LOANSLOANS

What do you need to get What do you need to get a loan?a loan?

Credit is the most influential factor Credit is the most influential factor in a lender’s decision to grant a in a lender’s decision to grant a loan.loan.

What is Credit?What is Credit?

Credit is your financial reputation.Credit is your financial reputation.

FICO ScoreFICO Score

FICO – Named for the FICO – Named for the score’s developer, Fair score’s developer, Fair Isaac Corporation.Isaac Corporation.

FICO score ranges from FICO score ranges from 350 to 850.350 to 850.

Scores between 675 – 850 Scores between 675 – 850 are considered good credit.are considered good credit.

Scores less than 600 are Scores less than 600 are considered poor credit.considered poor credit.

FICO ScoreFICO Score

You can buy your score from one of the You can buy your score from one of the three major credit reporting three major credit reporting companies:companies: EquifaxEquifax ExperianExperian TransUnionTransUnion

How To Improve Your How To Improve Your ScoreScore

Establish credit by obtaining some form of Establish credit by obtaining some form of loan.loan.

Be punctual and Be punctual and CONSISTANT!CONSISTANT! Check credit report often.Check credit report often. Keep debt in check.Keep debt in check. Avoid excessive inquiries.Avoid excessive inquiries. Keep accounts open.Keep accounts open. Keep a healthy mix (mortgage, credit card, Keep a healthy mix (mortgage, credit card,

a car loan, and perhaps a retail card)a car loan, and perhaps a retail card)

How Mistakes Affect How Mistakes Affect Your ScoreYour Score

Five C’s of CreditFive C’s of Credit

Capacity – annual income?Capacity – annual income? Character – will you repay the Character – will you repay the

loan?loan? Collateral – do you have assets?Collateral – do you have assets? Capital – what are you worth?Capital – what are you worth? Conditions – what are the lenders Conditions – what are the lenders

expectations and terms of the expectations and terms of the loan?loan?

Debt-to-Income RatioDebt-to-Income Ratio

Debt-to-income ratio measures the amount Debt-to-income ratio measures the amount of debt you have compared to how much of debt you have compared to how much money you make.money you make.

30% or less: This is the ideal level of debt. 30% or less: This is the ideal level of debt.

30% to 40%: Still credit worthy.30% to 40%: Still credit worthy.

41% to 49%: Hard to get credit at this level.41% to 49%: Hard to get credit at this level.

50% or more: GET HELP!!!50% or more: GET HELP!!!

Calculate Debt-to-Calculate Debt-to-Income RatioIncome Ratio

Debt:Debt:

Monthly mortgage or rent ______Monthly mortgage or rent ______

Minimum monthly credit card Minimum monthly credit card payments ______payments ______

Monthly car loan paymentMonthly car loan payment ______ ______

Other obligations ______Other obligations ______

Total monthly debt payments: ______Total monthly debt payments: ______

$850

$60$190

$75

$1,175

Calculate Debt-to-Calculate Debt-to-Income RatioIncome Ratio

Income:Income:

Monthly gross salary ______Monthly gross salary ______

Other monthly income ______Other monthly income ______

Total monthly income ______Total monthly income ______

Debt-to-Income Ratio:

Total debt ______ divided by total income ______

= ______

$1,175

$2,950 $90$3,040

$3,040

38.65%

Get Pre-ApprovedGet Pre-Approved

The best time to arrange The best time to arrange financing is before you go to financing is before you go to the dealership.the dealership.

Advantages of Pre-Advantages of Pre-ApprovalApproval

Gives you confidence and the upper-hand Gives you confidence and the upper-hand when negotiating a price at the dealership.when negotiating a price at the dealership.

Ensures that you don’t buy more than you Ensures that you don’t buy more than you can afford.can afford.

Provides an opportunity to find the best Provides an opportunity to find the best interest rate available – rather than relying interest rate available – rather than relying on dealers who have may have a hidden on dealers who have may have a hidden agenda.agenda.

Buying a CarBuying a Car

Things to avoid while shopping for a car:Things to avoid while shopping for a car:

1. Do not show enthusiasm! Dealers take 1. Do not show enthusiasm! Dealers take advantage.advantage.

2. Never buy a car in a hurry!2. Never buy a car in a hurry!

3. Do not give the salesman collateral.3. Do not give the salesman collateral.

4. Avoid being switched to a lease without 4. Avoid being switched to a lease without doing your homework.doing your homework.

5. Do not trade in your car without knowing 5. Do not trade in your car without knowing its value in advance.its value in advance.

6. Avoid financing automatically at a 6. Avoid financing automatically at a dealership.dealership.

Consider Buying a Used Consider Buying a Used CarCar

Benefits of Used CarsBenefits of Used Cars Used cars do not depreciate as rapidly Used cars do not depreciate as rapidly

compared to new cars.compared to new cars. One year old vehicles are about 20-30% One year old vehicles are about 20-30%

cheaper than new ones.cheaper than new ones. Used vehicles are sometimes still covered Used vehicles are sometimes still covered

by extended warranties.by extended warranties. You can trace the history of the car using You can trace the history of the car using

the Vehicle Identification Number (VIN).the Vehicle Identification Number (VIN). Some CU’s offer new car rates on used Some CU’s offer new car rates on used

vehicles.vehicles.

Buying UsedBuying Used

Have an independent mechanic check out Have an independent mechanic check out a used car before you buy it. a used car before you buy it.

Ask questions – pay attention to road Ask questions – pay attention to road noise, handling, brakes, seating comfort, noise, handling, brakes, seating comfort, etc.etc.

Order report on used vehicle from Order report on used vehicle from carfax.comcarfax.com

Using the WebUsing the Web

Web sites make car shopping a little Web sites make car shopping a little easier. Do your homework on sites easier. Do your homework on sites such as KellyBlueBook.com. such as KellyBlueBook.com.

Check online customer satisfaction Check online customer satisfaction and safety ratings.and safety ratings.

Web sites are good for researching, Web sites are good for researching, but not necessarily for car buying. but not necessarily for car buying. Be careful, and only deal with people Be careful, and only deal with people you can trust.you can trust.

Auto Dealer ExtrasAuto Dealer Extras

Extended WarrantiesExtended Warranties Fabric and Paint ProtectionFabric and Paint Protection RustproofingRustproofing Maintenance PlansMaintenance Plans Ding ProtectionDing Protection GAP InsuranceGAP Insurance

Everything is NegotiableEverything is Negotiable

Consider asking for all these “Extras” Consider asking for all these “Extras” for free…for free…

You Can Always Buy You Can Always Buy “Extras” Somewhere Else“Extras” Somewhere Else

Extras at a car dealership are like Extras at a car dealership are like extras at a movie theater…they are extras at a movie theater…they are WAY OVERPRICED!WAY OVERPRICED!

Remember: You can always Remember: You can always purchase extras from your bank, purchase extras from your bank, credit union, or insurance agent at credit union, or insurance agent at about half the cost!about half the cost!

Beware of “Bait and Beware of “Bait and Switch” TacticsSwitch” Tactics

It’s not unusual for dealerships to use “bait and It’s not unusual for dealerships to use “bait and switch” tactics to get consumers in the door, only switch” tactics to get consumers in the door, only to find that what they thought was true, isn’t.to find that what they thought was true, isn’t.

Things to watch for:Things to watch for: 0% Financing0% Financing Manufacturer RebateManufacturer Rebate Outstanding pricesOutstanding prices

If it sounds too good to be true, it most likely is…If it sounds too good to be true, it most likely is…

InsuranceInsurance

First time auto buyers usually First time auto buyers usually overlook the cost of insurance when overlook the cost of insurance when purchasing a vehicle. It can be very purchasing a vehicle. It can be very expensive. expensive. Sometimes your monthly Sometimes your monthly insurance payment can equal your insurance payment can equal your car payment.car payment.

Remember the following coverages when shopping for a new car…

Does not equal

Insurance CoveragesInsurance Coverages LiabilityLiability (Required) – covers bodily injury, and (Required) – covers bodily injury, and

damage to property of others that you are found damage to property of others that you are found liable for in an accident. Make sure you carry liable for in an accident. Make sure you carry adequate limits. The minimum coverage required by adequate limits. The minimum coverage required by the state is often too low. the state is often too low. You are responsible for You are responsible for whatever your insurance company does not pay.whatever your insurance company does not pay.

CollisionCollision (may be required by your lender) – covers (may be required by your lender) – covers damage to your vehicle, minus your deductible.damage to your vehicle, minus your deductible.

ComprehensiveComprehensive (may be required by your lender) – (may be required by your lender) – covers miscellaneous damage to your vehicle, minus covers miscellaneous damage to your vehicle, minus your deductible. For example, if you hit a deer or if your deductible. For example, if you hit a deer or if your car is stolen.your car is stolen.

Cost of InsuranceCost of Insurance

Here are a few factors that affect the Here are a few factors that affect the cost of insurance:cost of insurance: Gender (males cost more to insure)Gender (males cost more to insure) Residence (some cities have more Residence (some cities have more

accidents)accidents) Grades (you can get a good student Grades (you can get a good student

discount)discount) Type of vehicle (sporty models cost Type of vehicle (sporty models cost a a

lotlot more) more) Insurance coverage and limitsInsurance coverage and limits Driving recordDriving record

Male Car AccidentsMale Car Accidents

Female Car AccidentsFemale Car Accidents

How to Decrease the How to Decrease the CostCost

Shop around.Shop around. Consider a higher deductible.Consider a higher deductible. Drop collision and/or comprehensive Drop collision and/or comprehensive

coverage on vehicles worth $1,000 or coverage on vehicles worth $1,000 or less (check with your lender first).less (check with your lender first).

Buy a low profile car.Buy a low profile car. Take advantage of discounts (low Take advantage of discounts (low

mileage, auto seat belts, airbags, multi-mileage, auto seat belts, airbags, multi-vehicle, no accidents, driver training, vehicle, no accidents, driver training, good student, anti-lock brakes).good student, anti-lock brakes).

Monthly Car BudgetMonthly Car Budget

You should consider the following You should consider the following factors when planning a monthly factors when planning a monthly budget for your vehicle:budget for your vehicle: GasGas Oil changesOil changes MaintenanceMaintenance InsuranceInsurance Car paymentCar payment

DepreciationDepreciation

Depreciation is the invisible cost of Depreciation is the invisible cost of ownership. In the first year of ownership. In the first year of ownership, your vehicle may lose ownership, your vehicle may lose 20% of its original value due to 20% of its original value due to depreciation. By the end of the fifth depreciation. By the end of the fifth year, your vehicle’s value drops by year, your vehicle’s value drops by an average of 35%.an average of 35%.