Installment Loans for Bad Credit

shutterstock_199820666You need a loan and are looking into your options. While looking, you may have come across the option of installment loans. Let’s take a closer look at that option.

What are installment loans?

Installment loans are when you repay a loan over a set period of time with a set number of scheduled payments. This means there are normally at least 2 payments, but the loan term varies depending what you are paying off. Loan terms can be as short as a few months or as long as 30 years. A mortgage is a common type of installment loan. For installment loans, you have to figure out the loan term and the repayment by working with the lender. The amount and term length depend on what you can afford and what you are paying off.

In order to get an installment loan, lenders will look at your credit score, annual income and your debt-to-income ratio. If you have a bad credit score, you can still shop around for installment loans, but you may have a higher interest rate. However, if you make all your payments after receiving an installment loan, you can improve your credit score.

Benefits of Installment Loans

There are several good things about getting an installment loan. The major factors include that you have the option to pay over a longer period of time which can give you significantly lower payments. You also will have the same monthly payment every month because the interest rate will be fixed into you payment. This type of loan also gives you the ability to improve your credit score because you have the opportunity to make consistent timely payments that will improve your credit history.

What Goes Into Your Credit Score?

Financing_imageThere are lots of free websites you can go to in order to calculate your FICO score. Your FICO score brings out the important information in your credit report to see if you are a well-qualified buyer. FICO is simply one way to determine a credit score, and it is one of the most common ways. In this measurement, they take into account the important factors of your credit, so if you have a good FICO score that reflects you very well.

Like previously stated, you can go to many different websites to calculate your credit score, but it is important to know what makes up your credit score because that way you can look to improve it in order to get better financing options and lower interest rates.

What Makes Up a FICO Score

A FICO score is made up of 5 categories. These categories include Amounts Owed, Payment History, Credit Mix, Length of Credit History and New Credit.

The weight of these categories may vary a little bit depending on how long you have been using credit. However, generally Payment History is worth 35% of your total score and it is based on your history paying back debt. The Amounts Owed generally takes up 30% of your FICO score and that is determined by the amount in total that you owe. Just because you owe money does not mean you will be high-risk for making payments, but the FICO looks into how much you owe all-around.

The last three categories have to do with the credit lines you have currently. The first, Length of Credit History accounts for 15% and accounts for how long your credit accounts have been established and the age of all your accounts. Credit Mix is 10% and it consists of all of the credit cards, retail accounts, loans or any other debt you have. New Credit accounts for 10% of your score as well and this simply tracks how much new credit you have accumulated recently. Opening a lot of new accounts in a short period of time can indicate a greater risk.

When you go to look up your credit score, it is important to know what it consists of. Having a high credit score is important because it can open doors for you financially. Make sure you are informed and up to date on your credit score and credit history.

What Happens If I Can’t Make My Car Payments?

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If you know you won’t be able to make your car payment this month, the important thing to do is to be proactive. Life happens and unexpected financial situations occur, but it is important to act now instead of waiting until you have missed several payments.

The first thing you should do if you know you can’t make a payment is to contact your lender. It may seem scary, but your lender should be able to help you work something out. You may be able to get your lender to defer your payments for a month or two if your financial situation is short-term.

If you are having more long-term financial struggles, you will want to talk to your lender about extending your loan term so you can make lower payments each month. This will mostly likely increase your interest rate, but it will give you payments that you can afford to make.

You can also look into selling your car. Whether or not you want to do this depends on how much the car is worth and how much you still owe on the car. You are still responsible to pay back the loan, but if the car is worth around the same amount as what you owe, selling the car could help you cover the cost of the loan.

Ultimately, if you can’t work something out and you can’t make your payments, you will face repossession. This is something to try to avoid because it very negatively affects your credit score. However, there are options for you before repossession. Be sure to talk to an expert and consult your lender to try to find a situation that works best for you and your life.

Consolidating Debt

IMG_1109If you are havinng a hard time making multiple payments every month toward your debt and expenses, you may want to consider debt consolidation. Debt consolidation is when you combine your multiple payments into one payment. The idea of this is that it is easier to keep track of your debt and it will help you get out of debt faster.

There are a couple things you can do if you are looking into consolidating debt: debt management plans and consolidation loans.

Debt Management Plans

This type of a consolidation solution is usually offered by credit counseling organizations. The idea is to review your finances and budget and come up with a plan that is unique to you. The credit counselors will work to give you an affordable payment plan. You do have to make your payments regularly and on time to stay with the management plan.

Consolidation Loans

A consolidation loan is when you take out a loan against a larger asset like a house to pay off your high interest debts. This method can be risky because you could lose the asset securing the loan. However, you can probably get a lower interest rate than you currently have on your debts because you have the asset as collateral.

You will want to consider both of these options as well as any other options you have to get out of debt. You don’t want to have that debt hanging over your head, so now is the time to change that!

What Happens to Your Auto Loans When You File for Bankruptcy?

You may have run into hard times and you might be considering filing for bankruptcy. There are a lot of questions that you will want to ask yourself before filing for bankruptcy, but one important one is what will happen to you auto loan and your vehicle if you file?

There are two main types of bankruptcy to consider Chapter 7 and Chapter 13. Both of these have different rules when it comes to vehicles and auto loans, so check out the information below to stay informed on your options.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is when you give up a lot of your property to have your debts discharged. With auto loans, you have three options in Chapter 7 bankruptcy.

Reaffirming the Car Loan – In this situation, you will sign a contract to continue paying off the car loan as you have been before bankruptcy.

Redeeming the Car – This would be that you have to pay the lender the current market value of the vehicle all in one payment.

Surrendering the Car – If you cannot afford either of the above options, you will need to surrender the vehicle and your debt will be discharged.

Chapter 13 Bankruptcy

During Chapter 13 bankruptcy, you use a repayment plan to pay off most of your debts in one payment. There are a couple of options for you if you want to keep your car and your auto loan.

Repayment Plan – The repayment plan for Chapter 13 bankruptcy helps you pay off your debt with your money excluding necessary living expenses. Your car, in most cases, will be a necessary living expense; however, if you own a luxury car, it may not qualify as a necessary expense.

Cramdown – If you qualify for a cramdown, it can be a good deal for you. This helps you reduce your loan balance so it is the same as the current value of the car. Then you will be able to get rid of some of your car loan.

Get Out of Debt Game Plan

It’s finally fall and football season. You know your favorite team has a game plan for the season, but do you have a game plan to get out of debt? Debt could seriously be holding you back from your life and getting the most out of it. Being in debt doesn’t necessarily mean you’ve been financially irresponsible, but it will take some focus and a plan to get out of debt. Check out our game plan below and apply it to your debt and your life today.

Stop Borrowing Money

The first thing you have to do if you ever want to get out of debt is to stop borrowing. Immediately. If you are serious about turning around your debt, you have to stop making it larger, so that means no more signing up for credit cards or buying things you really can’t afford.

Establish an Emergency Fund

This is also a very important step. Establishing an emergency fund can help make sure you don’t go further into debt. Your debt may have started with an emergency; maybe you needed to pay for medical bills or a car to get to work because yours broke down. These may seem innocent enough, but if you start putting all these emergencies on your credit cards it can put you in debt quickly. If you establish an emergency fund right away, you can use that to help you not fall back into debt should an emergency occur.

Organize Your Debt

The next step is to actually look at the debt you have a decide where to go from there. Many people start by listing all of their debts smallest to largest. Then, they make large and frequent payments on the smallest debt until it is gone. They continue that process until they are debt free. The advantage of starting with your smallest debt is that you can pay it off quickly, which not only keeps you motivated to paying off your debt, it gets rid of an interest rate all that much sooner.

A big factor to consider when paying off debt is the interest rate. If you can, you will want to make payments larger than the minimum because then you will be done with your payments sooner, and you won’t have to pay as much in interest.

Create a BudgetIMG_1109

This step is important because it is making sure you are tracking where your money is going. If you set up a realistic budget and stick to it, you will be able to cut out unnecessary expenses and make larger payments on your debt.

Debt is not something you want hanging over your head. Use this Game Plan to get out of debt and stay out of debt.

 

Online Tools to Help you with Personal Finance

Want to get your personal finances in order? Need a little help? Don’t worry there is plenty of technology to save you. Check out these online resources and apps to make your finances a lot easier to handle.

Mint or YNAB:

Having a budget is very important to any personal finance goal or dream you may have. These two tools are personal budgeting websites and apps. They both help you track what you spend your money on and create goals for the future. A budgeting tool can help you meet financial goals and take charge of your personal finances.

FileThis:

Tracking your bills, online accounts and payments can seem overwhelming. FileThis allows you to store documents, bills and online statements all in one convenient place. This website also lets you set up bill reminders for due dates to make sure you are staying on top of all of your payments.filethis

HelloWallet Emergency Savings Calculator:

An emergency savings may not seem like an important priority, but having one can help you stay out of debt. Unforeseen things happen every day and you don’t want to get caught not having the money to pay for it. This tool uses your income and other factors in your life to determine the exact amount that YOU need to have in your emergency savings. This calculator customizes emergency savings to your life with a couple easy questions, so it is a great thing to check out.hellowallet

Getting where you want to be financially can seem like a lot of work, but if you use tools like these it can be much easier to manage your personal finances. What is your favorite online financial tool?

Types of Bankruptcy

IMG_1109Bankruptcy can sound scary, but it might be something you have to consider at some point. It can be a tough decision to make because it will have a dramatic impact on your life. It is important to research the different types of bankruptcy to find out what your options are.

Chapter 7

This is the most common type of bankruptcy, and it is for people with little to no income. Chapter 7 bankruptcy generally lasts from 3 to 6 months. This type of bankruptcy allows the individual to retain household goods and clothing, and also sometimes your home and vehicle. Once Chapter 7 bankruptcy is complete debts have been discharged.

Chapter 13

Chapter 13 bankruptcy lasts a little bit longer. This bankruptcy can last between 3 to 5 years. This bankruptcy is for people with a regular income who can pay back a portion of their debts through a repayment plan. In this plan, you get to keep all of your property as you pay back your debts. Chapter 13 is often referred to as reorganization bankruptcy because you can catch up on missed payments.

Knowing your options is the first step to fixing financial issues you may be having. There are resources out there for you to use, so make sure you find the information you need to get where you want to be financially.

How Do I Budget?

I’m sure you’ve heard that budgeting is a thing that people do, but have you ever done it yourself? Have you ever looked closely at where your money goes, or does it just kind of disappear before your eyes? If you are like a lot of people, you have probably never sat down and completed a budget, but this practice is becoming more and more popular because people want to have more control over their money. If you are ready to take control of your finances, budgeting may be something for you!

We put a budget worksheet below to get you started. Budgeting doesn’t have to be complex or scary, it can be as simple as filling out the worksheet below. The top half of this worksheet is ‘Fixed Expenses’ so these expenses will be the same every month. All you need to do is fill in the amount of money that you spend on each category every month.

 

budget worksheet 2

The second section is ‘Variable Expenses’ so this will be a little different. This is also the most important part of your budget. Variable Expenses are so titled because they can change every week or every month; you won’t always spend the same amount on these items, but by creating a budget you can try to spend a similar amount and keep those expenses low. Things like going out to eat or drink can end up costing us a lot of money. We hardly even notice it in the moment, but it really adds up! That is why a budget can be beneficial.

For the ‘Variable Expenses’ you will want to try to estimate how much you spend in these categories. You may not be able to be precise the first month you try, so you budget for ‘Variable Expenses’ could end up changing. However, eventually you will know how much you spend and then you can work to decrease that spending slightly. You might not notice if you go out to eat one less time a month, but you will save a significant amount of money if you incorporate things like that into your life and your budget.

Also, if you find you have extra expenses that aren’t on this worksheet, like a car payment or a certain amount of money you want to save every month, you can simply add those categories in. Tracking your spending and trying to limit your Variable Expenses can help you take control of your money. Then you can spend it on things you really need or want. Use this worksheet to give budgeting a try!

What is a Debt-to-Income Ratio?

It IMG_1109just makes sense that you need to be making more money than you’re spending on bills, debts and loans, but how much more money do you need to make? And what does that look like? Along with a credit score, a debt-to-income ratio is a number you should know when looking at personal finances and taking out loans.

Debt-to-Income Ratio

A debt-to-income ratio is a number that lenders use to measure your ability to repay the money you have borrowed. To calculate your ratio, you will add up all your monthly payments and divide that total by your gross monthly income.

A lender often looks at your debt-to-income ratio to determine whether or not you will be able to make your monthly payments. A low ratio indicates a good balance between your debt and income, so it means you will likely be able to make your payments. However, the higher the ratio is, the more of a risk it is for the lender to loan money to that borrower.

A debt-to-income ratio is another number you will want to know before going to get a loan. The best thing you can do is be knowledgeable about your options so you can pick the loan that is right for you.

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