MagnifyMoney Fine Print Blog and NewsTue, 23 Jul 2019 14:40:24 +0000en-CA hourly 1 You Still Get a Piece of the Wells Fargo Settlement?, 23 Jul 2019 12:24:33 +0000 Wells Fargo settlement is still being distributed to eligible customers, but the deadline for customers to get a piece of the settlement passed as of July 2018. So the short answer is no, you cannot still get a piece of the Wells Fargo settlement. That said, the Wells Fargo settlement is an important example … Continue reading Can You Still Get a Piece of the Wells Fargo Settlement?

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The Wells Fargo settlement is still being distributed to eligible customers, but the deadline for customers to get a piece of the settlement passed as of July 2018. So the short answer is no, you cannot still get a piece of the Wells Fargo settlement.

That said, the Wells Fargo settlement is an important example of people working together to bring a big institution to justice for its bad actions. Studying it can provide lessons in case you ever find yourself eligible to take part in a similar class-action lawsuit.

“Class actions are an important tool to compensate harmed consumers and hold companies accountable,” said Matthew Preusch, attorney at Keller Rohrback LLP, part of the team that represented consumers in the Wells Fargo lawsuit. “You should always be on the lookout for official court-approved notices advising that you be entitled to compensation.”

What is the Wells Fargo settlement?

The Wells Fargo settlement exists to compensate current and former Wells Fargo customers who were victims of fraud when the bank’s employees opened up accounts in their names without consent. Some customers who purchased identity theft protection were also part of the suit.

“Wells Fargo employees opened unauthorized lines of credit, savings accounts and checking accounts for a lot of customers ,” explained Ken Tumin, founder and editor of DepositAccounts, a subsidiary of LendingTree. “They did it to meet their sales targets.”

All in all, Wells Fargo employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers. Once it was discovered, a class-action lawsuit was launched to go after Wells Fargo on behalf of the customers affected. This means there are just a few plaintiffs who sued Wells Fargo, but additional “class members” can join the suit.

In July 2017, Wells Fargo settled the lawsuit, agreeing to pay $142 million to victims in the form of cash benefits. This amount was intended to reimburse any fees that people were charged for the unauthorized accounts, and compensation for any potential harm done to people’s credit related to the unauthorized accounts. Any leftover money will pay additional compensation on a per-account basis.

In addition to the settlement for the victims, Wells Fargo was also hit with a $100 million fine to the Consumer Financial Protection Bureau’s (CFPB) Civil Penalty Fund; an additional $35 million penalty to the Office of the Comptroller of the Currency; and another $50 million to the city and county of Los Angeles.

Besides the troubles stemming from the fraudulent accounts scandal, in December 2018, Wells Fargo also agreed to pay a $575 million settlement with the attorneys general of all 50 states and Washington, D.C. for tricky practices with their auto loan and mortgage products.

Who was covered by the Wells Fargo settlement?

According to the official Wells Fargo settlement website, there are three main qualifications for people to be a part of the settlement:

  • If you had one or more unauthorized Wells Fargo accounts opened in your name between May 1, 2002, and April 20, 2017.
  • If you had one or more unauthorized Wells Fargo accounts applied for in your name between May 1, 2002, and April 20, 2017, regardless of whether that account was opened.
  • Or, if you obtained identity theft protection services from Wells Fargo between May 1, 2002, and April 20, 2017.

How do you get restitution under the Wells Fargo settlement?

The deadline to file a claim was July 7, 2018, so only those who are already signed up will be part of the settlement. If Wells Fargo had a record of a complaint about Unauthorized Accounts that you made to Wells Fargo, the Office of the Comptroller of the Currency or the CFPB, you might have been automatically enrolled in the class-action settlement. (If you’re not sure if you were included in the settlement, you can request more information by calling 1-866-431-8549.)

“For this case, Wells Fargo did send out letters to many that were affected with instructions about how to file claims,” said Tumin. The lesson here is that “[….] it makes sense to pay attention to what you receive from your institutions,” he added.
For those who did pay attention to their mail, or for those who were automatically enrolled, getting cash in hand from the settlements is expected to take a very long time. “There won’t be anything paid out until appeals have been exhausted, and that can take many years,” said Tumin.

What’s more, payment to class members can be made only after class members’ damages are calculated in accordance with the settlement. Then, the claims have to be processed and the damages must be determined based on credit bureau data analysis. At that point, checks can begin to go out to all eligible class members at the same time.

Do I need to hire a lawyer to participate in the Wells Fargo settlement?

The courts have already appointed Keller Rohrback LLP to represent all class members as “Class Counsel.” Anyone who is part of the lawsuit will not be charged a fee. If you did participate in the settlement, however, that also means you gave up your right to sue Wells Fargo and related parties on your own for related claims.

Those who opt to hire their own lawyers or pursue their own lawsuits will be treated separately from the class-action suit.

Lessons learned from the Wells Fargo settlement

Whether or not you’re involved in the Wells Fargo settlement, it’s a good reminder that keeping tabs on your financial life is important. “It shows how beneficial it can be to get online access to your accounts and keep track of them,” said Tumin. That way, you can quickly spot anything that is amiss, such as an additional, unauthorized account with one of your banking institutions.

The other big takeaway is that when your consumer rights are on the line, there are protections in place and by going through the appropriate channels, there will be consequences for the offending institution.

Should you ever find yourself in the situation of receiving a notice that you may be eligible for a class-action lawsuit, take the time to review it carefully, says Tumin. “Claims forms can be a hassle and the benefit is often small in terms of money victims sometimes see,” he said. “But, you can look at it as an indication that a megabank did something wrong and you were able to have a little bit of justice.”

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What Do Mortgage Loan Officers Worry About Most? Not Your Credit Score, 23 Jul 2019 07:21:09 +0000 a nation, we obsess over credit scores. Once hidden in the computer terminals of banks, they’re now available for free to you via many providers on the internet. But in reality, getting a loan takes into account much more than just your credit score. And nowhere is that more clear than when you try … Continue reading What Do Mortgage Loan Officers Worry About Most? Not Your Credit Score

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As a nation, we obsess over credit scores. Once hidden in the computer terminals of banks, they’re now available for free to you via many providers on the internet. But in reality, getting a loan takes into account much more than just your credit score. And nowhere is that more clear than when you try to get a mortgage or refinance an existing one.

The process is usually murky, but a 2014 survey of loan officers by FICO sheds some light on what really matters.

The survey asked what factor would make a loan officer most hesitant to approve a mortgage, and the No. 1 answer took the lead by a wide margin:

  • High debt-to-income ratio 59%
  • Multiple recent applications 13%
  • Low FICO score 10%
  • Frequent job changes 9%
  • Lack of savings 8%

Clearly, your debt-to-income ratio is key.

Why is debt to income a bigger factor than your score?

It is crucial that a borrower be able to afford a loan. What you pay every month toward your house and other obligations compared to what you earn is the most important factor. A FICO score only tells whether you are a reliable payer, not whether you can afford a house.

The loan officer can look past a less-than-perfect FICO score if you’re buying a house you can truly afford. Being able to afford a house means keeping your debt-to-income ratio below 36% when counting all of your monthly debt obligations, including credit cards, car loans, student loans and housing expenses.

Officially, conforming loans can be secured with debt-to-income ratios as high as 45% or so, but that’s cutting it close, unless you have substantial savings or bonuses that don’t get counted in the income calculation. Ideally, you shouldn’t be going any higher than approximately 35%.

Think about it this way: If you’re pulling in $5,000 a month before taxes, a 45% debt-to-income ratio means you’re paying $2,250 a month servicing your mortgage and other debt. With a 35% tax rate, you’re left with just $1,000 in cash each month for other expenses.

Yes, you may get a tax benefit at the end of the year for deducting interest, if you itemize, but the reality is you’re pretty house poor in this situation, even if you have a perfect credit score.

At a 35% debt-to-income ratio, you’ll have $1,500 a month in cash for your other expenses. That’s 50% more left to spend than with a 45% ratio.

Will a better score help at all?

Your credit score can definitely help when it comes to getting a better mortgage rate.

Here is a national sample of 30-year fixed mortgage rates on a $300,000 loan by FICO score as of May 29, 2019 (these numbers will change frequently, but this should give you a general idea of how your score might affect your rate):

  • 760- 850: 3.701% $1,381 / month
  • 700-759: 3.923% $1,419 / month
  • 680-699: 4.100% $1,450 / month
  • 660-679: 4.314% $1,487 / month
  • 640-659: 4.744% $1,564 / month
  • 620-639: 5.290% $1,664 / month

The difference between a marginally excellent credit score (700-759) and a truly excellent one (760+) is about $38 a month on a $400,000 mortgage. That’s around $494 a year, and $14,820 over the life of the mortgage.

Don’t take on new credit

One thing you should understand if you’re in the market for a mortgage is that you should be careful about applying for new credit.

Loan officers don’t want to see a lot of recent credit applications, and each one can temporarily ding your FICO score five or 10 points. So if you’re on the borderline of 760, 700 or 680, it’s best to avoid opening any new credit accounts for about six months before getting a mortgage. Otherwise a couple of cards could end up ultimately costing you in extra payments.

And if you have a borderline score, pay as much debt off as you can before applying.  This will help your debt-to-income ratio, and improve your score. Just make sure you do it at least one month before applying for the mortgage, as banks typically report data to the credit bureaus only once a month.

And don’t be afraid to shop around for the best mortgage rate; just make sure you do all your shopping in a short period of time for the smallest impact to your score. Multiple mortgage inquiries during one shopping period (typically 30 days or less) only count as one inquiry on your credit report.

Need help figuring out which lender to go with? LendingTree, MagnifyMoney’s parent company, has a handy mortgage shopping tool. You may be matched with lenders who want to lend to someone with your score and income. You can start the mortgage comparison process by visiting LendingTree’s website:



on LendingTree’s secure website

NMLS #1136 Terms & Conditions Apply

Bottom line

you don’t need a perfect FICO score to qualify for a mortgage, or even to get a fair rate. But you do need to be looking for a home you can truly afford based on your income.

While you may qualify for a bigger, better house than you thought you would, it doesn’t mean you’ll be able to afford your current lifestyle with that bigger payment.

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The Best Online Savings Accounts in July 2019, 23 Jul 2019 04:05:03 +0000 July 23, 2019 There are no excuses for sticking with a low-rate savings account these days. Online savings accounts provide consumers with interest rates that are way above those offered by conventional banks. The best online savings accounts can easily earn you an APY of or greater, while the average rate offered by a … Continue reading The Best Online Savings Accounts in July 2019

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The Best Online Savings Accounts

Updated July 23, 2019

There are no excuses for sticking with a low-rate savings account these days. Online savings accounts provide consumers with interest rates that are way above those offered by conventional banks. The best online savings accounts can easily earn you an APY of 2.15% or greater, while the average rate offered by a traditional brick-and-mortar bank remains at a paltry 0.26%.

If you’re still skeptical about switching to an online bank, consider the facts. Your funds are just as safe stashed with an FDIC-insured online bank as they would be with the bank branch on Main Street, and you’re likely to get better technical support with an online-only bank website and app. Many offer round-the-clock customer support and online chat features that make it easy to resolve issues without needing to visit a branch in person. Along with higher rates, you may end up saving on the cost of the account. With lower overhead costs, online banks typically charge lower fees.

Every month we review and compile the best savings account offers from online banks. Our ranking factors in features such as a higher-than-average interest rate, no minimum balance requirement, and superior ATM access.

1. High Rate: Goldman Sachs Bank USA – 2.15% APY, no minimum balance (but no ATM access)

High-yield Online Savings Account from Goldman Sachs Bank USA

Our advertiser Marcus by Goldman Sachs, the consumer bank of Wall Street giant Goldman Sachs, offers a 2.15% APY on deposits. There isn’t a minimum balance requirement to earn the APY and there are no transaction fees. Upon opening the account, you can deposit funds via electronic transfer, wire transfer, or deposit by check. You can get access to your funds via electronic transfer or wire transfer. Goldman has been investing heavily in Marcus, its online consumer bank. Marcus is already offering some of the best savings accounts and personal loans in the market, and further expansion is expected. The savings account has consistently been paying one of the highest rates in the market. With a 2.15% APY, you can get one of the highest rates in the market from a well-known brand. The maximum deposit is $1,000,000 and deposits are FDIC insured up to the $250,000 limit.


on Goldman Sachs Bank USA’s secure website

Member FDIC

2. High Rate: Barclays Bank – 2.10% APY, no minimum balance

Online Savings Account from BarclaysBarclays is a large, old British bank, based in London and with more than 325 years of history. Although Barclays is huge in the United Kingdom, it is a challenger brand in the US. Barclays offers savings products with highly competitive rates. These deposits are used to fund their rapidly growing American credit card business. The online savings account has a 2.10% APY with no minimum balance to open and no monthly fees. Your deposits are FDIC insured up to the legal limit. The Barclays website has a good look and feel. And you can have the confidence of keeping your money with one of the world’s largest and oldest universal banks.


on Barclays’s secure website

Member FDIC

3. High Rate: American Express National Bank – 2.10% APY, no minimum balance (and no fees)

High Yield Savings Account from American Express National BankOur sponsored advertiser, American Express National Bank, offers a Personal Savings account, which earns a 2.10% variable Annual Percentage Yield (APY) as of 12/20/2018. The account charges no monthly fees and requires no minimum deposit, making it an affordable account to open. You must fund your account within 60 days of applying for the account, and the FDIC insures your deposits up to $250,000. Overall, the account is a great option for anyone who wants the flexibility of earning a high interest rate on a sum of money you’ve stashed away, minus the withdrawal restrictions of a certificate deposit.


on American Express National Bank’s secure website

Member FDIC

4. Top Choice: Ally Bank – 2.10% APY, no minimum balance and you can get a free checking account

Online Savings Account from Ally BankAlly is a bank without branches that has consistently been paying high interest rates on savings accounts. Ally has no minimum balance requirement and will pay 2.10% APY. Even better, you can open a free checking account (also with no minimum balance requirement and eligible for the 1% cash back offer). This makes access to your savings account incredibly easy – because you can transfer funds online (or via the app) and have immediate access via checks, debit cards and ATMs. With an Ally account, you will have access to their full suite of expanding (and market-leading) products.


on Ally Bank’s secure website

Member FDIC

5. High Rate: Synchrony Bank – 2.15% APY, no minimum balance, (and ATM access)

High Yield Savings from Synchrony BankSynchrony Bank pays a healthy 2.15% APY. There is no minimum balance requirement and no monthly fee. In addition to the great rate, you can get an ATM card. Most internet-only banks require you to transfer funds electronically, which can take a few days. If you ever need quick access to your funds, the ATM card makes access easy. You might not recognize the Synchrony brand in the banking space, but it is a large, well-capitalized business. Synchrony used to be a part of General Electric (GE), and was spun out as a separate company. Unfortunately, the digital experience is not the best, but they now have a mobile banking app.


on Synchrony Bank’s secure website

Member FDIC

6. High Rate for big balance savers: Customers Bank – 2.50% APY, $25,000 to open

High-Yield Savings Account from Customers BankCustomers Bank was established in 1997 and has grown to be known as a “super-community bank” in Pennsylvania, Washington D.C., Illinois, New York, New Jersey, and New England. The bank has over $9 billion in assets, making it a mid-sized bank. Currently, Customers Bank is offering an outstanding rate on its High-Yield Savings Account. If you can deposit a minimum of $25,000 into the account, this bank will reward you with a 2.50% APY. You’ll have to maintain this balance to continue earning the high rate. You must fund the account within 30 days of receiving application approval. This account doesn’t come with any monthly fees. A few items to be aware of: this account doesn’t come with checks or a debit card. Customers Bank does have ACH transfer limitations of $5,000 per day and $50,000 per statement cycle. You can easily open this account online and manage the account online or Customers Bank’s mobile banking app. Deposits are FDIC-insured.


on Customers Bank’s secure website

Member FDIC

7. High Rate: CIBC Bank USA – 2.39% APY, $1,000 to open

CIBC Palladian Savings Account from CIBC USACIBC Bank USA is the U.S. division of a Canadian based bank. This division was established in 1991 and has since acquired over $27 billion in assets. Currently, CIBC Bank USA is offering an online-only savings account with a competitive APY of 2.39%. You’ll only need $1,000 to open the account. While there isn’t a monthly maintenance fee, you may be charged $10 if you make more than six transactions per statement cycle. CBIC Bank USA does have a mobile banking app, but make sure that you download the app for the U.S., not Canada.


on CIBC USA’s secure website

Member FDIC

8. High Rate: CIT – 2.30% APY, $100 to open

Savings Builder from CIT BankCIT is a very large bank that you probably never heard of. It has more than $50 billion of assets and makes loans (and leases) to middle market companies and small businesses. To fund those loans, CIT operates an internet-only bank that pays some of the highest interest rates in the country. While CIT isn’t as big as other online banks, they’re currently offering a very healthy APY of 2.30% on their Savings Builder account. You only need $100 to open the account, but you’ll need to meet one of two requirements to earn the high rate. We really like the options that CIT Bank has put in place to earn this high APY. The two ways to continue earning this high rate are:

  1. Make a monthly deposit of $100 or more into this account
  2. Maintain a daily balance of $25,000 or more

Even better: there aren’t any monthly maintenance fees and interest compounds daily. Deposits are FDIC insured.


on CIT Bank’s secure website

Member FDIC

9. High Rate: HSBC Direct – 2.30% APY, $1 minimum to open, no minimum balance to earn APY

HSBC Direct Savings from HSBC DirectHSBC Direct is the online division of financial giant, HSBC Bank. Based on the amount of assets HSBC Bank has acquired to date, it is the 14th largest bank in the U.S. While HSBC Direct may sound like a new player to the online banking game, this division was actually around prior to the 2008 financial crisis and offered extremely competitive rates. After the financial crisis, the bank renamed the online division to HSBC Advance and slowly started to decrease its online savings account rates, much like other online banks were doing around that time.

Fortunately, HSBC has decided to reenter the online banking space. Since the initial launch in July of 2018, the bank has consistently increased its HSBC Direct Savings Account rate from 1.70% APY to 2.30% APY. You only need $1 to open the account and the APY will be applied to any balance below $2 million. You may fund the account via ACH transfer and the account can be opened online. You will have to deposit new money to the account, which means that you cannot be a member of the HSBC Group in the United States. The account doesn’t have a monthly maintenance fee and all deposits are FDIC insured.


on HSBC Direct’s secure website

Member FDIC

10. High Rate: Citizens Access – 2.20% APY, $5,000 minimum balance amount

Online Savings Account from Citizens AccessCitizens Access is the online division of Citizens Bank. This division was recently created to provide the best savings rates to consumers. While the online division is brand new, the bank its backed by isn’t. Citizens Bank has been around for a while and has grown to have over $122 billion in assets. While you need to deposit and maintain a minimum balance of $5,000 to earn the 2.20% APY, you’ll be funding an account that comes with no fees. If your balance happens to fall below $5,000, the APY will drop to 0.25%. One downside to this online-only bank is that they don’t currently have a mobile banking app. This means that you’ll have to do all of your banking through their website. Luckily, their website is mobile-friendly.


on Citizens Access’s secure website

Member FDIC

11. Unique Bank + Highest Overall Rate: Fitness Bank – 3.00% APY, $100 minimum to open

Fitness Savings (12,500+ Steps) from FitnessBankFitness Bank is unique and new online bank. It’s a division of Affinity Bank, which has been around since 2002 and has acquired over $318 million in assets. Affinity Bank decided to launch a concept like no other to reward actively fit individuals with the highest APY currently available. While most institutions choose to offer tiered rates based on balance amounts, Fitness Bank offers tiered rates based on the average number of steps you take on a daily basis. To earn the high 3.00% APY, you’ll need to take an average of 12,500 steps or more per day. If you only take an average of 10,000 to 12,499 steps per day, you’ll earn an APY of 2.50% (which is still a great APY). You’ll earn 1.75% APY if you take an average of 7,500 to 9,999 steps per day. Taking an average of 5,000 to 7,499 steps per day will qualify you for an APY of 1.25%. Finally, if you take anywhere between 0 to 4,999 steps on average per day, you’ll only earn 0.50%.

Fitness Bank will track your steps by requiring you to download its Step Tracker app. The bank will then calculate your average steps from the previous month to determine which tier you qualify for. Once the bank determines which rate your activity qualifies you for, you will continue earning that rate for an entire month until the bank recalculates your activity. The activity requirement will be waived for the first month so that you can get your app all set up and start logging in some steps. For this first month, you’ll automatically earn the 3.00% APY.

In terms of actual money, you will need at least $100 to open the account and you’ll need to maintain this balance to waive the $10 monthly maintenance fee. The bank does impose a limit on the amount of money you’re able to transfer in and out of the account via ACH. You cannot transfer more than $15,000 per day in or out of the account. You also cannot exceed more than six certain withdrawals or you’ll incur an excessive withdrawal fee of $10 for each additional withdrawal. In addition to the Step Tracker app, Fitness Bank has a mobile banking app to manage your account.


on FitnessBank’s secure website

Member FDIC

12. High Rate for big balance savers: Northpointe Bank – 2.55% APY, $25,000 minimum balance amount

Ultimate Savings from Northpointe BankNorthpointe Bank is a fairly small institution when compared to some of the bigger banks on this list. However, they’ve quickly accumulated over $800 million in assets. This month, they’ve made it on to our list due to their outstanding APY of 2.55% on their Ultimate Savings Account. In order to earn this rate, you’ll need to maintain a minimum balance amount of $25,000. If your balance drops below $25,000, you’ll still be able to earn a 1.12% APY. If your balance rises above $1 million, the APY will also drop to 0%. There are no monthly fees associated with this account, but there may be a $15 excessive transaction fee if you make more than six transactions per month. Northpointe Bank allows you to easily manage the account via their mobile app.


on Northpointe Bank’s secure website

Member FDIC

13. High Rate: Vio Bank – 2.52% APY, $100 to open

High Yield Online Savings Account from Vio BankVio Bank is the online division of MidFirst Bank, a national private financial institution with over $16 billion in assets. Vio Bank was recently created and is not yet as established as Marcus, Barclays, American Express, Synchrony, and Ally Bank. However, this online bank launched strong with a High Yield Online Savings account offering 2.52% APY on all balances. You only need $100 to open the account. You can fund the account via ACH.

There are a few limitations to keep in mind: incoming ACHs take anywhere between two to five business days to post and the online bank may place a hold your ACH for two or three business days. When you’re ready to transfer funds out of the account, you’ll be limited to $5,000 per outgoing ACH. You’ll also be limited to transferring an aggregate monthly total of $20,000 via outgoing ACHs. As is with every other savings account, you’ll also be limited to making six withdrawals per monthly statement cycle. The good news (aside from the high APY) is that Vio Bank doesn’t charge a monthly maintenance fee. Vio Bank also has a mobile banking app where you can conveniently manage your accounts on-the-go. Also, its website is mobile friendly so it should be fairly easy to do your online banking from a smart phone, as well.


on Vio Bank’s secure website

Member FDIC

14. High Rate: Salem Five Direct – 2.51% APY, $100 to open

eOne Savings from Salem Five DirectSalem Five Direct is the online bank division of Salem Five Cents Savings Bank, a community bank based in Salem, Massachusetts. Salem has been around for more than 150 years and all deposits are insured by the FDIC up to the legal limit. Salem Five Direct also has DIF Insurance, which means that if you have over $250,000 in a Salem Five account, the amount over $250,000 will also be insured by the Depositors Insurance Fund. That’s a huge benefit that not a lot of banks offer.

You only need $100 to open this account, and there are no monthly maintenance fees. However, they do have a few limitations to be aware of. First, according to their online banking agreement, Salem Five Direct limits the dollar amount of their External Transfers to $5,000 per transaction, $5,000 in aggregate per day, and $20,000 in aggregate per month. So, if you decide to have more than one account with them, like their money market account, they’ll look at the aggregate amount of External Transfers conducted from both the savings account and money market account. Second, account holders are limited to six withdrawals per statement cycle due to Federal Regulations. If you exceed the six withdrawal limit, they’ll charge you $10 per additional transaction. Finally, the web and mobile experiences are not great. But, if you give them a call (which we have done), you will get friendly service from a community bank. While this bank does offer one of the best rates for an online savings account, we want you to be aware of their limitations.


on Salem Five Direct’s secure website

Member FDIC

15. Runner-Up: For Small Balance Savers Digital Federal Credit Union – 6.17% APY up to $1k

Primary Savings from Digital Federal Credit Union (DCU)Digital Federal Credit Union (DCU) currently offers a nice account for people who are just starting to save. You can earn an APY of 6.17% with their Primary Savings Account. You will only earn that rate on deposits up to $1,000. Once you have more than $1k, you should consider other accounts on this list. It is a credit union – and your deposits are insured by the NCUA up to the legal limit. Anyone can join the credit union by donating to one of their participating organizations such as Reach Out for Schools, which has a membership fee of $10. You’ll be able to join one their participating organizations when you go to open your account with DCU. DCU is also part of a nationwide CO-OP network that allows their members to have access to shared branches and surcharge-free ATMs throughout the U.S.


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

NCUA Insured

Recap of the best high-yield savings accounts by APY

  • Digital Federal Credit Union – 6.17% APY
  • FitnessBank – 3.00% APY
  • Northpointe Bank – 2.55% APY
  • Vio Bank – 2.52% APY
  • Salem Five Direct – 2.51% APY
  • Customers Bank – 2.50% APY
  • CIBC – 2.39% APY
  • CIT Bank – 2.30% APY
  • HSBC Direct – 2.30% APY
  • Citizens Bank – 2.20% APY
  • Synchrony Bank – 2.15% APY
  • Goldman Sachs Bank USA – 2.15% APY
  • Barclays – 2.10% APY
  • American Express National Bank – 2.10% APY
  • Ally Bank – 2.10% APY

How to find the right savings account for you

  • Focus on rates, but don’t forget about fees. Snagging the highest interest rate isn’t always your best bet. You also want to ensure the whole account helps you earn consistent returns. For example, a high-rate online savings account might reset to a lower APY after an introductory period. Perhaps the best rate requires a balance that’s too high or too low for your needs. And watch out for monthly fees that could eat into your savings.
  • Compare, compare, compare. Use our savings account comparison tool to calculate how much you could earn with different accounts. You can filter by ZIP code and size, which can help large-balance savers find better options than no-minimum options.
  • Carefully consider CDs. CDs allow savers to earn more on their savings by agreeing to lock up their funds for a set period of time. With CDs, you make your initial deposit at a set APY and wait for the CD term to mature. With most CDs, you can’t touch the original deposit amount before maturity without paying a penalty. Since CDs are less liquid than a standard savings account, they’re good for setting aside money you won’t need to access in the near term. Typically, we recommend using CDs for long-term goals, like accumulating a down payment for a home.

How the Fed impacts online savings rates

The interest rates offered by banks are tied to the federal funds rate, which is set by the Federal Reserve’s Federal Open Market Committee (FOMC). This includes the deposit account rates that grow your money in savings and other deposit accounts. When the federal funds rate rises, you might see that reflected in the deposit interest rates at most banks.

As the Fed hiked rates over recent years, online banks were far quicker to raise their rates in turn than traditional banks. Just look at the average APY offered by big banks — 0.26% vs. 1.52% on average for online banks as of December 2018.

We’ve enjoyed successive Fed rate hikes for the last few years, but the trend is waning. As we continue into 2019, the odds of a rate hike this year have reached zero. The Fed did nothing at its January meeting, and didn’t raise rates at the March meeting either.

The bleak federal funds rate outlook doesn’t necessarily mean that banks will start slashing their own deposit account rates. Online banks are extremely competitive and need to remain so if they want to maintain their edge.

In the January Goldman Sachs earnings call, Goldman Sachs Executive Vice President and CFO Stephen M. Scherr noted it has no plans to walk back on rates for its online savings account Marcus, aiming to keep its rank among the top savings rates in the country.

We heard much of the same from fellow online bank Ally Bank, whose CFO Jennifer LaClair said during its January earnings call that it’s still important to take the “competitive landscape” into account.

Still, other earnings calls indicated that banks are in as much of a holding pattern as consumers are. When asked about the bank’s deposit rate outlook in the event of a Fed rate slowdown, Bank of America CFO Paul Donofrio noted, “At some point, the broader retail rates will rise. We just don’t know when. So, I think we’re just going to have to wait and see.”

As for what that all means to you, chances are that if you keep your deposits with an online bank, you’ll still get the most competitive rates regardless of a Fed pause or rate decrease. You might see an overall decrease in online savings rates (moreso in the competitive rate-chasing CD space), but they’ll still outperform most brick-and-mortar rates any day.

The bottom line

So what’s a saver to do? At the end of the day, you want the account that makes the most sense for you. Choose the one that lets you save and manage your money in the best ways possible. The most efficient way to consistently grow your money is to open an online savings account. These accounts will offer the best interest rates compared to brick-and-mortar banks, no matter where the federal funds rate goes this year — plus, they’re easily accessible in case of emergency. If you don’t need immediate access to your money and you have some extra cash lying around, open a high-yield CD as a more long-term savings alternative.


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Annuity vs. CD: What’s the Difference?, 22 Jul 2019 13:37:43 +0000 money for the future while growing your nest egg is the core of all financial planning. Developing a portfolio of investments that ensures a strong financial future can be complex, however. Between savings accounts, stock options, bonds, individual retirement accounts (IRAs) and 401(k)s, there’s a lot to consider. Among these great options are also … Continue reading Annuity vs. CD: What’s the Difference?

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Saving money for the future while growing your nest egg is the core of all financial planning. Developing a portfolio of investments that ensures a strong financial future can be complex, however. Between savings accounts, stock options, bonds, individual retirement accounts (IRAs) and 401(k)s, there’s a lot to consider.

Among these great options are also annuities and certificates of deposit (CDs). Let’s take a closer look at these two products, define how they function and help you decide which one you should choose as part of a solid savings plan.

Annuity vs. CD: What is an annuity?

An annuity is a financial contract between you and an insurance company, primarily used to save for retirement. Annuities assure retirees a fixed stream of income. When working with annuities, you make contributions in a lump sum or through a series of payments. From there, the insurance company will disburse periodic payments beginning at a predetermined date, whether immediately or years down the line.

Annuities are usually sold by an insurance company, which takes your money and invests it for you. Your funds accrue interest over time and grow tax-free, which means you won’t have to pay any taxes on gains from the investment until you withdraw the funds. When you take distributions from an annuity, they are taxed as regular income.

There are three types of annuities — fixed, indexed and variable — and two ways to receive distributions — immediate annuities and deferred annuities. Immediate annuities begin paying you benefits as soon as you fund them, while deferred annuities don’t begin distributing benefits until a future date. Both varieties pay out on a regular basis, and some offer death benefits. If you die before the total annuity has been paid out, a beneficiary may continue to receive payments.

Fixed annuities

Fixed annuities guarantee a minimum interest rate and a fixed number of payments over time. The annuity provider is required to make these payments in a specific dollar amount. You’ll be able to agree to receive payments over an agreed-upon amount of time — 15 years, for example — or for the duration of your lifetime or a beneficiary’s lifetime. Fixed annuities are regulated by state insurance commissioners.

Indexed annuities

Indexed annuities distribute payments to you based on the performance of a stock market index, typically the S&P 500. The annuity provider delivers a payout minimum determined at the time investment, no matter the performance of the stock index over the course of the investment period, plus additional amounts when the index performs well. When the index doesn’t perform well, all you get is the minimum payout. Indexed annuities are regulated by state insurance commissioners.

Variable annuities

Variable annuities offer greater flexibility than fixed or indexed annuities. You may choose to invest your payment into a range of investments, most typically mutual funds. Your payouts and payment periods will differ based on the size of your investment, expenses incurred and investment option’s performance over the course of the investment period. These are regulated by the Securities and Exchange Commission.

Annuity vs. CD: What is a CD?

CDs are offered by banks and credit unions, primarily to save money for short- and medium-term goals. With a CD, you agree to place a fixed amount of money into an account for a set amount of time, called a term, lasting from three months to 10 years. Each financial institution offers different rates for CDs, and the interest paid out generally compounds over the term of the CD. The financial institution pays interest on the CD principal, but the interest is only accessible and paid out to you once the term of the CD is complete.

After the term of the CD ends, you withdraw your funds plus the interest that has accrued. You can purchase CDs through federally insured banks, which insure the investments up to $250,000. This Federal Deposit Insurance Corporation (FDIC) insurance combined with the steady interest growth make CDs one of the safest options for those looking to save for their future.

Annuity vs. CD: What are the differences?

There are key differences between annuities and CDs. First and foremost, these two financial instruments pay out very different amounts on very different payment schedules. When investing using annuities, you’ll have the option to receive regular payments over time, which may include part of the principal investment as well as interest earned. In all but a few cases, CDs pay out principal and earned interest only at the end of the term, once the CD matures.

CDs and annuities are insured differently. The FDIC insures CDs up to $250,000, while fixed and indexed annuities are regulated by state insurance commissions. When buying an annuity, you must research whether your state has a guarantee association that provides some level of protection for when an insurance company in that state fails. Also note that variable annuities are considered to be a security, and as such, are regulated by the SEC. Variable annuities are covered by the Securities Investor Protection Corporation (SIPC).

You need to consider the differing tax treatment of annuities versus CDs. While interest from both investment vehicles are taxed as regular income, the principal from a CD is never taxed. However, with annuities, both the principal and interest are taxed, even when purchased with pretax funds out of an IRA. A set amount of an annuity’s payout that was purchased with after-tax dollars is taxed as regular income, while another portion is not subject to taxes. Annuities offer tax-deferred growth, however, which means you won’t have to pay any taxes on growth until you withdraw the money.

Breaking Down Annuities vs. CDs



Receive portion of principal investment and interest in regular payments over time.Receive a single payment of principal and interest once the CD has matured.


Varies on a state-by-state basis, depending on the rules of each state’s guaranty association.Insured by FDIC up to $250,000.


Portions of both interest and principal may be taxed as regular income.Interest is taxed as regular income. Principal is never taxed.

Annuity vs. CD: Which should you choose?

Because individuals usually use CDs for terms ranging from six months to 10 years, CDs are a strong option for those who are pursuing short- or medium-term savings goals. People making longer-term plans for retirement down the line, however, may want to do more research on investing in annuities. Because these investments give you the option to receive steady payments for a fixed amount of time, say 20 years or until you pass away, they can act as a good option for retirees who would like to receive regular income payments throughout their retirement. Annuities can act as a partial substitute for income once you’ve retired from the workforce.

Bottom line

When planning for your financial future, you’ll want to consider a variety of investment opportunities, including both annuities and CDs. Everybody’s financial situation and saving goals are unique. Are you looking to invest now to receive fixed payments over the course of 20 years once you’ve retired? Or are you hoping to earn some interest over the course of a year or five in a more secure fashion? Perhaps you’re looking to do a bit of both.

Most importantly, keep doing research. When evaluating your investment portfolio, think through the pros and cons of annuities and CDs, what they have to offer and how they fit into your long-term goals.

The post Annuity vs. CD: What’s the Difference? appeared first on MagnifyMoney.

How to File Taxes as an Immigrant, 19 Jul 2019 19:59:08 +0000 recurring themes have dominated the news cycle over the past few years: immigration and taxes. While these may seem like entirely separate issues at first glance, immigrants do pay federal income taxes — and face a variety of unique challenges in the process, including dealing with language barriers and learning to file for the … Continue reading How to File Taxes as an Immigrant

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Two recurring themes have dominated the news cycle over the past few years: immigration and taxes. While these may seem like entirely separate issues at first glance, immigrants do pay federal income taxes — and face a variety of unique challenges in the process, including dealing with language barriers and learning to file for the first time.

To help make filing your taxes as an immigrant a little easier, here’s an overview of who needs to file, how to file for the first time and where you can turn for help.

Who files taxes?

Citizens aren’t the only ones who pay taxes in the U.S. Immigrants who are authorized to work in this country are required to pay the same federal and state income taxes that citizens do, and undocumented immigrants pay billions of dollars in taxes each year — often for public benefit programs that they are unable to use.

Filing requirements depend on whether you are considered a nonresident alien or a resident alien.

Resident aliens

A resident alien must meet one of two tests:

  • Green card test. The U.S. Citizenship and Immigration Services issued you an alien registration card, also known as a “green card,” which allows you to permanently live in the U.S. as an immigrant.
  • Substantial presence test. You must be physically present in the U.S. for at least:
    • 31 days during the current year, and
    • 183 days during the three-year period that includes the current year and the two years immediately before that. (You can read more about how days of presence are determined here.)

Resident aliens follow the same filing requirements as U.S. citizens.

Nonresident aliens

If you are not a U.S. citizen and don’t meet either of the tests to be considered a resident alien, you are considered a nonresident alien.

As a nonresident alien, you must file a tax return if you own a business in the U.S. or have U.S. income and did not have enough tax withheld by your employer. You may also want to file an income tax return to receive a refund of tax withheld.

What’s a W-4?

If you work in the U.S., your employer should ask you to complete Form W-4, which is used to determine the correct amount of tax to withhold from your pay.

Form W-4 includes worksheets to help you determine how many “allowances” you should claim. Each allowance reduces the amount held from your paycheck. You get one allowance for yourself, one for your spouse, and one for each dependent you claim on your tax return.

You can complete a new Form W-4 at any time, and it’s a good idea to submit a new one to your employer anytime your tax situation changes, such as if you get married or divorced or have a new baby. Adjusting your withholding can help prevent having too much or too little tax withheld.

Rather than relying on the worksheets included with Form W-4, you may want to use the IRS’s Withholding Calculator.

How to pay U.S. taxes

In some countries, the government withholds tax from your paycheck, and that’s the end of your tax filing requirements. In the U.S., it’s more complicated. Here’s an overview of what you’ll need to file a tax return.


To pay taxes in the U.S., you will either need a Social Security number (SSN) or an individual taxpayer identification number (ITIN).

Noncitizens authorized to work in the U.S. by the Department of Homeland Security can apply for a Social Security number in their home country before coming to the U.S. or by visiting a Social Security office in person. You will need to complete Form SS-5, Application for a Social Security Card, and provide documentation to prove your identity, work-authorized immigration status and age. You can learn more about the acceptable documentation here.

If you are not eligible for an SSN, you can apply for an ITIN by filling out Form W-7, Application for IRS Individual Taxpayer Identification Number and submitting it to the IRS along with documentation proving your identity and foreign status. The Instructions for Form W-7 include a list of acceptable documents and instructions for submitting your application.

Which tax forms to file

The tax forms you’ll use to file your tax return depend on whether you are a resident alien or a nonresident alien.

Resident aliens use the same tax form as citizens: Form 1040, U.S. Individual Income Tax Return. Generally, Form 1040 is due on April 15 of the following year. However, if you are living and working outside of the U.S. on April 15, you are given an automatic extension to June 15. You can request a longer extension, until Oct. 15, by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.

Nonresident aliens file using Form 1040-NR, U.S. Nonresident Alien Income Tax Return. Form 1040-NR is also due on April 15 of the following year, but taxpayers who are not living and working in the U.S. on that date have until June 15 to file. You can request an extension to October 15 by submitting Form 4868 by the due date of your return.

Reporting income earned outside the US

Many resident aliens and nonresident aliens continue to receive income from outside of the U.S. even after they begin working in the country. Resident aliens are required to report income from all sources within and outside of the U.S. on their tax returns, whether they are living in the U.S. or abroad.

However, you may qualify to exclude a portion of your foreign earnings from your taxable income — the amount you can exclude changes each year. You can determine your eligibility and the exclusion amount using Form 2555, Foreign Earned Income. You can also use the IRS’s Interactive Tax Assistant Tool to help determine whether the income you earned in a foreign country can be excluded.

What to do if you’re undocumented?

According to the Pew Research Center, there were roughly 10.5 million undocumented immigrants in the U.S in 2017, and 7.6 million of them are a part of the U.S. workforce.

Whether undocumented immigrants work legally under Deferred Action for Childhood Arrivals (DACA) protections or work illegally with falsified or nonexistent documentation, they are required to pay taxes on any income earned in the U.S.

Many undocumented immigrants face barriers to complying with U.S. tax laws due to language barriers, difficulty understanding complex tax laws or fears that the IRS will pass their information along to immigration enforcement.

Later, this article will cover resources where immigrants can find help with tax filing. As for immigration enforcement fears, you generally do not have to fear that the IRS will share your application for an ITIN or tax information with immigration enforcement officials. The IRS is not allowed to release taxpayer information to other government agencies, except for providing information to the Treasury Department for tax compliance investigations or under a court order related to a non-tax criminal investigation.

Benefits of paying taxes

Filing a tax return and paying taxes to the U.S. does not entitle nonresident aliens or undocumented workers to claim Social Security benefits, but there are other benefits to filing tax returns. According to the National Immigration Law Center, paying taxes:

  • Demonstrates compliance with federal tax laws
  • Gives immigrants who want to legalize their immigration status and become a citizen an opportunity to prove they have “good moral character”
  • Document work history and physical presence in the U.S.
  • Claim certain tax benefits, such as the Child Tax Credit
  • Claim insurance premium tax credits for children who are U.S. citizens

Where to find help

The IRS’s Volunteer Income Tax Assistance (VITA) program helps taxpayers who cannot afford traditional tax preparation service, need translation assistance or need help applying for an ITIN. The IRS trains and certifies volunteers to provide free basic tax return assistance to individuals.

You can locate a VITA site by visiting and entering your ZIP code. Before visiting a VITA site, you may want to review Publication 3676-B (available in English and Spanish) to verify the services provided by VITA and check out the IRS’s What to Bring page to ensure you have all of the required documents and information volunteers will need to help prepare your return and apply for an ITIN, if necessary.

If you prefer to handle tax filing on your own, check out our recommendations for tax filing software.

The bottom line

Working through the forms required to apply for an ITIN and prepare a tax return can be daunting, but seeking help and overcoming the barriers to complying with U.S. tax law is important. If you plan to seek citizenship down the road or someday appear in front of an immigration judge, the fact that you’ve dutifully filed income tax returns while you lived and worked in the country can help make a stronger case for you to remain in the country.

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How to Speed Up Your Mortgage Refinance, 19 Jul 2019 18:11:01 +0000 The saying “time is money” is even more true when you’re refinancing your home to reduce your monthly payment. The sooner you complete a refinance, the sooner you’ll be able to enjoy the benefits of lowering your payment and improving your financial situation. There are steps you can take to move the process along … Continue reading How to Speed Up Your Mortgage Refinance

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The saying “time is money” is even more true when you’re refinancing your home to reduce your monthly payment. The sooner you complete a refinance, the sooner you’ll be able to enjoy the benefits of lowering your payment and improving your financial situation.

There are steps you can take to move the process along more quickly. We’ll discuss these as we explain how to speed up your refinance.

Why speed is important in a refinance

Interest rates change on a daily basis. Once you lock in your rate, the clock begins ticking. If you don’t complete the refinance within the lock timeline, you could end up paying extension fees or end up having to re-lock at a higher rate.

Rate locks are usually priced in 15-day increments, although different lenders may offer other timelines. The shorter the lock period, the better your rate should be. If you can complete your refinance within one of the shorter lock-in periods, you’ll end up with a lower rate, lower costs or both.

Tip No. 1: Know what you want to accomplish with the refinance

If you’re objective is to save money every month on your payment, the refinance process can be incredibly fast. The simpler your goal is for the refinance, the easier it will be for the lender to approve your loan.

If a lender sees that you’re saving money and improving your financial situation with a lower down payment — and that you have made all your payments on time — it already has a pretty good idea that you’ll make a new lower payment on time.

However, if you’re applying for a cash-out refinance to consolidate debt, that may be a red flag that you are overextended on credit because your job or income is unstable, prompting lenders to request more proof of income to make sure you can repay your loan.

Tip No. 2: Pick a streamline refinance option

One of the benefits of government-backed loan programs, such as those offered through the Federal Housing Administration (FHA) and Veteran Affairs (VA), is the ability to refinance under “streamlined” guidelines. These refinance programs don’t require any income verification, and they usually won’t require any appraisal.

They also don’t require a full credit report, and they only verify that you’ve made your current mortgage payments on time with a mortgage-only credit report. Because lenders don’t have to underwrite your income or an appraisal, the refinances can be completed very quickly.

If you have an FHA or VA loan and have made seven payments on time since you took out your mortgage, you are probably eligible for a streamline refinance option. The VA streamline program is more commonly called a VA Interest Rate Reduction Refinance loan (IRRRL), but it features the same income and appraisal flexibilities as the FHA streamline refinance.

Tip No. 3: See if you can get an appraisal waiver on conventional financing

When market values go up — as they consistently have for at least the past five years — conventional lenders may begin to offer appraisal waivers. Although you’ll still need to document your income and assets, conventional lenders may be able to offer you a waiver of your appraisal, which will significantly speed up your refinance process. It will also save you the cost of an appraisal, which is usually $300 to $400.

You may hear your loan officer talk about a property inspection waiver (PIW) or an automated collateral evaluation (ACE). These basically amount to a computerized system accepting the estimated value you input on your loan application as the appraised value for your refinance.

Appraisal waivers are usually only available on rate-and-term refinances, which are refinances paying off the balance of your loan to save money. If you are looking for a cash-out refinance to consolidate bills or make home improvements, chances are you’ll need a full appraisal.

Tip No. 4: Fill out an accurate and complete application

Take the time to fill out your loan application accurately. Be sure to provide contact information for your employer, your homeowners insurance company and a complete two-year history of your employment and addresses.

If you’ve applied for new credit accounts in the past 60 days, have a current statement handy in case the balance and payment haven’t yet appeared on your credit report. These may seem like minor things, but they can cause major delays if you don’t disclose them properly at the beginning of the loan process.

Tip No. 5: Have your basic paperwork ready to provide

Depending on the type of refinance for which you are applying, there may be very little your lender needs. However, there are some basics you should have handy to speed up the process, just in case.

  • Current month of pay stubs: If you aren’t doing a streamlined government refinance, this is usually the bare minimum a conventional lender will need.
  • Last year’s W-2: If you have high credit scores (above 720), you may not have to provide a W-2, but it depends on the type of income you receive. If you get overtime and commissions on top of a base salary, expect to provide two years’ worth of W-2s.
  • Current mortgage statement: This is needed to show that there are no late fees accruing. It also provides a snapshot of your current loan balance for your loan estimate preparation.
  • Two months of bank statements from a checking or savings account: Some lenders will only require one month. If you’re adding the closing costs to your loan balance, you may not need any bank statements at all.
  • Copy of your current homeowners insurance policy: Whether you include your homeowners insurance in your monthly payment or not, the lender will need this to calculate your total qualifying payment. It will also need to switch the lender information to show who your new mortgage company will be.
  • Current property tax statement: Again, this is required regardless of whether you have an escrow account. Your property taxes will need to be current, and the lender will need the yearly taxes to calculate your total qualifying payment.
  • Copy of your driver’s license or picture ID: This is needed to confirm your identity at your application and then again at your closing.

Tip No. 6: Apply with a digital or online refinance lender

You may see advertising or have a loan officer tell you about a digital or online refinance process. This generally means the lender doesn’t need any income or asset documentation to approve your loan, allowing the refinance to finished quickly.

That doesn’t mean they aren’t accessing your personal information in another way. New technology allows lenders to access your income and employment history through online databases. It can see your assets with “view-only access” to your banking accounts.

You generally have to work for a large employer to be eligible, and your bank accounts need to be with a large bank. You also need to be comfortable with giving your lender your log-in credentials for your bank for “read-only” access.

Tip No. 7: Stay at your current job

Your income and employment will be verified during the loan process and right before closing. Switching from a salaried to a commission position, or changing employers, will create delays in the process or prevent you from being able to complete the refinance at all.

Tip No. 8: Don’t make large deposits into your checking or savings accounts

If you are increasing your loan amount to cover your costs, you may not need to provide any bank statements at all. If you do need to provide bank statements, the first thing the lender will look for is large deposits.

If you received a large cash gift from a relative, or recently sold an asset such as a car or coin collection, avoid depositing the funds until after your transaction is complete to avoid having to provide documentation and explanations.

Tip No. 9: Provide only asset documentation you need for the loan

Refinance lenders only need enough documentation to approve your loan. If you have an extensive portfolio of stock funds, 401(k) plans or several different asset accounts, you don’t need to disclose them if you aren’t going to be liquidating them to complete your refinance.

Tip No. 10: Communicate any changes to your loan officer immediately

Sometimes a new job opportunity is too good to pass up, or a car breaks down requiring you to buy a new one. The most important thing is to immediately notify your loan officer of any changes to your employment, credit or assets so they can develop a game plan to prevent any unnecessary delays finishing your refinance.

Things that could slow down the refinance process

Sometimes situations can arise that you have no control over in the refinance process. You’ll need to make quick decisions to keep the refinance moving if you run into any of them.

Your appraisal comes in lower than estimated

A low appraisal could affect the viability of a refinance. This is especially true with conventional mortgages, where the interest rates are influenced by how much equity you have. Even a 5% difference in your estimated value could result in a higher rate, higher costs or both.

You can also dispute a home appraisal by providing recent, similar sales you think better represent your home’s value. If your value comes in lower, reach out to your loan officer to have a new break-even point analysis done to make sure the refinance still make sense. This calculation divides the total closing cost of your refinance by the monthly savings to determine how long it takes to recoup the costs. Getting your refinance done quickly isn’t beneficial if it takes you longer to recoup the costs than you plan to live in the home.

One caveat: Don’t give the appraiser your opinion about what you think your home is worth. There are very strict laws in place to make sure appraisers have the independence to evaluate your home’s worth without any pressure from an interested party. An appraiser can refuse to complete your appraisal, creating delays and potentially causing the lender to decline your loan.

Some states consider it a felony to influence a home appraiser, so it’s best to let the appraiser do the inspection, then dispute the value with recent sales if you don’t agree with the appraiser’s opinion.

You have a second mortgage you want to keep

If you have a home equity loan or a home equity line of credit (HELOC), you may want to keep it open and just refinance your first mortgage. This will require an extra approval process called “subordination” or “resubordination.”

Your second mortgage lender will need to agree to being “subordinate” to your new first mortgage. That means your first mortgage lender wants to have first rights to foreclose on your home if you default.

Home equity loan and HELOC lenders will usually have a process in place to approve subordinations quickly, but some have long turn times that may force you to lock in your mortgage for a longer time period.

Final thoughts about speeding up your refinance

Be sure to shop around to get the best rate possible. Once you’ve found your best deal, lock it in and be prepared to act quickly with any documentation requests from your loan officer and loan processor.

Taking all these steps will help speed your refinance up so that you can begin enjoying the benefits of a lower rate and monthly payment.

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Guide to Home Appraisals for Mortgages, 19 Jul 2019 18:03:24 +0000 are many factors that can lead to a mortgage denial when you’re trying to buy a home. One of the most common things that can stand between you and an approval is an issue with the property’s appraisal. But what is an appraisal? And why do home appraisals matter so much during the home … Continue reading Guide to Home Appraisals for Mortgages

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There are many factors that can lead to a mortgage denial when you’re trying to buy a home. One of the most common things that can stand between you and an approval is an issue with the property’s appraisal.

But what is an appraisal? And why do home appraisals matter so much during the home buying process? This guide answers those questions and more.

What is a home appraisal?

An appraisal is a written estimate that details a professional appraiser’s opinion of a home’s value. When you buy a home, your mortgage lender will more than likely require a home appraisal before approving the loan.

“Appraisers are reporters of the market,” said Stephen Wagner, 2019 president of the Appraisal Institute in Chicago. “They interpret the actions of buyers and sellers in the marketplace.”

All 50 states require appraisers to be certified or licensed to provide appraisals to mortgage lenders who are federally regulated, according to the Appraisal Institute. Appraisers receive their credentials after passing an examination administered by their state’s appraisal board.

When choosing an appraiser, government-sponsored enterprise Fannie Mae has specific requirements for mortgage lenders. They need to select from professionals who not only meet the certification or licensing requirements, but also have experience in and knowledge of the local real estate market and the specific property type being appraised.

Many appraisers use the Uniform Residential Appraisal Report, the most common form used in real estate appraisals.

What do appraisers look for?

Before visiting a property, an appraiser gathers upfront information related to the property. Once they begin the appraisal assignment, they typically review the property’s:

  • Amenities
  • Condition
  • Interior
  • Structure
  • Upgrades

But not all appraisal assignments look the same, said John Brenan, vice president of appraisal issues with The Appraisal Foundation in Washington, D.C.: “Some require an appraiser to personally inspect the interior of a home. Some only require an appraiser to personally inspect the exterior of the home.”

The homebuyer doesn’t have to be present for the appraisal. In many cases, a real estate agent will provide access to the home if necessary, he added.

The U.S. Department of Housing and Urban Development (HUD) requires appraisals for FHA loans to be more in-depth than those for conventional loans. Appraisers hired by FHA lenders must establish an unbiased opinion of a home’s value and determine whether it meets the FHA’s minimum property standards — by inspecting the home’s foundation and major systems, for example.

The U.S. Department of Veterans Affairs follows a similar process for VA home appraisals. The appraiser must determine the value of the home and review the property’s condition to assess whether it meets the VA’s minimum property requirements.

Appraisers typically determine a home’s value by using one of three common methods:

  • The sales comparison approach, which involves reviewing recent home sales and homes currently for sale that are similar to the property being appraised. The appraiser makes adjustments to the home’s value based on its condition, features and quality.
  • The cost approach, which involves calculating what it would cost to build that same house on a similar lot, minus depreciation. This method can be helpful for appraisals on relatively newer homes, according to Brenan.
  • The income approach, which involves taking the rental income of the property being appraised, or a comparable property, to determine a value that would provide the rate of return that the typical investor would require for a similar home. As Brenan noted, this approach is typically used for commercial property appraisals.

The most commonly used method for real estate transactions is the sales comparison approach. When using this approach, appraisers consider several factors, according to the Appraisal Institute, which include:

  • Conditions of the sale
  • Economic characteristics
  • Expenditures made immediately after the purchase
  • Financing terms
  • Location
  • Market conditions
  • Non-property components of value
  • Physical characteristics
  • Property rights being transferred
  • Use and zoning

Homebuyers usually pay for an appraisal as part of their closing costs. An appraisal fee can run about $300 to $400, but it can vary depending on the state, property type, loan type and the complexity of the appraisal assignment. For example, the VA has a state-by-state fee schedule for home appraisals. The appraisal fee is $450 in Georgia and $525 in New York.

There isn’t a “shelf life” on appraisals, Brenan said. However, each lender has guidelines it follows that dictate how old an appraisal report can be for mortgage lending purposes.

Why appraisals matter to the homebuying process

An appraisal establishes a home’s value. This number is important to your mortgage lender because it affects the loan you need to purchase the home.

Lenders rely on a house appraisal to determine whether the sales price makes sense and to calculate the homebuyer’s loan-to-value ratio.

[An appraisal], as described by Wagner, “is a risk mitigation tool at that point, to make sure that somebody’s not paying too much for a property or that the lender isn’t going to lend too much against the property.

Put another way, a home appraisal is designed to ensure that the collateral for a mortgage — the house — is adequate enough to justify the loan amount, Brenan said. The appraisal also helps establish value in the event of a foreclosure sale, should the lender need to take the property back because the borrower defaulted on the mortgage.

Aside from mortgage approval, other reasons you might need an appraisal include:

Can you skip a home appraisal?

In certain circumstances, you may be able to sidestep the home appraisal requirement when getting a mortgage to purchase a home.

Conventional mortgage borrowers may be able to get what’s called a property inspection waiver (PIW) mortgage, which is a loan that goes through the underwriting process without an appraisal. It’s also known as an appraisal waiver mortgage.

With a PIW mortgage, the lender can use existing information about the property’s estimated value to originate a loan, rather than ordering a new appraisal. However, the homebuyer would need to supply a 20% down payment in most cases.

How to dispute a home appraisal

An appraiser’s opinion of value isn’t necessarily the end of the line, Brenan said.

If you’re not happy with your appraisal — for example, the home value comes in lower than expected — you have the option to dispute the appraiser’s findings.

Let’s say you’re looking to buy a home priced at $300,000 but the appraisal comes in at $250,000. After your lender has given you a copy of the appraisal report to review, you can request another appraisal if you’re not satisfied with the results. It’s helpful to provide any evidence you may have that disputes the appraiser’s findings, such as a recent comparable sale or missing square footage.

Keep in mind that your lender isn’t obligated to honor your request. But if it does, you’ll be responsible for the additional appraisal fee.

“If the borrower or a real estate agent or whoever wants the appraiser to consider additional information, go through the lender, share that information,” Brenan said. “The appraiser will review it and notify the lender if it warrants any type of change.”

If your lender decides to stick with the original appraisal or no changes occur after it’s reviewed, a few things can happen. Using the example above of an appraisal coming in lower than the sales price, you would either need to come up with the difference in cash or renegotiate with the seller on a lower price. Otherwise, the loan could be denied.

It’s also important to remember that although a house appraisal is part of your homebuying process and you’re responsible for paying the fee, you aren’t the appraiser’s client. In terms of a home purchase or refinance, the lender is required to order the appraisal and can’t accept an appraisal ordered by a borrower — “that is to avoid any possible bias or undue influence,” Brenan said.

Home appraisal vs. home inspection

While they both involve taking a critical look at a home, an appraisal and inspection aren’t the same.

An appraisal examines the elements and features that help determine the value of a home. But an inspection evaluates the home’s structure, interior and exterior to assess its condition and recommend any necessary repairs. Unlike appraisals in most cases, home inspections can be optional. Inspection fees range from about $300 to $500, though it can change based on a number of factors, such as the size and age of the home.

An appraiser is generally looking for things that impact value, such as the quality, design and floor plan, Wagner said.

“Appraisers do not inspect properties to the depth and level that a home inspector might, wherein as a home inspector is … testing plumbing and electrical and kind of almost seeing behind the walls, if you will,” he explained.

The bottom line

A home appraisal provides benefits for both homebuyers and mortgage lenders, Wagner said.

“In addition to valuation issues, they may find out things about the property that they might not have otherwise been particularly aware of,” he said.

For example, a home could be advertised as a certain size, but the appraisal showed that it’s actually smaller or larger than marketed.

“There’s a number of aspects of the physical characteristics of a property that may come to light that were not obvious to the buyer at the outset,” he said.

Lastly, since an appraiser is analyzing market information to arrive at a home’s value, there’s not much of a need to worry about bias.

“The appraiser is the independent, impartial, objective party in the entire transaction,” Brenan said. “The appraiser is the only one whose compensation does not depend on whether the deal goes through or not.”

The information in this article is accurate as of the date of publishing. 

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Things You Didn’t Know About the $10 Dollar Bill, 19 Jul 2019 15:30:46 +0000 the musical “Hamilton” conquering Broadway (and the rest of the world), Alexander Hamilton is back in vogue. Did you realize that besides inspiring the musical, Hamilton’s portrait graces the $10 dollar bill? OK, fine. Everybody knows that, but what else about this iconic piece of U.S. currency might you be missing? There are over … Continue reading Things You Didn’t Know About the $10 Dollar Bill

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Alexander Hamilton, the first secretary of the treasury (source: iStock)

With the musical “Hamilton” conquering Broadway (and the rest of the world), Alexander Hamilton is back in vogue. Did you realize that besides inspiring the musical, Hamilton’s portrait graces the $10 dollar bill? OK, fine. Everybody knows that, but what else about this iconic piece of U.S. currency might you be missing?

There are over 2 billion $10 bills currently in circulation, each of which typically lasts four and a half years before they’re replaced. Today, money coming out of circulation is recycled, although this didn’t use to be the case. Up until 2010, two-thirds of the old money being taken out of circulation would end up in landfills.

Who makes the $10 bill?

It’s no accident that Alexander Hamilton’s portrait appears on the $10 dollar bill today. After all, he served as the first secretary of the treasury from 1789 to 1795, and played a leading role in building the First Bank of the United States, which acted as a proto-central bank for the young nation. The bank distributed the first U.S. banknotes at this time — although the country would have to wait until 1861 for its first federally-issued $10 dollar bill.

Today, the Federal Reserve is responsible for controlling monetary policy in the U.S., which it does by setting interest rates. The Fed was established back in 1913, and one common misconception is that the Fed prints money. This is not the case: the Department of the Treasury is actually responsible for printing the currency, including the $10 dollar bill.

The 1913 Federal Reserve Act called on the Fed to preserve the economic stability of the country. On a day-to-day level, the Fed sets the level of short-term interest rates, as well as, the cost and availability of credit. Meanwhile, the Treasury prints and controls currency in circulation, and collects taxes via the Internal Revenue Service (IRS).

Early history of the $10 dollar bill

The $10 bill was originally nicknamed a “sawbuck” because of the X featured on early versions of the bill, which looked like sawhorses. Before the Federal Reserve was created, it went through many iterations.

The first $10 note issued by the federal government was printed in 1861, and featured a portrait of former President Abraham Lincoln. His face remained on the bill up until 1863, when Benjamin Franklin took over what is known as the First Charter $10 bill. Congressman Daniel Webster was the face of the $10 bill from 1869 to 1880. This bill is also sometimes referred to as the “jackass note” because the eagle shown on the front of the bill, when turned upside down, looked like the head of a donkey.

1903 $10 dollar national currency, issued by the First National Bank of the City Of New York (source: iStock)

From 1863 to 1929, the government let individual banks issue their own notes, referred to as “national bank notes.” Apart from federally issued notes, there were multiple national bank versions of the $10 bill. Some of these versions include the ten dollar silver certificate featuring former Vice President Thomas Hendricks, the $10 bison note featuring Lewis and Clark, as well as the Red Seal 1902 bank note, which carried Gen. William McKinley on the face of the bill.

1901 $10 dollar bison note, featuring Lewis and Clark (source: iStock)

Ironically, Andrew Jackson, who was a fierce critic of central banking in the U.S. and paper notes in general, was the face of the $10 note from 1914 to 1929. These bills were quite large, measuring in at 7.375” x 3.125” inches. The back of the original Jackson $10 bill did not include a portrait of the Treasury building, as later versions did. Instead, it featured a plow and horses, as well as, smokestacks in the distance to symbolize agriculture and commerce.

Variations on the Hamilton $10 dollar bill

Alexander Hamilton’s face did not show up the $10 dollar bill until 1929. The size of the bill was reduced to 6.12” x 2.14” after 1929. This bill remained largely the same by design up until 1990, when a few slight modifications were made. The Treasury’s seal on the right front side of the bill was layered under the word “ten” on the newer bills. The word “ten” was also layered on top of the two numerical 10s on the bottom of the bill.

The 1990 bank notes also included a thread on the left front side of the bill that, when held up to light, spelled out “USA” and “TEN”. Changed as a security measure, this thread would glow orange when illuminated by an ultraviolet light. Additionally, the 1990 series notes had the words “The United States of America” in very small type around the outer edge border of Alexander Hamilton’s oval portrait

Changes to the $10 bill with the 2000 redesign

In 2000, a revised version of the $10 bill was unveiled to combat counterfeiting, which had seen a spike since the rise of digital printers. One of the main design changes was a revised portrait of Hamilton. The portrait was also moved slightly to the left side of the bill. The threading of “USA” and “TEN” included on the 1990 series was moved to the right side of the bill. As an added security measure, the 2000 note also included a faint portrait of Hamilton in the blank space to the right of the main portrait. This faint portrait that can only be seen when held up to the light and is along the same plane as the Secretary of the Treasury’s signature.

2006 series $10 dollar bill (source: iStock)

The $10 bill that is in circulation today is from the 2006 series. The most distinct change is the bill’s subtle background colors of orange, yellow and red. The portrait of Hamilton no longer has a border around it, and the watermark portrait of him was moved to the upper right-hand side of the bill underneath the new red “We The People” text that was added. In this series of bills the Fed added some patriotic symbols of freedom throughout. There are two depictions of the Statue of Liberty’s torch on the bill, one big and one small. The lower right “10” on the front of the bill now shifts from copper to green when titled.

The future of the $10 bill

Treasury Secretary Jacob Lew announced in 2015 that a fresh face would be featured on a new $10 bill to be introduced in 2020. Secretary Lew suggested that the new $10 note should feature a woman who was a “champion of our inclusive democracy.” While the decision to launch a new $10 bill was based on security needs due to counterfeiting, the 2020 date also coincides with the 100th anniversary of the 19th amendment, which gave women the right to vote. The Treasury asked the public to submit candidates for the new $10 dollar bill portrait, and received over a million responses.

In April 2016, the Treasury reversed course and said that instead of a new $10 bill, a new $20 dollar note would be introduced in 2020 featuring a portrait of Harriet Tubman. This decision was triggered by strong public support, as well as legislation introduced by New Hampshire Sen. Jeanne Shaheen. It was also announced that Alexander Hamilton would remain on the front of the $10 bill, and a tribute to the heroes of the women’s suffrage movement would be included on the back of the bill instead of a portrait of the Treasury building.

In May 2019, Treasury Secretary Steven Mnuchin delayed the launch of the Harriet Tubman $20 dollar bill to 2028, citing anti-counterfeiting features as the primary reason for the delay. The choice of Harriet Tubman had earlier been criticized by President Trump, who, in 2016, said during a live town hall event that he’d rather keep Andrew Jackson on the $20.

Despite the delay of the new $20 bill, new $10 and $50 notes are still expected to be released in 2020. The final design has yet to be released to the public. The Bureau of Engraving and Printing did not respond when asked to comment on the new $10 bill design.

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How to Send a Remittance, 19 Jul 2019 15:24:45 +0000 has long been a land of opportunity, where people could come from other parts of the world to build a better life. Many of these newcomers work hard to provide money and support for their families back home, boosting both countries’ economies in the process. When you send money this way, it’s known as … Continue reading How to Send a Remittance

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America has long been a land of opportunity, where people could come from other parts of the world to build a better life. Many of these newcomers work hard to provide money and support for their families back home, boosting both countries’ economies in the process. When you send money this way, it’s known as a remittance.

Global remittances reached an all-time high of $689 billion in 2018, according to the Migration and Development Brief from The World Bank and KNOMAD. The majority of that total — $529 billion — was sent to low- and middle-income countries. In 2017, the U.S. sent the most money at around $68 billion. In 2018, India was the largest receiver of remittances at $78.6 billion.

We’ll tell you a bit more about remittances and the different ways you can send one.

What is a remittance?

A remittance is when you send money to a person or a company as payment, including to someone in another country. Remittances usually take the form of electronic transfers, checks or money orders. Most often, remittances are sent by a worker in one country to their family in their home country. When work cannot be found at home, it’s a way to share wages to support those left behind — often in low-income, disadvantaged countries.

Dilip Ratha, lead economist at The World Bank and an author of the brief cited above, sees remittances as much more than just sending money.

“Remittances are a proven way of sharing prosperity between different places,” he said. “They are a highly visible and tangible benefit of international migration for remittance-receiving countries.”

How remittances affect source and receiving countries

For receiving countries, Ratha points to remittances playing an important role in reducing child labor in disadvantaged households across several developing countries. Remittances have also been linked to higher expenditures on education, school enrollment and years of completed schooling.

Not only that, but a 2017 Organisation for Economic Co-operation and Development report demonstrates that immigration is not a fiscal drain for the remittance source countries. “There is a common belief in many countries that immigrants are net beneficiaries of social services, and thus have a negative fiscal impact,” the report states. In fact, the OECD found the opposite to be true. Immigration and remittances have provided a net positive fiscal effect for these countries.

“For remittance source countries, the remittances are derived from the labor, innovation and entrepreneurship income of migrant households,” Ratha said. “In almost every country, the self-employment ratio of immigrants is higher than that of natives with similar education levels.”

Immigrants are also more likely to be represented among inventors and innovators, helping boost the economy. Plus, the immigration of young workers can help ease countries’ strained pension systems.

What are my options for sending remittances?

You have a variety of options for sending remittances, including online services and money transfer services with retail locations that take cash.

Let’s take a quick look at what these services might cost. For example’s sake, let’s say you’re sending $100 from your U.S. bank account to someone in the Philippines, who will receive it in Philippine pesos.

ServiceCost for Online Bank Transfer Cost for Cash Pickup
  • Economy: $0

  • Express: $3.99

  • Economy: $0

  • Express: $3.99

Western Union$0$3.99

How to send remittances online

Technology has given us several different platforms to send money. Plus, it allows you to send money much faster than sending some cash in an envelope across the globe.


TransferWise allows you to send money to your recipient’s bank account in almost 50 countries around the world. Each transfer can be completed within seconds or a few days, depending on your payment type, the country you’re sending to and the country from which you’re sending. You can send a maximum of $50,000 per day with TransferWise.

TransferWise is pretty transparent about what it charges. It notes when it raises prices (last done in June 2019) and breaks down where your money goes. Like other services, TransferWise also offers a pricing calculator to indicate what your transfer will cost from the start. Plus, TransferWise guarantees getting you the best exchange rate it can. You’ll need to create a TransferWise account to use the service.


Xoom, a service from PayPal, operates entirely online. Still, along with international bank transfers, it also allows for cash pickup and even cash delivery. Xoom services are available in over 70 countries.

Xoom’s transfer fee will depend on your payment method, how much money you send, where you send the money and which currency you select for disbursement. You can pay with your bank account, credit or debit card or your PayPal account.


Remitly is a mobile-focused service that offers several options for sending and receiving money. If you’re sending money, you can choose between Express, which uses your debit or credit card to send money in minutes for a fee, and Economy, which sends money within three business days from your bank account at its lowest rate.

If you’re receiving money through Remitly, you can get money sent directly and immediately to your bank or mobile money account, instantly pick up cash at thousands of locations or have money delivered to your home within one to two days.

Remitly connects U.S. users to more than 40 countries.

How to send remittances with cash or money orders

If you’d rather send cold, hard paper, that’s still an option, too. Plus, there are remittance services that make it way faster and much safer now than sending an envelope through the mail.

We looked at what these services cost when sending money from your bank account. Using the same example — sending $100 from the U.S. to the Philippines — here’s a closer look at their fees when you send cash in person.

ServiceCost for Account DepositCost for Cash Pickup
Western Unionn/a$4

Western Union

Western Union has been a big name in the remittance space for decades. While you can transfer money between bank accounts online (and on the Western Union app), you can also visit over 550,000 Western Union agent locations in more than 200 countries to pay for your transfer in cash — and to pick up a payment.


MoneyGram has over 350,000 locations worldwide, reaching over 200 countries. You’re able to send and receive money both online and in person. Look for MoneyGram money order signs at many supermarkets, financial institutions and check cashers. You can also use its fee estimation tool to determine the exact cost of your remittance transfer.


Ria provides access to over 369,000 locations in 149 countries. At its locations and online, you can send money through your bank account, debit or credit card and with cash. Your recipients can then receive payments in their bank accounts, as a cash pickup or delivered to their home.

How (not) to send remittances through banks or credit unions

You may want to steer clear of using your bank or credit union to send a remittance. On average, banks are the costliest channel for sending remittances. In the first quarter of 2019, banks charged an average of 10.9%, according to The World Bank and KNOMAD.

Using your bank may seem convenient, especially since you don’t have to create an entirely new account with a different service. But not all banks even offer this service, so check whether your bank allows you to make international transfers directly from your account, perhaps with a service such as Zelle. Automated Clearing House (ACH) transfers typically don’t come with fees, but you might lose some money with the bank’s high exchange rate.

Another bank option is to send a wire transfer. However, these tend to have really high fees and exchange rates.

Which is the best way to send a remittance?

The best service will largely depend on your resources and preferences. If you’re looking for the cheapest options, sending an online bank account transfer might be your best bet.

“Improved technology is likely to have had a positive impact on formal remittance flows,” Ratha said.

They’re able to lower costs and offer better exchange rates. He adds that the online remittance industry could benefit further from “harmonized regulation and adoption of innovative technologies,” which could lower remittance costs.

Of course, online transfer services have their drawbacks. TransferWise and Xoom aren’t great options if you’re dealing with cash since they don’t accept cash payments. Xoom can be good if you’re sending electronically, but your recipient needs to pick up the cash. The same is true for services including Western Union and MoneyGram.

Using Western Union, MoneyGram and other services like them are handy if you don’t have a bank account. They allow you to make your payment in cash easily at a participating location. Plus, these services have a much wider network than TransferWise and Xoom.

With such a wide selection of remittance services, you’re bound to find one — or two — that you favor over the others. Figure out what it is that you need from a service, whether that’s cash delivery or instant payment. That way, you can better weigh your options and find the right remittance service for you.

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How to Get Out From Under a Bad Car Loan, 19 Jul 2019 15:05:38 +0000 all make mistakes. Maybe you’re struggling to pay your bills, especially your car loan, and are looking for a way to get out from under that burden. Or perhaps you’re doing better financially than when you purchased your car and it’s time to refinance into a better loan. No matter how you got into … Continue reading How to Get Out From Under a Bad Car Loan

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We all make mistakes. Maybe you’re struggling to pay your bills, especially your car loan, and are looking for a way to get out from under that burden. Or perhaps you’re doing better financially than when you purchased your car and it’s time to refinance into a better loan. No matter how you got into a bad car loan or why you want out of it, you always have options.Understanding those options is the first step to improving your financial situation. Here’s what you should know:

How do I know if I have a bad car loan?

If you have a bad car loan, you probably know it. A bad car loan is one that you can’t afford, or that costs you too much money in interest expense every month. If you are struggling to make car payments or are falling behind on your loan, you’re likely in a bad car loan.

What’s important to realize is that circumstances change. You could have taken out a loan on a new pickup truck while you had a good job and could easily make the payments. When you’re unemployed, however, the truck payments become a huge burden. You may even fall behind.

Another possibility is that you could buy a car when you have a thin or damaged credit history, at a high interest rate. A year or two later, when you have a decent credit score, you could do a lot better. A good car loan when you bought the car is a bad car loan now.

If you think you’re in a bad car loan or one that no longer fits your needs, it’s time to start finding ways out of that loan.

What’s a good interest rate for a car loan?

The interest rate level you should consider to be “bad” depends on your situation, primarily your credit score. “The interest rate you pay should not be higher than what you would pay on a credit card,” said Bruce McClary, vice president of public relations and communications at the National Foundation for Credit Counseling (NFCC) in Washington, DC. “Check your credit score and see where you are. Could you qualify for a lower interest rate loan? If you have a credit score in the 700s or 800s, you’ll get a good loan. If it’s in the 500s or 600s, you’ll probably still have to pay a higher interest rate.”

Generally speaking, the higher the interest rate, the more important it is to try to find another solution. “I would say any auto loan that carries an interest rate in the 20% range is something you would want to get out of quickly,” said McClary. “In the teens, in the high end, you should consider refinancing.”

6 ways to get out of a bad car loan

Before you decide how you should get out of a bad car loan, you should decide exactly what you hope to accomplish by doing so. Are you trying to get a lower interest rate, keep your car or not have car payments at all? If you don’t set clear goals, you could get out of one bad loan only to make your financial situation worse.

Once you know what you want to achieve, you can decide which of these options is best for you:

1. Refinance a car loan

If your only car problem is that you took out a loan with a too-high interest rate, either because your credit score was lower or because you didn’t shop around as well as you could have, you should probably refinance your car. In fact, if you have a car loan, it pays to occasionally check that you are still getting the best deal possible on your car loan.

Refinancing with a new lender can help your credit history if you have missed payments on your car loan. “You can get creative, refinancing the amount you owe and flipping it into a new loan,” said McClary. “Then, you’re starting with an account that is healthy.” Bear in mind that if you have missed payments, your current lender has probably already reported negative information to the credit bureaus. That information will stay on your credit history for up to seven years, even after you close the account.

You could also refinance your car loan if you want to change the length of the loan. For example, say you originally took out a 3-year loan, but the payments are too high. You might refinance with a 4- or 5-year loan, instead.

Refinancing a car is almost always a better financial decision than getting a new car to get out of a loan. You generally pay a few fees to refinance, but you avoid paying sales tax on a new car, and you avoid the temptation to buy a more expensive car, just to get out of a bad loan.

Be sure to shop around for a car loan refinance. You can start your search at your local bank or credit union, or online at MagnifyMoney. Fill out an online form, and receive potential refinance auto loan offers from lenders at once, depending on your creditworthiness. Use the auto loan calculator to see how much a car loan should cost, and how much you can afford.

2. Renegotiate a car loan

If you just need help getting back on track, or need to make your payments more affordable, you can talk to your current lender. They may offer temporary hardship forbearance in certain circumstances, which means they can allow you a little more time to catch up.

Another way they may help is by extending the terms of your loan so your payments are lower. Be aware that the longer the term, the more total interest you will pay before your loan is paid off.

3. Pay off a car loan

If you want to keep your car, look for a way to pay off or pay down your car loan. You may have savings you could use, if you can do so without jeopardizing your emergency fund and other goals.

Avoid taking money out of your retirement account. For one thing, you could owe a hefty penalty and taxes to the Internal Revenue Service. For another, retirement funds are for retirement.

You could also sell investments or other vehicles to pay off your loan, or work extra hours. Even if all you can do is make extra payments on your principal every month, you will pay off your car loan more quickly, and save a significant amount of interest expense.

If you don’t want to keep your car; for example, if your household has two cars and can get along with one, you can sell your car to pay off the loan. You’ll get the best price if you sell your car yourself. Be aware that you need to gain enough from the sale to pay off the loan, or come up with the difference yourself.

4. Trade in a car to get rid of a bad loan

If you need a new car anyway, you could trade in your old car as a down payment on a new one. The advantage of getting out of your car loan and car ownership, this way is that it’s easy. The dealership is motivated to sell you another car, so they’re almost certain to take your old car. They may even take it if you’re underwater on your current loan — if you owe more than it’s worth — and roll the excess amount you owe into your new loan.

Trading in your car can be a good idea if you are hesitant to try and sell your car yourself, and you need a more reliable or different car.

It is not a good idea for people who might use a bad car loan as an excuse to trade up to a more expensive car that strains their budget and prevents them from ever paying off a car or reaching other financial goals.

If you trade in your car, make sure you get the best loan you can get. Check your credit score before you go car shopping, and make any improvements to your score before you shop for a loan. Don’t just take financing at the dealership without comparison shopping the loans first.

5. Surrender the car to the lender

If you’re in financial trouble and you can’t keep up your car payments, one option is to give up your car. You can drive your car to the lender, or wait for them to come and get it.

Either of these options should only be a last resort. “You can turn in the car,” said McClary. “They’re holding it as collateral. You can give them the keys and say, ‘Here. I can no longer afford it.’”

The problem with turning in your car is that it is a “voluntary repossession.” If you owe more on the car than the car is worth and you can’t pay the excess amount (which is likely if you can’t afford your payments), it may harm your credit history and score. You should also be prepared to keep making your car payments until they sell the car, if possible. “You need to talk to someone immediately about clearing it,” said McClary. “Your credit won’t get any better unless you continue to make payments until they sell the car.”

Whether you turn in your car voluntarily, or you miss payments and they tow it out of your driveway, the repossession will be reported on your credit report.

The lender can sue you for the deficiency, or the difference between the amount you owe and the amount the car is worth, less the expenses of selling the car. So it’s possible you can lose or turn in your car, and still have car payments. And now your credit report is damaged, so any car loan you get will likely carry a high interest rate.

6. File for bankruptcy

If your finances have reached a point where you cannot pay your bills and you don’t see any other way out of debt, you may need to consider bankruptcy.Chapter 7 or Chapter 13 bankruptcy can actually help you keep your car, which can be important if you need it to get to work and earn a living.

Filing for bankruptcy doesn’t get you out of a car loan, however. You must continue payments on your car loan to keep your car in bankruptcy. However, filing for bankruptcy can give you relief from collection efforts by other creditors, making it easier for you to keep up with your car payments.

If you are considering bankruptcy and you want to keep your car and car loan, you must indicate to the court that you want to “reaffirm” the debt. By reaffirming, you promise to pay your car loan as if you had not filed for bankruptcy, in exchange for keeping the car. You must show that you can afford to make the payments and that the vehicle is necessary. Your ability to keep your car may depend on your equity in it, and your state law. If you reaffirm the debt, but fail to make the payments, you can still lose the car.

Alternatively, you can surrender your car in bankruptcy. In a Chapter 7 bankruptcy, this wipes out your debt. You may be able to keep your car until the bankruptcy is finalized.

Remember your long-term goals when getting out from under a bad car loan

It’s easy to think about short-term fixes to financial problems. And getting through this month and the next is important. Try to choose a path that lowers your interest expense and total debt, if possible. Avoid decisions that can harm your credit history. Your long-term financial health depends on taking a longer-term view as you decide on the best way to get out of your bad car loan.

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