewards unless you reach $20, which can take a while to accumulate.
  • It doesn’t work with every grocery store — you can’t use it at mom-and-pop shops or bodegas.
  • Offers don’t last forever; sometimes they expire before you remember to redeem them in time.
  • After you claim offers, Ibotta will often ask you personal questions such as your age, gender, race and consumption references. You can’t proceed without answering, but Ibotta is not transparent as to why they are collecting such data and how they will use such information.

Receipt Hog

Receipt Hog is unique in the sense that it pays you for uploading pictures of your receipts for market research. Any receipt will work, whether it’s from a large grocery chain or corner bodega.

How it works

Step 1: Submit receipts

You earn coins from your receipts from any store, depending on the amount of money you spent. You earn:

  • 5 coins for a receipt total of less than $10
  • 10 coins for a receipt total of $10 to $50
  • 15 coins for receipt total of $50 to $100
  • 20 coins for a receipt total of more than $100

Note: A receipt must be uploaded to the app within 14 days of the transaction date. You can submit up to three receipts from the same store with the same transaction date and up to 20 receipts per week.

Step 2: Redeem points

Once you reach 1,000 coins, you’ll be eligible for a PayPal cash redemption or an Amazon gift card.

  • 1,000 coins = $5
  • 2,900 coins = $15
  • 4,300 coins = $25
  • 6,500 coins = $40

The more coins you redeem, the higher the payout — it’s worth waiting until you earn 6,500 coins to maximize your earnings. The redemption request will be approved within seven days.

Where it works

You can submit receipts from any store within the U.S., Canada and the United Kingdom.

Extra bonus

Receipt Hog offers extra points-earning opportunities:

  • You can earn additional rewards and bonuses by completing surveys or challenges, or by uploading more receipts.
  • You can connect your Receipt Hog account with your email address and Amazon to earn bonus points and awards.

Pros and cons

Pros

  • Uploading receipts is the simplest way to earn money, among these selections — you don’t need to spend time looking for eligible offers or deals with Receipt Hog.
  • It’s the most widely applicable app among the four. It can be used in all stores that sell groceries, big and small, and in three countries.
  • You won’t need waste money on items you don’t use just to get cashback rewards.
  • Receipt Hog also allows users to earn rewards from retailers that sell clothes, home improvement and furnishings, office supplies, electronics and arts and crafts and sporting equipment.
  • The company is transparent about its data collection purpose.

Cons

  • If you are a new user, you have to complete an introductory survey before you can access the cash-out page.
  • The reward system is a bit complicated: you earn points based on how much you spend on groceries on one receipt, and then you have to convert from points to dollar amounts to get rewards.
  • Because you earn points primarily by submitting receipts, your earnings from Receipt Hog may not be as substantial compared with other product- or band-oriented rebate apps.
  • There is a waiting period of up to seven days to receive funds, the longest cash-out wait of all apps reviewed.

Fetch Rewards

Unlike Ibotta, which has a limited choice of grocery stores and specific offers on products, Fetch Rewards allows you to scan any receipt from any grocery store in the U.S. Its offers are based on specific brands, not products or stores. Most of the brands partnering with Fetch Rewards are popular consumer brands that sell processed food or personal care items.

How it works

Step 1: Upload receipts

Scan your grocery receipt from any grocery store, convenience store, drug store or liquor store.

Note: Receipts must be scanned within 14 days of the transaction date. You can upload up to 14 receipts in a rolling seven day period.

Step 2: Earn points

If you have purchased a product from one of Fetch Rewards’ participating brands, you’ll earn points for that item. There are three categories of points: base, bonus and special.

Step 3: Redeem rewards

As your points accumulate, you can redeem them for gift cards to popular retailers that work with Fetch Rewards. Every 1,000 points are worth $1. There are four tiers of rewards: 5,000 points, 10,000 points, 25,000 points and 50,000 points; you can earn gift cards with a cash value of $5, $10, $25 and $50, respectively.

Where it works

Any U.S. grocery store that carries the 200+ popular brands in the app.

Extra bonus

You receive 2,000 points after you refer the app to a friend and their first receipt has been approved and accepted.

Pros and cons

Pros

  • Anyone who lives in the U.S. can potentially take advantage of the app.
  • The brands are common enough that most grocery stores carry them.
  • The gift-card options are extensive.
  • Deals don’t expire.

Cons

  • If an account is inactive for 90 days, the points will expire.
  • The deal options are limited to 200+ brands.
  • All offers are for processed foods. You won’t be able to get credit for buying fresh produce with Fetch Rewards.
  • You can’t convert points to actual cash that can be transferred to your own financial account.

BerryCart

BerryCart is a healthy answer to Fetch Rewards. Users earn rewards for buying organic, gluten-free or non-GMO foods. Rather than offering brand-based deals, BerryCart offers are based on specific products.

How it works

Step 1: Find deals

Browse BerryCart deals in the app. The deals are only valid for a certain period of time. It currently offers cashback rewards on nearly 50 items. The app tells you where the item is available near you based on your GPS location; most of the offers are worth from $0.25 to $2.

Step 2: Claim deals

In order to claim a specific deal that BerryCart offers, you have to click the “Fact” button on the offer page to learn information about that product.

Step 3: Upload receipts

After your grocery shopping trip, you can snap a picture of the receipt or the bar code to receive a rebate for the item you previously claimed. BerryCart will deposit the funds into your account within 24 hours.

Step 4: Get cash

Once your accumulated rebates reach $5, you can cash them out by transferring the money to your PayPal account, or you can buy a gift card to iTunes ($5 to $15) or Hotels.com ($10 to $20).

Where it works

You can use BerryCart in any store that carries the items BerryCart currently offers deals on.

Extra bonus

  • You can earn extra cash back by writing reviews on each product.
  • You earn $2 for each successful referral.

Pros and cons

Pros

  • If you buy mostly organic, all-natural, gluten-free and non-GMO foods, this app is for you.
  • It works at grocery stores across the country.
  • You can learn nutritional facts about the things you buy while claiming deals.
  • The credit you earn is deposited in 24 hours, the speediest among all four apps reviewed.

Cons

  • The app is limited, in that not many deals are available on BerryCart. Currently you can only earn cash back on about 50 products.
  • It requires many steps before you eventually receive the awards.
  • The BerryCart app is not very intuitive.

The bottom line

It’s fulfilling to earn cashback rewards just by scanning your grocery receipts. To maximize your earnings, you’ll probably want to check the apps when creating your shopping list. It’s even more gratifying if you can combine your app rebates with store discounts. But it’s also easy to overspend — squelch the impulse to buy something solely for the cash back because you may end up wasting money instead of saving it.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Auto Loan

Everything Non-U.S. Citizens Should Know About Financing a Car

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.

Buying a car as a non-citizen
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When they first arrive in the U.S., many expats and international students pay cash to purchase cars because it seems like the easiest way to buy a vehicle in their new country. But you can finance a car as a noncitizen, an expat worker or an international student.

Lenders cannot discriminate against anyone based on citizenship. But they do determine a borrower’s creditworthiness. On the surface, it seems like a noncitizen is in the same position as any American borrower. But the truth is, you do have unique challenges in obtaining auto loans because of your credit (or lack thereof) and immigration status, which affects the loan terms and interest rates that you will get.

To help you make better borrowing decisions, we will go over the details that international students or expats in the U.S. need to pay specific attention to when it comes to financing a vehicle.

Things you need to know before taking a car loan

Credit history

This will likely be your biggest obstacle because chances are you may not have had time to build a credit history in this country. Without establishing credit first, it’s extremely difficult for you to receive financing for a vehicle.

And even if you are deemed eligible for an auto loan, you may receive a far higher interest rate compared with those with a U.S. credit history.

When “ghosts” aren’t offered a loan due to lack of credit history, they need to have a cosigner who’s living in the country and has a U.S. credit history. The cosigner may not have to be a U.S. citizen. With a cosigner on your auto loan, your interest rate may not be as astronomical, but it will still be significantly higher than that of a borrower with healthy U.S. credit.

If you are going to live in the U.S. for a long time, it’s worth spending some time establishing or improving your credit score now so that you can refinance or qualify for a better APR on an auto loan later.

The length of your visa

When you arrive at a dealership, a dealer runs your Social Security number to check your credit, which will also tell the dealer who you are.

Another question is how long you will be allowed in the country. As a foreign national in the U.S., the loan term you will be eligible for has to be shorter than the period you’re allowed to stay in the country legally.

This means if your work visa is valid for three years, your auto loan will be three years or less. According to data from Experian, one of the three major credit reporting agencies in the U.S., the average car loan term Americans get is nearly six years.

To shorten the length of your auto loan, you either have to put down a larger down payment or pay higher monthly payments. On the bright side, your total finance charges over the life of the loan would be lower as a result.

Down payment

International AutoSource, a service for expat car leasing, financing and rentals without a local credit history, advises expats and international students to provide a down payment of 10% to 20%.

The more you can put down on your car when you buy it, the better APRs you will likely be offered because it’s a less risky loan for the lender. To avoid depleting your savings, once you have done your research and finalized your vehicle decision, you probably want to save up for the down payment first, as well as run the numbers to make sure that the monthly payment will fit into your budget.

Where to shop for a car loan

Like buying anything else, you should always shop around for a car — and a car loan — comparing options and negotiating with sellers for a lower purchase price.

Dealerships

The most common way to get a car loan is to go through a dealership that acts as a middleman between you and the lender. You buy the car and fill out all the paperwork through the dealership. Your first contact with your lender would be about a few weeks after everything is signed, when you should expect to receive detailed information about your loan account.

Direct lenders

You can also apply for an auto loan directly through banks, credit unions or finance companies online to avoid fees that you could otherwise incur with a dealership. Compare auto loans on LendingTree’s online exchange. MagnifyMoney is a subsidiary of LendingTree.

Services catering toward expats

There are also car financing services catering to your special needs as a non-U.S. citizen. Look for those services online and reach out to them for specifics.

International AutoSource, as we mentioned before, is an established car leasing and financing service specialized in working with foreign nationals. The company works directly with car manufacturers and allows expats without a credit history to take out auto loans. Its APRs range from 0.9% to 6%, depending on the vehicle, model and terms. For comparison, the APR for a 48-month auto loan can be as low as 3.44%.

Documentation non-U.S. citizens need to apply for an auto loan

Proof of identity

You can provide your passport. A green card, employment authorization card or a driver’s license will also do.

Visa

Lenders need to verify the length of your stay in the U.S. to determine your loan term. Your valid U.S. visa will help them determine the duration of your loan term.

Social Security number

To pull your credit history, a lender will need your Social Security number, name, address and date of birth.

Proof of residence

Your driver’s license usually works if your address on the license is current. Otherwise, you may show the dealer a piece of mail you have received recently that has your name and address on it, such as a utility bill or bank statement.

Proof of income and employment

Copies of your pay stub that is dated within 30 days and details the salary you’ve been paid year to date. You may also be asked to provide three months’ worth of pay stubs, bank statements, a verifiable offer of employment or an employment letter.

Proof of insurance

You are required by your lender to have auto insurance if you are to take a loan on a car. Check with your lender on exact coverage requirements, but most require that you have full coverage (liability and collision).

It’s a good idea to shop around for auto insurance before purchasing a vehicle. Get multiple quotes so that you know what to expect, even if you don’t know exactly which car you’re getting. It’s usually after you agree to buy a specific car, before you go in to sign the paperwork for it, that you will be asked to obtain full coverage insurance and have the company provide proof of insurance. You can call the company that previously gave you the best insurance quote and finalize the decision. The insurance company can send proof of coverage to the dealership, either by email or fax. The dealer should then give you and the lender each a copy.

Vehicle information

If you’re buying a new car, you will need to obtain or complete a bill of sale, purchase agreement or buyer’s order that should include:

  • Purchase price
  • Vehicle identification number (VIN)
  • Year, make and model

If you’re buying a used car, aside from the above information, you also need to provide the car’s mileage, original title and disclosure of any liens on the car. You can obtain such information from your seller.

A key takeaway

Before you decide to buy a specific car, you should determine whether financing is your best option based on your credit, your cash flow and how long you will stay in the U.S. If you are here only on a temporary assignment, maybe leasing a car would be a better solution. For example, Volvo has a special leasing program for international students. Once you decide that you want to finance a car, if you can’t qualify for a desirable APR due to the lack of credit, do the math and see if taking on an expensive loan makes economic sense for you. Consider getting a cosigner on your loan if you can. In some cases, when people are not in urgent need for a car to get around, it’s worth spending some time to improve your credit first and waiting to buy later.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Building Credit

New to the U.S.? Tips for Noncitizens to Build Credit

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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Many new immigrants to the United States may be dumbfounded by a cosign requirement to lease an apartment lease, or difficulties in getting a loan or rejections when they apply for a credit card. The reason these things happen? Because they don’t have a credit history in this country.

If you plan to build a life and a career in the U.S., building that three-digit credit score should be a high priority once you enter the country. Without a credit history, you will face tremendous obstacles, financial and logistical alike, in your new life. Unfortunately, you cannot transfer your credit file from your home country to the U.S.

Good credit is critical throughout your financial life in America, from buying a car to leasing an apartment or obtaining personal loans. The better your credit score, the easier it is for you to access credit and the less a loan will cost you.

How do you build your credit without a credit history in America? Let us fill you in.

What’s a credit score?

Before we discuss the specifics of building credit, let’s first learn the very basics of a credit score.

There are several types of credit scores out there, and most scoring models agree on a score range of 300-850. FICO is the most widely used scoring model, provided by the Fair Isaac Corporation — its scores are used by 90% of U.S. financial institutions.

Depending on your specific score, the quality of your score falls into one of five tiers of credit. The higher your score, the better.

A “poor” score typically falls between 300 and 579. “Fair” credit scores are in the range between 580 and 669. “Good” scores are between 670 and 739. “Very good” ones are between 740 and 799. And “excellent” scores fall between 800 and 850.

Credit Category

Score Range

Excellent800-850
Very Good740-799
Good670-739
Fair580-669
PoorLess than 580

How does a credit score work?

Your creditors report your borrowing, repayment history and other financial behaviors to three major credit reporting bureaus: Equifax, Experian and TransUnion. These bureaus generate your credit report; credit scoring agencies such as FICO then use the information in your credit report to assign you a credit score.

Your score indicates how likely you will default on debt. In the eyes of lenders, the higher your score, the less likely you will default on your loans. Banks, credit card issuers and other lenders make lending decisions based on a borrower’s creditworthiness. They offer lower rates to borrowers with higher scores.

Your FICO credit score is calculated by five factors, each of which carries a certain weight:

  • Your payment history: 35%
  • The amount of debt you owe: 30%
  • The length of your credit history: 15%
  • New credit inquiries: 10%
  • Types of credit you have: 10%

Note: LendingTree is the parent company of MagnifyMoney.

How to build credit from scratch

You can definitely build your credit from scratch by working to improve the factors that go into your score — except for the length of credit history. It’s impossible to travel back in time to open a credit account, so improving this factor just takes patience. Luckily, the length of your credit history isn’t the most important thing that determines your score.

Your credit history starts from the moment you open your first credit account. Make it work in your favor by following healthy financial habits and avoid common missteps, which we will detail below.

Dos

Apply for a secured credit card

Without a credit score to start with, you may not qualify for a regular credit card. What you can do is to open a secured credit card by providing the bank with a deposit as collateral. A secured card is a way to prove to a lender that you are responsible and a minimal risk.

The bank will keep the deposit, which is typically $200 or more, and give you a credit limit equal to your deposit. Your credit limit, balance and payment information are reported to the three major credit bureaus. If you fail to pay your credit card on time, the bank can take your deposit and apply it toward the debt.

Make on-time payments

Payment history is the largest component of your credit score. Making your credit card or loan payments on time is crucial in establishing your credit and maintaining a good score in the future. Payments that are more than 30 days late will start to hurt your score. At the very least, be sure to pay your bills no later than 30 days after the due date.

If you are concerned that you may be late on payments or miss them entirely, set up payment reminders or autopay.

Keep your credit utilization at or below 30%

The amount of debt you owe makes up 30% of your score, so you should be careful not to use too much of your available credit. Using a high percentage of your available credit could indicate that you are overextended and may be more likely to miss payments.

A good rule of thumb here is to keep your credit utilization ratio (the percentage of your available credit being used at one time) at or below 30%. That means a credit balance of lower than $3,000 balance for a $10,000 credit limit.

Keep close tabs on your credit

Once you have established credit, check your credit report regularly to watch your progress and make sure nothing has been mistakenly reported. Negative marks hurt your score and you should dispute the ones that are untrue to get them off your report.

The best place to get your credit report is at AnnualCreditReport.com, where you can access one free report from each of the three credit bureaus every year.

Make your rent count

Some property management companies and landlords use electronic payment services that report payment information from tenants to credit agencies. If your landlord offers such a service, opt in to have your rent payment history reported to one or all of the credit agencies.

If you make on-time payments, your credit score may go up. Of course, the opposite can happen, too: Your score may slip if you miss a rent payment. Learn more about how to report your rent payments to credit bureaus.

Work toward a 760 credit score

You don’t have to earn a perfect credit score of 850 to be considered successful or qualify for the lowest interest on loans. A more optimal credit score to work toward is 760. Anyone with a score of 760 and above will likely get desirable rates offered by lenders. A history of credit, on-time payments and decreasing the amount you owe will help you work toward this goal.

Don’ts

Don’t open new accounts frequently

Try to stick with your very first credit card before you open other credit accounts. While it’s important to have a number of different accounts, it’s not wise to apply for a bunch of new credit cards in a relatively brief time period.

More new accounts generally pose more risk to lenders, and will also reduce the average age of your credit accounts. In addition, once you apply for a new account, the lender will check your credit score, which triggers a hard inquiry. A hard inquiry will cause your score to drop a few points.

Don’t close your first credit card

Keep the first secured credit card you received, even if you don’t use it later. This card will establish the length of your credit history. Most people choose a no-fee rewards card or a bank credit card as their first credit account, so it doesn’t cost anything to keep the card for the length of your history. You can see a list of good no-fee rewards cards here.

Don’t obsess over your credit score

As you build your credit, it’s gratifying to see your progress. Keep tabs on your score, but it’s not wise to obsess over it. Give it time; your score will increase as long as you follow the steps we discussed above. A difference of 10 or 20 points is not usually going to significantly change the rates you get or loans you qualify for.

Don’t plan on paying interest

Nothing in the scoring models suggest that carrying credit card debt month to month is beneficial. It is totally possible to establish a good credit score by paying off your credit card on time and in full every month. Don’t plan to pay interest — in other words, don’t pay just the minimum payment — to build your credit score. It won’t help with your score, and it will cost you a staggering interest payment.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Personal Loans

The Pitfalls of Buying Furniture With In-Store Financing

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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Buying furniture is a complex endeavor. There’s much to consider before you finalize your decision: the size, the color, the style — and the cost.

Couches, beds, and tables can be quite expensive, and it may be tricky for just anyone to come up with a large amount of cash to cover these expenses. Many furniture stores offer “interest-free” in-store financing that makes such major purchases seem like an easy-peasy process for customers. But if you fail to repay the balance during the interest-free period, you end up paying more than you thought you would.

In this post, we will walk you through the pros and cons of in-store furniture financing. We also offer alternatives that may help you buy the furniture you want.

How 0% in-store furniture financing works

Many large retail stores that sell furniture have a deferred-interest financing program that allows consumers to open up a store credit card in which there may not even be a required minimum purchase.

The store may let you finance the piece of furniture you buy for a 0% interest rate for a period. The interest-free window could be one to six years, depending on the creditor. After that point, the APR could jump to 20% to 25%, or even higher.

Ashley HomeStore, for example, has a store card with a 29.99% APR and it offers interest-free financing for up to 72 months. Rooms To Go’s store credit card has the same APR, and it offers 0% interest from September 2018 through February 2023.

The key thing to understand is the deferred interest clause that can come with these types of cards. This means that if you don’t repay the entire principal amount before the promotional window closes, the credit card company will retroactively charge all the interest it would have charged.

“They might have 0% interest for 24 months, but if you don’t pay it all off in 24 months, your interest is calculated back from day one and added to your balance,” said Jude Boudreaux, a certified financial planner and founder of New Orleans-based Upperline Financial Planning. “It’s a tremendous penalty.”

Let’s say the store offers to sell you a couch for $3,000, interest-free for 12 months. You will have no problem if you pay the $3,000 off in month 12. But if you leave even $1 on the credit card after that 12-month period is over, you might owe $750 in interest if the regular interest rate is 25%. Ouch.

– Read why rent to own furniture specials is a bad idea!

Advantages of financing your furniture in-store

Enjoy an interest-free loan — if you meet the promo requirements

In-store financing could be a good deal as long as the buyer pays off the money borrowed within the 0% interest rate period.

For someone who doesn’t have enough savings to cover the furniture, instead of cashing their emergency fund, taking a 0% interest rate loan is a better, safer choice. But make sure you pay it off before the term is up to avoid retrospectively accrued interest.

Get new furniture right away

With a financing offer, you can go in and buy the items that you’ve been eyeing right away even if you don’t have all the cash on hand to purchase them.

The trick here is to stop yourself from going overboard to the point where you’re left with unaffordable monthly payments or you aren’t able to pay the card off before the promotional period ends.

“Be very careful because it’s easy to overspend when you have the ability to borrow like that,” Boudreaux said.

Help build your credit

Those who don’t have a stellar credit score may also have an opportunity to build credit with a store card. Often, the furniture sellers work with a financial institution that issues those store credit cards, and sometimes the credit company reports to one or all three credit bureaus. Check with the retailer before you apply for the card to see if it reports your payments to credit bureaus.

And, keep in mind, this can work against you as well. If you miss payments, it will hurt your score. Simply applying for new credit can temporarily ding your credit score. For that reason, ask the store if it offers a soft pull prequalification. You can get a good idea of whether you’ll get approved for financing without having to agree to a hard credit pull.

Disadvantages of financing your furniture

You may have to make a large interest payment

Zero-interest financing deals can be a great idea if you can pay off the money borrowed within the promotion period. But, in real life, many may not be able to do so. The big caveat here is that if you don’t repay the entire principal amount on time, you may be on the hook for interest.

On top of owing deferred interest going back to the beginning of the date of purchase, the credit card company will continue to charge interest until you repay the full amount owed. Remember, those cards carry pretty high-interest rates — higher than a typical credit card’s interest — so once the regular APR kicks in and you’re hit with all the deferred interest charges, it gets very expensive very quickly.

“They know that there’s a percentage of people that won’t pay the balance within the promotion time,” said Juan Guevara, a certified financial planner based in Colorado. “That’s how they make their money.”

Alternatives to in-store financing

Save up cash

Some people may not realize that if you want to buy furniture, you’re going to be making a payment no matter what. Instead of getting a loan, you might as well save up cash to pay for it. This strategy will keep you from the risk of having to pay high interest retrospectively if you can’t repay the loan within the promo period.

If you are disciplined enough to save up for a piece of furniture, the chances of you splurging are slimmer than someone who borrows money with a loan or credit card.

Offer to pay cash upfront and ask for a discount

Another advantage of purchasing furniture with upfront cash is a potential discount you might be offered.

As we discussed earlier, offering financing options costs money for the retailer. You are in a disadvantaged position to negotiate with the retailer for a discount if you take the financing deal. But if you offer to pay for furniture with cash in full, then you have the bargaining power.

Use a 0% intro purchase credit card

Before you accept a retailer’s in-store financing, even if it has a 0% intro APR, consider bringing your own financing to the table. There are some good 0% intro purchase APR cards on the market. And regular credit cards usually carry a lower interest rate than retail store cards, which can save you a bundle if you’re left making payments after the promo period ends.
If you’ve got a credit card that will offer you a 0% percent introductory rate on purchases,
compare its regular interest rate with that of the furniture store credit card. Choose the lower-cost option in case you cannot pay off the balance by the time the promotional 0% interest period is up.

Complete a balance transfer

If you sign up for in-store financing (a credit card) but can’t pay the balance off before the interest-free period ends, you’re at risk of getting hit with deferred interest charges.

To buy yourself more time, consider using a balance transfer credit card.

With a balance transfer, you can possibly roll over your debt from the store credit card to the new card that has an introductory interest-free period. The promotional 0% interest period typically lasts from 12 to 21 months. You usually have to pay a one-time balance transfer fee, which is often 3% of the amount of the transfer.

You’ll need good credit to qualify for the best balance transfer offers. And, keep in mind, you cannot transfer balances between credit cards issued by the same company.

Use a home equity line of credit

Another way to rustle up some extra funds is by using a home equity line of credit (HELOC). A HELOC is a revolving credit line. It’s secured by your house. You can apply for a HELOC, leave it open and draw funds from it as needed. Draw periods usually last for up to 10 years. As you pay off the principal, your credit gets replenished and you can use it again. You only pay interest on what you borrow.

The HELOC likely carries a lower interest rate than other unsecured financing options such as a credit card or personal loan. If you’re uncertain whether you can pay off the balance of in-store financing, and you fear you’ll get hit with a penalty or deferred interest charges, it can be a safer bet. You can avoid the possible penalties that come with the in-store financing offer.

Take out a personal loan

An increasing number of people have taken out personal loans to buy furniture. According to data from the Federal Reserve, the average personal interest loan rate was 10.31% in the second quarter of 2018. Financial experts generally don’t recommend this option. Although it’s lower than a typical credit card interest rate, it’s higher than your HELOC interest rate, if you have one. Your earning potential could offset the higher interest rates. Compare multiple lenders at once with our comparison tool below!

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.

Rent-to-own

Some stores offer rent-to-own programs that allow customers to take the furniture home and make installment payments. Renters can potentially own the furniture after they pay the total cost. But take note: These plans can be significantly more expensive than outright purchases. It’s technically not a loan, so there’s no disclosed interest, but the extra renting costs are usually calculated into the installments.

“By the time you own it, you may have paid triple the amount (of the regular price), so in essence, your interest rate could have been a lot higher,” said Chris Dlugozima, a financial wellness expert at GreenPath, a nonprofit debt and consumer credit counseling.

Bottom line

In-store furniture financing can be to your advantage as long as you stay within your budget when you buy and pay the debt off on time. But if you can’t be sure that you can repay the entire balance during the 0% interest rate period, think twice before you open that store credit card. At the end of the day, the expense has to come out of your cash flow. Compare your options, look at your financial situation and choose the one that comes with fewer risks and less potential cost.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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The Best Place to Exchange Currency

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.

The most affordable way to spend money in a foreign country is by using your credit card, exchange rate-wise. However, credit cards may not be widely accepted in your travel destination, or perhaps you simply want to have foreign money on hand before you arrive for peace of mind.

You can purchase foreign currency from your local bank, at an airport kiosk or from an online currency exchange. You tell them the particular amount of foreign currency you need and pay for it in U.S dollars just like buying anything else.

Not every place offers the same exchange rate, though, and some places charge extra fees. It’s important to compare rates and avoid additional fees to make sure you are not paying a high price on the foreign money.

In this post, we will compare the pros and cons, and the cost of each currency exchange option for you before, during and after your travel.

Ways to exchange currency before your trip

Bank or credit union

Exchanging foreign currency before traveling gives many people peace of mind. Ordering foreign cash from your bank or credit union is a common way to do so.

This will save you time and headaches from queuing up at money-exchange facilities at the airport and sweating over the math on the spot. Most banks and credit unions offer somewhat similar exchange rates. The trickier part is to compare fees. Some banks don’t charge fees, but others do. Fees will affect the exchange cost significantly if you don’t exchange much money in the first place.

Pros

  • Banks offer relatively competitive rates compared with retail currency exchange bureaus or airport exchange kiosks because of the bigger volume they sell and buy.
  • Some banks offer online currency order and delivery. Constraints and fees may apply. For example, Bank of America customers can order up to $10,000 in foreign currency online over 30 days. But if they need more, they have to stop by a Bank of America location.
  • You can choose to receive your order in small, large or mixed denominations depending on availability.

Cons

  • If you go to a bank branch, they may not have the amount of foreign cash you need. It would usually take a few days for the bank to get the money ready for you. Don’t wait too
    long to exchange currency. Call your bank in advance for availability of specific currencies.
  • Each institution limits on amounts. With Bank of America, for instance, your order amount must be at least $100.
  • Some banks charge additional service or delivery fees.
  • Banks offer less competitive foreign exchange rates compared with credit/debit card rates.

Costs

The difference in rates offered by different banks is small. So the major factor that will affect the efficiency of your exchange is fees. We look into the fees for four major banks (they’re the largest by assets):

Bank of America

Rate: On Sept. 19, Bank of America provided an exchange rate of 1:1.2304 between euros and U.S. dollars. Purchasing 1,000 euros would cost $1,230.40. You can check the daily rates BOA offers here.
Fees: If you choose to get the foreign currency delivered, there is a delivery fee of $7.50 on all foreign currency orders less than $1,000; this fee is waived if the currency you buy is worth $1,000 or more.
Ways to purchase: You can order online if you have a BOA checking or savings account. BOA credit card holders only can order currency at a physical bank branch, but the purchase needs to paid in cash.

Chase

Rate: The exchange rate for buying euros at Chase on the same day was 1:1.251. The cost for 1,000 euros would be $1,251.
Fees: $0.
Ways to purchase: You have to show up at a branch to make an order; you can’t order online and have to pick up the cash later if they don’t have the currency you need in stock.

Citibank

Rate: On Sept. 20, Citibank offered a rate of 1:1.2462 for you to buy euros. That means if you bought 1,000 euros, the cost in U.S. dollars would be $1,246. You can check the rate of the day by calling its 24-hour Exchange Rate Hotline: 1-800-756-7050, option #1.
Fees: If you are a client with the Citigold® or Citi Priority Account Package, there are no additional fees. But if you are not, $5 service fee will be charged if the transaction amount is $1,000 or less. Additionally, Citi charges a fee from $10-$20 to deliver to your address, depending on the delivery option.
Ways to order: You will have to be a Citi client to buy foreign currency. To order, visit your nearest Citibank branch or call 1-800-756-7050, option #2.

Wells Fargo

Rate: On Sept. 19, buying 1,000 euros would cost $1,229.80 at Wells Fargo, not much different than other major banks. You can check the rates of the day here.
Fees: No fees.
Ways to purchase: Besides physically visiting a branch, Wells Fargo clients can also exchange currency through the bank by ordering money online or by phone to get it delivered to your home or a branch near you within 2-7 days.

Order cash online

No other method can beat ordering foreign currency online in convenience. You just click buttons and purchase foreign currency at your fingertips. But the rates are slightly higher than what banks have. The major player that dominates the online currency exchange space is Travelex.

Travelex charges delivery fees if you order a small sum of foreign currency. If you are seeking the convenience of getting foreign currency delivered, you will be better off ordering foreign currency from a bank that offers free delivery or charges a lower delivery free.

Pros

  • You can exchange currency without having to step out of your house.
  • Rates are better than kiosks at airport or hotels.
  • You can earn United MileagePlus® bonus miles if you buy currency through Travelex.
  • You can pick up money in a retail facility or get currency delivered as early as the very next day after you put in an order.

Cons

  • There’s a $9.99 shipping fee if the transaction is less than $1,000.
  • You have to order in advance for delivery.
  • The exchange rates won’t beat what banks offer.
  • Travelex does not give small denominations of foreign currencies for delivery, so you’re limited to converting to round numbers in the foreign currency.
  • The minimum amount required in each order is $50.

Costs

Rate: On Sept. 19, the euro-U.S. dollar exchange rate provided by Travelex was 1:1.285. The price of 1,000 euros would be $1,284.69. That’s $54 more expensive than you would pay Bank of America for the same amount of euros.
Fees: A UPS Standard Delivery fee of $9.99 is charged if the order is less than $1,000. The fee is waived on transactions of more than $1,000.

Airport kiosks

Departure or arrival terminals at major airports all have plenty of choices for exchanging currencies. Those are the places you should avoid because the exchange rates they offer are typically higher than bank rates and online rates. And oftentimes, those kiosks levy an additional transaction or service fee, making your purchase all the more expensive.

Take Travelex as an example, its physical locations offer different rates than its online rates. And the specific rate depends on the amount of foreign currency you order. The more you buy, the better the rate you will get. In addition, a flat $9.95 service fee applies to each transaction.

However, if you need cash but did not budget enough time ahead of your trip to order foreign currency from your bank, the currency-exchange kiosks would pretty much be your last option before departure. Many of these exchange facilities also have locations in downtown areas, hotels, train and bus stations. They may or may not carry the same rate and fees as the airports. One thing you can do to save money on exchanging money at the airport is to visit the airport’s website before you get there to compare fees from different merchants.

Pros

  • They are easily accessible at airports.
  • Their opening hours are long, if not 24 hours. Many stay open from 5 a.m. to 11:00 p.m. everyday.
  • Those physical kiosks usually have more denominations available than online orders.
  • There is no minimum amount required at a physical store; you can change small amounts of cash, but the transaction fee will still apply.

Cons

  • They offer worse rates than banks and online shops.
  • You likely will have to pay an added service fee

Costs

Rate: On Sept. 19, buying 1,000 euros at a Travelex kiosk would cost $1,370. The rate was 1:1.37. This is more expensive than what you’d get via its website (1:1.285). And if you buy 600 euros at the kiosk, the rate would be even higher — 1:1.38.
Fees: There is a flat service fee of $9.95 per transaction, however little money you exchange through Travelex. If you factor in the service fee, the cost for 1,000 euros would be 12% higher than what you would pay for the same amount of currency at Bank of America.

Ways to exchange currency during your trip

ATM

The least expensive way to access any local currency in cash is by using an ATM on the ground with a checking account that has no fee for out-of-network ATMs and no foreign transaction fees.

You would get the same exchange rate you’d get if you used a credit card at a merchant. Most ATM networks use either the Visa or Mastercard exchange rate, which is the best because it’s very close to the interbank rate banks give each other.

For example, the Mastercard euro-to-U.S. dollar exchange rate on Sept. 19 was 1:1.171, and the Visa offered a pretty close rate of 1:1.172, if the credit/debit card charges 0% fees. These rates were lower than rates of U.S. banks that day.

You don’t have to make this account your primary checking account — just transfer the money you need to your no-fee account in U.S. dollars before the trip, and withdraw on location in local currency.

For security purposes, it’s safer to withdraw cash on the ground as you need it than carrying a large sum of cash with you during the trip. It’s also better to have a separate checking account just for travel. That way if there is fraud, it’s less likely to hit your main account.

Aspiration Summit and Charles Schwab Checking are two nationally available accounts with no out-of-network ATM fees or foreign transaction fees.

With most U.S. debit cards, however, the banks levy a foreign transaction fee up to 3% of the withdrawal amount each time and a flat third-party ATM fee of $1-$5. The ATM operator may also charge a fee.

Still, ATMs would be a cheaper option than exchanging currency at banks or airport kiosks. Let’s say you withdrew 1,000 euros Sept. 19 through Visa at an ATM, if you factor in the exchange rate, the 3% transaction fee and the $5 ATM fee, the total cost would be $1,207 — less expensive than exchanging the same amount of euros at Bank of America.

To save costs on your trip, look for a debit card with low or no foreign transaction fees and no out-of-network ATM fees. If they do charge fees, try to take out a high amount of cash at one setting to avoid multiple fee payments if you need to access more cash later on.

Credit card

The reason why credit cards are the best option to spend money overseas is that a credit card’s exchange rate will certainly beat banks and kiosks, as we discussed above. More important, credit cards offer significantly better protection against fraud than debit cards. Many credit cards charge no foreign transaction fees, and even better, you may earn miles or cashback rewards by using credit cards. Here we’ve rounded up the best travel credit cards with no foreign transaction fees.

Pro tip: One of the key recommendations for international travelers is to make sure your transaction is done in the local currency, not in U.S. dollars. Your credit card will always have a better exchange rate in the local currency than what merchants can offer in U.S. dollars. Plus, a merchant may even slide in an extra fee that you might not know about.

Cash

If you have U.S. dollars in cash, you can also exchange the local currency when you are in your host country. In fact, exchanging money in your host country gives you a better exchange rate than exchanging foreign currency in the U.S. before you go.

This is because the local currency is more common than your U.S. dollar is in that country, and therefore it’s cheaper to buy there. Meanwhile, your U.S. dollars are worth more in a foreign country because it’s a less common currency. Therefore, you will get more local money for your U.S. dollars.

Banque de France, the central bank of France, showed that on Sept. 19, the euro-to-USD exchange rate was 1:1.1667. That means it would cost you $1,167 to get 1,000 euros in France, excluding fees, which is less than you would pay for the same amount of euros at a major U.S. bank.

What to do with your leftover currency after your trip

Try to use up the foreign currency before you return to the U.S. If you have leftovers after your international trip, there are several ways to handle it.

Sell it back to your bank or Travelex

Banks and Travelex will buy the major foreign currencies; but they may not be able to purchase some foreign currencies, such as Argentinian pesos (ARS) Cuban pesos (CUP) at Travelex.

The big caveat here is that you will inevitably lose money by returning the foreign currency. The banks and Travelex make money from the difference between the purchase and sale of foreign currency. The rate they would offer for buying foreign currency from you is always lower than their selling rate

For example, Chase would buy 1,000 euros for $1,085 on Sept. 19, whereas it sold 1,000 euros for $1,251. Travelex would buy 1,000 euros for $1,020 that day. But if you wanted to buy the same amount of euros from a kiosk, the cost would be $1,370.

On top of that, additional fees may be attached to your sale. Citi, for instance, charges $5 if you exchange less than $1,000. Travelex bureaus don’t charge a service fee when you return your foreign currency. However, if you choose to send your leftover currency in the mail, a $5 fee will be deducted from your final proceeds and a delivery fee may also apply.

Keep it

You will be better off keeping the leftover currency: you’ve already bought it with extra cost, and selling it at a cheaper price means you will lose even more money. Why not save the hassle and save it for your next trip?

Sell it to friends and family

Ask your friend, family and neighbors whether they have international travel plans. If they will make a trip to the country you have visited, offering to sell them the local currency at a better rate than what banks provide.

Donate it

You can donate your leftovers after you finish your vacation — brighten up someone else’s day.

On many American Airlines international flights, flight attendants pass around to collect unused currencies from travelers as donations to UNICEF “Change for Good” charity program.

“Change for Good” charity donation barrels are also available at 10 international airports. As you walk around the airport, look out for those barrels to drop your leftover currency.

If you were not able to donate your foreign currency on a flight or at an airport, you can still support the cause by sending your money to:

UNICEF USA
ATTN: Change for Good Program
125 Maiden Lane
New York, NY 10038

Key takeaway

International travel is expensive already. Finding an affordable way to exchange foreign currency can save you some money. For that, you want to look for the option with the most competitive rate and avoid extra fees. When you are on your foreign trip, use a credit card that carries no foreign transaction fees as often as possible. As far as cash goes, the best way to access foreign currency to withdraw money at an ATM using a debit card that doesn’t charge out-of-network ATM fees or foreign transaction fees when you are on the ground. If you need a small sum of cash on hand before traveling, your local bank would be your best option. Ordering foreign currency online can be convenient, but mind the delivery fee that may apply. Our last piece of advice: Avoid airport or hotel exchange kiosks whenever possible.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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News

APR vs. Monthly Payment: Which Should You Focus On?

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APR vs. monthly payment
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When shopping for a loan, it’s tempting to cast your eyes to the monthly total. That low monthly payment may fit into your budget, but it’s more important to look at each loan’s annual percentage rate. The APR will provide a much clearer picture of how much the loan will actually cost you in the end.

The monthly payment is determined by the loan amount, the interest rate and your loan term, but it doesn’t tell you how expensive the loan is. While a low monthly payment on a loan may appear to be a good deal, the total cost of a loan may be much higher than you think if it carries a high APR and the payments are spread out over a long period.

What is APR anyway?

APR is the annual rate of interest paid on a loan. It tells you how much it costs to borrow for one year. The reason why APR gives you a true picture of how expensive your loan is is because it factors in not only the interest costs but other fees lenders charge for a loan. The APR is determined by lenders’ fees, the risk of the business that is borrowing the money and the length of the loan’s term.

If a lender doesn’t charge additional fees, the loan’s APR and interest rate are the same. But if the lender charges a 5% loan origination fee, the APR can be higher than the simple interest rate. For example, you can probably find a personal loan that has an 8% interest rate, but if the lender bundles fees into the total loan amount, the APR may be 9% or even higher.

Longer-term loans have higher APRs because the risk of default is somewhat higher. Lenders make lending decisions based on a borrower’s creditworthiness — the higher the credit score, the better the rates and terms. Lenders perceive those with subprime credit scores as risky borrowers, and that’s why those with less-than-stellar credit often are subject to higher APRs and longer terms.

Why a low monthly payment may not be cheap at all

A low monthly payment doesn’t necessarily mean the loan is inexpensive, but a high APR definitely means a higher cost of borrowing because it tells you how much interest and fees you pay on a loan.

Here’s an example of why the monthly payment is not the only factor you should consider while borrowing money:

Earnest, an online lender, offers no-fee personal loans with fixed rates from 6.99% to 18.24% APR. On a hypothetical $10,000 loan amount, the monthly payment is $210 if Borrower A gets a five-year loan with a 9.49% APR. The borrower will have to pay $12,598 by the end of the loan term. That translates to a total interest cost of $2,598.

In contrast, if Borrower B takes the same loan with a 6.99% APR — the lowest rate — and a three-year loan term, the borrower has a $309 monthly payment. Borrower B’s monthly payment is higher than Borrower A’s, but the total interest paid over the loan’s life span is only $1,114, less than half of what Borrower A will pay over five years in interest.

Now, let’s say Borrower C picks a $255 monthly payment for a five-year, $10,000 loan that carries an 18.24% APR, the highest rate. The total cost of the loan is $15,301, with $5,301 paid in interest — more than half of the loan principal and $4,187 more than Borrower B will pay. This is the most expensive loan option offered by Earnest, but the monthly payment isn’t the highest.

Borrowers A and C have the same five-year loan term, but because they qualify for different APRs, Borrower C ends up paying about $2,700 more in interest, or more than twice of what Borrower A pays in interest on the loan, even though their monthly payment amounts are closer.

 

Earnest personal loan

Scenario

Loan amount

Loan term

Monthly payment

APR

Total payment

Borrower A

$10,000

5 years

$210

9.49%

$12,598

Borrower B

$10,000

3 years

$309

6.99%

$11,114

Borrower C

$10,000

5 years

$255

18.24%

$15,301

Monthly payment vs APR: What should I focus on when shopping for a loan?

Your monthly payment doesn’t really tell you much about your loan. If you focus only on whether you can afford a loan on a monthly basis, you may be vulnerable to sneaky sales tricks that make it seem like you’re getting a good deal when you’re really not.

When you borrow money, If you are looking for nothing but a monthly payment that will fit your monthly budget, the easiest way is to stretch out the loan over a few more years. Instead of a two-year loan, you may take a five-year loan with lower monthly payments but a higher APR. Unfortunately, by doing so, you will end up paying more for borrowing money over the life of the loan.

Instead of settling on a monthly payment, you should look at the APR and the long term. Lower APRs on the same loan amount always mean lower interest payments. Although you won’t get the lowest monthly payment with the shortest-term loan, you will spend less in the end.

How do I reduce loan costs?

Improve your credit

Before you shop for a loan, check your credit score. Lenders offer better terms and lower rates to borrowers with higher credit scores because they are less likely to default on their debt. A recent LendingTree study estimated that someone with a fair credit score paid $29,106 more than someone with a “very good” credit score for the same $234,437 mortgage loan and $5,629 more in interest for the same $5,265 credit card debt. LendingTree is the parent company of MagnifyMoney.

If you have a subprime credit score, you can save money on loans by improving your credit score. The key to increasing your score is to make on-time payments on bills, keep your credit utilization ratio at or below 30%, have a mix of credit accounts and don’t apply for too many loans too frequently. Read more about how to improve your credit score.

Pay off your debt faster

If you have already taken on an expensive loan and if your lender doesn’t charge prepayment penalties, you can reduce your interest payment by paying off your debt fast. There are two ways to save money: pay extra each month or make a large lump-sum payment when you get a windfall.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Personal Loans

Need Cash Fast? Compare Emergency Loan Options

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.

A financial emergency can strike at any time, and you may suddenly find that you need an abundance of cash — fast. Unfortunately, not everyone is able to get through these situations without borrowing money.

Tens of thousands Americans are living paycheck to paycheck. According to a recent consumer expectations survey by the New York Federal Reserve, one in three Americans say they wouldn’t be able to come up with $2,000 within a month to cover an unexpected expense.

If you don’t have an emergency fund, what do you do when you get hit by an unexpected medical bill or your car breaks down? We give you options for finding money quickly if you need it right away, and options if you can afford to wait.

When you need money in 1 or 2 days

Credit cards

If you don’t need cash, your credit card could be a way for you to handle an emergency almost instantly. As expensive as credit cards are, the APRs are generally not going to be too much higher than 30%.

“It’s not ideal,” Chris Dlugozima, a financial wellness expert at GreenPath, a nonprofit debt and consumer credit counseling service that operating in all 50 states. “But if it comes down to a credit card or a payday loan that’s charging 500% interest, it’s sort of the lesser of two evils.”

A credit card can be a quick fix for a one-off emergency. However, if you routinely fall behind on bills, you should consider turning to your credit card with caution. The double-digit interest rate will quickly increase the amount you owe if you’re not able to pay the balance off in full on time.

Credit Cards

Pros

Cons

It allows card holders to access funds quickly.

High APRs, averaged at 16%.

There may be flexibility if you struggle with credit card debt. For instance, you could try to work out a repayment plan with your credit card company.

Your debt can quickly snowball if you keep getting into credit card debt for emergencies.

APRs are lower than those of credit card cash advances.

Credit card cash advances

In a time-sensitive situation, a credit card advance allows you to borrow cash against your line of credit. You request the money at an ATM with your credit card and a cash advance PIN, in person at a bank, or with convenience checks you make out to yourself and cash.

While they are relatively easy to obtain in emergencies, cash advances typically have higher APRs than regular purchases and they carry fees (3% to 5% of the money borrowed). Unlike a regular purchase, where interest doesn’t start to hit unless you don’t pay the balance, interest starts accruing right away when you advance money.

It can be a costly way to borrow money, but if you think a cash advance is the best option for you, make sure you pay the advance off as quickly as possible.

Cash Advances

Pros

Cons

It allows card holders to access cash quickly.

Higher APRs than normal— usually up to 30%+.

There is a service fee and possibly an ATM fee.

Your cash advance credit limit may be different than your credit limit for purchases. For example, a bank may give you a total credit limit of $5,000 but limit you to using $2,500 of it for a cash advance.

Signature loans

If you have relatively good credit and a good relationship with a bank, you can try to get a signature loan or a personal loan in an emergency. Your local community bank, credit union, or a major retail bank might be willing to work with you in this situation.

A signature loan is an unsecured form of borrowing, and its interest rates range from 8% to 15%, depending on your credit and the relationship you have with the bank. It usually has shorter terms than other personal loans, ranging from just a few months to 4 to 5 years, on average.

The application and approval process can be quicker because it’s a shorter-term, less risky loan. To apply, you must submit qualifying financial documents, including proof of income and employment.

Signature Loans

Pros

Cons

The underwriting process can be quick.

APRs are higher than collateral-based loans.

They carry lower APRs than credit cards.

There’s a lack of flexibility after you take out a loan if the emergency is on-going and you need to borrow more.

You will know how much to budget for debt repayment every month.

Payday loans and auto title loans

Payday and auto title loans are high-cost loans that can be obtained easily and quickly from storefront or online lenders. Consumer and financial experts strongly recommend borrowers steer clear of such loans because they are designed to profit based on borrower’s inability to repay.

Payday loans are small-dollar personal loans that become due in a lump sum on your next payday. A typical two-week payday loan with a $15-per-$100 financing fee translates to an annual percentage rate of almost 400%. In comparison, the benchmark APR for affordable small loans is 36%. If you can’t repay on the next payday, you can roll over your debt and incur another $15 fee — that’s when a debt trap begins.

Of the 2,900 payday loan complaints received by the Consumer Financial Protection Bureau in 2017, 30% were about unexpected fees and 15% on their unaffordability.

A title loan is a secured loan, and you have to put up your car as a collateral to get it. Title lenders charge an average of 25% as a monthly financing fee, which adds up to an APR of at least 300%, according to the FTC. If you can’t repay the loan at all, you risk losing your car.

“You should try everything else,” said Juan Guevara, a certified financial planner based in Colorado. “And if there’s absolutely no other way to do anything, think about those shorter term loans.”

If these risky loans are your last resort to cover an emergency, be sure to pay off the debt in the shortest term possible to avoid getting caught in a debt trap or losing your car.

Payday/Title Loans

Pros

Cons

The underwriting is both weak and quick.

They are extremely expensive loans with triple-digit APRs.

Borrowers may risk getting caught in a debt trap if they can’t repay payday loans.

Borrowers may lose their cars if they can’t pay off the debt.

Alternatives

Negotiate with your creditor

When you are in a financial emergency, the first step is to try to negotiate with your creditor before borrowing money. Before a bill comes due, talk to your creditors and explain the circumstance. If you need a few more days to come up with the money, they’re way more likely to work with you then you might realize. Many utility companies and hospitals offer lower interest — even 0% — payment plans to make sure that you can pay past due balances over the course of several months.

Ask for help from friends and family

If the negotiation doesn’t work out, ask your family or friends and see if they can loan you money before turning to risky, expensive loans.

“There might not be an interest rate attached to that but you also got to be careful that you could be damaging a relationship there if you don’t end up paying [the debt] back,” Guevara said.

When you need money in 1 or 2 weeks

“Payday alternative” loans from credit unions

If you have a little bit more wiggle room, plenty of community banks and credit unions offer small-dollar loans with much lower interest rates than payday or title loans. These types of financial institutions are much better regulated than high-cost lenders.

For example, all federal credit union loans have an 18% interest cap, with one exception — Payday Alternative Loans, which have interest rates capped at 28%.

“Payday alternative” loans

Pros

Cons

They are safer loans compared to unaffordable payday lending.

They carry fairly high APRs.

The loan term is short, ranging from one to six months.

It takes a while to obtain the loan. Borrowers must be members of the federal credit union for at least one month.

The loan amount is small, typically up to $1,000.

Personal loans

Personal loans offer perhaps the greatest flexibility when an emergency strikes. You can borrow money at a fixed interest rate over a fixed amount of time, then you pay a fixed monthly payment until your loan is paid off.

The process to apply for a personal loan is similar to applying for a credit card or auto loan: The lender will run your credit and offer you a certain rate based on your creditworthiness. Besides your credit score, you’ll need to prove that you have the ability to repay your loan, usually with pay stubs or other evidence of employment.

A personal loan is a form of unsecured borrowing, which means its interest rates are generally higher than secured loans, such as a mortgage. The higher your credit score, the lower rate you may qualify for. Nationally, a personal loan with a 24-month loan term carries an average 10.31% interest rate. You can apply for a personal loan from banks and online lenders. Use our table below to compare personal loan options to find the best option!

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.

Compare offers and shop for a personal loan on MagnifyMoney’s personal loan online market.

Personal loans

Pros

Cons

There are a variety of loan amounts and terms to choose from.

APRs can be high if your credit is not great.

You know exactly how much you will ultimately pay in interest.

If you have a situation where you don't know exactly how much cash you're going to need, a personal loan can be limiting since you must apply for a set amount of money.

You request a certain amount of money to cover an emergency, and so there's no temptation to borrow additional funds later.

Credit cards with 0% intro APR

If your credit score is good, apply for an introductory 0% interest credit card. Balance Transfer credit cards let you wait as long as 21 months to pay off your balance without accruing interest.

A balance transfer card is a solid option for those with a tall stack of credit card debt. It allows users to move debt from a high-interest credit card to a card with a promotional 0% APR period (not through same card issuer). As a result, you could pay less in interest than you would if you kept the debt where it is. But if you can’t repay your debt before the promo period ends, the credit card company may retroactively charge you all the interest that they would’ve charged during the intro period.

Credit cards with 0% intro APR

Pros

Cons

You can borrow money for 0% interest for a period of time.

If you can’t repay your balance within the 0% interest period, you may be hit with all the interest you would have accrued during the intro period — known as deferred interest.

Some cards charge $0 intro balance transfer fees, allowing you to cut costs.

You don’t know exactly how much money you will ultimately pay in interest.

The new card may offer a sign-up bonus and/or long-term perks, although this may not be a concern when you are in an emergency.

You need a good or excellent credit score to qualify for the best offers (generally 700 and up).

If you are in an ongoing financial tragedy, a credit card gives you flexibility in terms of the amount of money you can borrow.

In most cases, you have to pay a balance transfer fee — typically 3% of your total transfer amount.

401(k) loans

A 401(k) loan allows you to borrow up to $50,000 or half of the total amount of money in your account, whichever is less. Most 401(k) plans offer such loans.

The funds are taken directly out of your 401(k) account balance and a repayment plan is created based on the amount you borrowed and the interest rate you agreed to. When you make payments, the money goes back into your 401(k) account, typically through an automatic payroll deduction. The maximum loan term is usually five years, and you’ll need to make payments at least quarterly.

If you fail to repay the loan on deadline, the money withdrawn is counted as taxable income and the IRS will charge you a 10% early withdrawal penalty if you are under age 59½.

401(k) loans

Pros

Cons

You can get money relatively quickly without any credit check because you are essentially borrowing from yourself.

If you default on the loan, the money you borrowed will be taxed and hit with a 10% penalty unless you’re already age 59½ or meet other special criteria.

You have a long time to repay the loan.

The money you borrowed is not participating in the market and you may lose out on compound interest. It affects your portfolio performance over time.

The interest you pay back to the account is money put back in your retirement fund.

Alternatives

Asking your employer for help

While it’s not common, some employers may offer paycheck advances or financial help in other ways to help you get through an emergency. For instance, some employers have an Employee Assistance Program (EAP), which are designed to help resolve problems workers encounter in their life, financial and personal alike.

If your company doesn’t have an EAP, you can still ask if they can provide some type of loan or even give you a raise if you’ve been doing a good job, Guevara suggested. Even if they decline your request, it doesn’t hurt to ask.

Negotiate your charges

As we discussed earlier, negotiating is probably one of the best tools you have when an emergency arises. Explain your situation to your creditor and they may work out a payment plan with you or simply extend your due date, depending on the specific situation.

When you need money in 1 or 2 months

Home equity loans or HELOC

When you have time on your side, you may leverage the equity in your home to cover short-term emergency needs. You can take the time time to shop around with different lenders for a home equity loan or a home equity line of credit (HELOC). Both loans are secured by your house.

A home equity loan is a fixed-rate installment loan. The borrower gets a one-time lump sum. It’s repaid in equal monthly payments over a fixed period of time — usually in 10, 15, 20 or 30 years. It’s the second mortgage on your house.

A HELOC, on the other hand, is a revolving credit line. How much you can take out will depend on your home’s value, your remaining mortgage balance, your household income and your credit score. HELOCs typically have variable interest rates, so it’s important when you’re applying for a HELOC to understand exactly how much can the interest rate go up.

You can apply for a HELOC and leave it open, allowing you to draw funds from it as needed; it can stay open for up to 10 years. As you pay off the principal, your credit gets replenished and you can use it again. You only pay interest during this time period. After the line expires, you enter the repayment period, when you’ll repay the remaining balance as well as any interest owed, if there is any.

Some financial planners advise their clients to open HELOCs even they are not planning to use them, just in case something comes up in the future. Most lenders will let you borrow up to 85% of your home value, minus your outstanding debt.

The appraisal and underwriting process for both loans takes one to two months. Qualifications vary, but most lenders will check your credit and debt-to-income ratio. You should expect to pay closing costs and other fees upfront, which range from $500 to $2,000.

Interest rates on both loans are not that different from a regular mortgage rate, which is lower than other unsecured loans.

Home equity loans or HELOCs

Pros

Cons

Both have significantly lower APRs compared to other unsecured borrowing options, such as credit cards or personal loans.

You have to make monthly payments and you don't have a 0% interest promo period.

You have a long time to repay the loan and the monthly payments are usually quite small.

Both types of loans almost always have closing costs and other fees.

With a home equity loan, your monthly payment is predictable because your interest rate will be fixed.

If you take out a HELOC with a variable rate, your monthly payments may change.

You can withdraw funds as needed with a HELOC.

Defaulting on either loan could result in a foreclosure.

Alternatives

Sell some assets

If you have one or two months to come up with funds, you may want to see if you can generate some income by selling some of your assets, either doing a yard sale or selling your possessions on eBay.

A key takeaway

When emergencies arise and you don’t have rainy day cash, don’t panic — you should first and foremost try the cost-free ways to bridge a financial shortfall. If you can’t borrow money from friends and family or work out a payment plan with your creditor, then consider the least expensive loan that comes with the lowest level of risk after determining how much money you need and how much time you have to come up with the funds. Don’t focus just on the monthly payment, but the interest rate and the loan term as well.

After recovering from this current financial emergency, start planning for the next one. Life will inevitably throw a curveball at you again, be it unexpected job loss or an astronomical hospital bill. If you start putting money away now, you will have the money to deal with the next financial setback.

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Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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Consumers Pay a Price for Trump’s Tariffs on $200 Billion in Chinese Imports

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President Donald Trump made good on his threat of imposing tariffs on $200 billion worth of Chinese-made goods when he announced Monday that a 10% duty will take effect Sept. 24, rising to 25% by the beginning of next year.

The silver lining: The later timing avoids Christmas morning meltdowns from kids who missed out on trendy electronic gadgets due to increased prices. The bad news? This may not be the end of the trade war. China reacted to Monday’s announcement with talk of retaliation, which led President Trump to threaten further tariffs on another $267 billion worth of Chinese imports. That would bring the total value of Chinese goods subject to tariffs to more than $500 billion, virtually all Chinese imports.

Tariffs Explained: What They Are, How They Work, Why It Matters

For now, the administration removed nearly 300 items from the original proposed list, a nod to U.S. companies’ concerns since Trump first threatened tariffs this summer. Popular consumer electronics products such as smartwatches and Bluetooth devices are among those that dodged the higher tariffs. Some consumer safety products, such as bicycle helmets, baby car seats and playpens also were taken off the list.

It could be worse for consumers, but …

The tariffs account for nearly 40% of the $505 billion in Chinese items the U.S. imports annually. Although they will start at a more subdued 10% level, eventually, American consumers will keenly feel the pain from the swath of stiff tariffs on thousands of goods as varied as fish, baseball gloves, luggage, dog leashes, furniture, lamps and mattresses.

“What the tariffs will do is basically cause many people to pay more for whatever they buy in the stores,” said Gary Hufbauer, economist and nonresident senior fellow at the Peterson Institute for International Economics. “It could be worse … 25% is a lot different than 10%.” The PIIE is a nonprofit, nonpartisan economics research institution in Washington, D.C.

“[They thought they might have to pay] $8 for that new T-shirt, they may pay $7, whereas previously it was $5,” Hufbauer said, giving an example.

Before excluding the 300 items, almost 23% of the targeted items on Trump’s $200 billion list were consumer products, according to a July PIIE analysis. By comparison, consumer products made up just 1% of the initial $50 billion worth of Chinese products Trump put into place earlier in the summer.

Why Trump takes a step back

Delaying the full 25% duty is an attempt to mitigate potential political and economic consequences ahead of the midterm election, said Hufbauer.

For one, Hufbauer said, Trump does not want to see the stock market tank before November.

“Many of his supporters own shares, and they would blame him because they thought the stock market was dropping because of his foreign policy, his trade wars,” Hufbauer said.

The U.S. stock market on Tuesday closed higher as investors shrugged off escalating trade tensions.

There is also a concern that if high tariffs are slapped on Chinese imports, American manufacturers that import components from China may have to pay higher prices for those parts or worse, lay off workers as a result. Even though consumers don’t buy parts directly, they end up being incorporated or assembled into products that consumers eventually buy. Manufacturers must either pass along the increased cost to consumers or find other ways to cut expenses.

“Those stories are not good for a person going into an election,” Hufbauer said.

What’s at stake

When the tariffs are at the 25% level, economists estimate that consumers will have to bear about half — 12.5% to 15%— while the rest is absorbed by the producer or manufacturer.

Those who have purchased washing machines this year may have already understood how tariffs affect consumer product prices. The price of imported washing machines shot up 16.4%, three months after the Trump administration imposed 20%-50% tariffs in February, according to the American Enterprise Institute, a Washington, D.C.-based conservative think tank.

There are also indirect impacts, which may emerge more slowly, as 47% of the $200 billion tariff list comprises tens of billions of dollars of intermediate inputs — those parts and components of final products we mentioned earlier — imported from China. Consumers will likely have to spend more on items assembled with parts imported from China that are subject to high tariffs.

What’s next

Trump has been tough on trade since he was on the presidential campaign trail. He has accused China of practicing unfair trade policies, such as forcing U.S. firms to transfer technology to Chinese counterparts. Supporters of the new tariffs hope it will persuade China to play fairer on trade. Even critics agree that China has in some ways stymied growth in U.S. industries, but they also criticize Trump’s protectionist trade policy and say it will ultimately hurt industries and individuals in both countries.

It’s possible Trump will act on his rhetoric and continue to wage a trade war against China, economists said. But Hufbauer thinks Trump is trying to pressure China into making concessions ahead of the upcoming trade talks between Beijing and Washington.

If Beijing is willing to make concessions on some of the main issues Trump raised, the trade tensions could be dialed back a bit, Hufbauer said. “I don’t think we’re going to get into a happy friendly time,” he said. “But I think we could reduce the confrontation a lot if China decides to make some concessions.”

However, if 25% tariffs are imposed on total trade in both directions, then we would enter a full-blown trade war we haven’t seen since the 1930s. In that case, economists said American companies that rely on global supply chains will hold off on investment decisions due to the uncertainty around global trade, which will negatively affect the U.S. economy and eventually cause the unemployment rate to swing up.

“Using the terminology of war, Trump’s misguided trade war is generating lots of collateral damage and friendly fire that is putting [America’s] companies, workers and consumers at great risk,” said Mark Perry, an economics policy scholar at the American Enterprise Institute and professor of finance and business economics at the University of Michigan-Flint.

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.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at shenlu@magnifymoney.com

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