low rate loans

Why Do I Need To Get Preapproved For A Loan?

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Q: I’m in the market for a new home, and everyone I talk to, from friends to financial Home with Sold Sign in frontadvisors, suggests I get preapproved for a mortgage before I start house hunting. Why is this so important?

A: You’re actually on the receiving end of great advice. When looking to take out a large loan, whether it’s for purchasing a home or buying a car, having that preapproval in hand before you start your search is crucial.

Depending upon the type of loan, the process of getting preapproved for a loan can take time. The lender will begin by asking for your financial history and other personal information. If you have a co-borrower, the lender will need this information about them as well.

You’ll be asked to provide your Social Security Number (SSN) and for permission to allow the lender to access your credit report. If the information you provide is satisfactory, as is your credit report, the lender will begin constructing the details of your loan. When they have determined how large of a loan you will be eligible for, they will grant you a preapproval letter. The letter will also detail your estimated interest rate on the loan, though that will sometimes also depend upon the specifics of your purchase, such as the year and condition of a car or appraisal on a home.

Having your preapproval letter will shorten the loan process significantly when you’re actually ready to take out the loan. However, that is only a small benefit of getting preapproved before you start “shopping.”

Here are some other advantages of getting preapproved for a loan:

1.) You’ll know what you can afford

Your preapproval will tell you exactly what you can afford. This way, you’ll avoid being disappointed later when you have your heart set on a certain home only to be told you can’t swing it financially. Knowing how large a loan you’ll qualify for will simplify your search and get you into your new home or car sooner.

Be sure to calculate other monthly costs, such as property taxes, home insurance and increased auto insurance rates when determining the actual amount of money you’ll need to shell out each month.

2.) Don’t get taken for a ride

Picture this scene at a car dealership:

Salesperson: So, you’re here to buy a new car! What are you looking for?

You: Well, I want something with a smooth ride and –

Salesperson: Got it. And how much of a monthly payment can you afford?

You: Weeelll, I think I can swing up to $200 a month, but I’d rather something closer to $150 if you —

Salesperson: Step right this way please! Let me show our new line of Camrys at just $205 a month! They have the most luxurious feel and the ride is smooth as butter!

What happened here is, quite simply, a salesperson looking to make the most money out of a customer. When you’re unsure about how much you can spend, the dealer will capitalize on your uncertainty and try to sell you a car that just barely skims the maximum amount you’ve decided you can afford.

Also, when you name a monthly payment you can manage, the dealer will work with that number instead of talking about the price of the car. They may try to inflate the payment with charges and fees just because they fit within your named payment amount.

In contrast, when you show up at the dealer with a preapproval in hand, the salesman will have to show you cars with price tags that fit within your loan amount.

Don’t get taken for a ride; get your preapproval before you set foot in the dealer shop!

3.) Be taken seriously

A car dealer will take you a lot more seriously when you wave that preapproval in their face, since having that information in hand shows you’re ready to buy.

When purchasing a home, the same rule holds true. A realtor will be able to assist you more efficiently when you know exactly how much house you can afford. They may also give you better service since you’re showing that you’re serious about buying a home. In fact, many realtors refuse to show homes to buyers who don’t have a preapproval in hand.

4.) Know you have financing you can trust

When you show up at the car dealership with a preapproval from your credit union, you know the deal is in your best interest. Many auto shops have access to several financing options and they’re almost always going to put customers into financing options that are in their own wallet’s best interests.

5.) Purchase your dream home

A preapproval makes you a valuable customer. It also helps you stand out from the pack. If you’re looking to buy a home in a competitive market, you may be competing with several other buyers for the same house. Having your preapproval will give you a leg up on bidding wars. A seller will be more eager to work with someone who’s already started the mortgage process. You can end your search sooner with a preapproval!

In the market for a new home or car? Don’t forget to call, click, or stop by Destinations Credit Union to hear about our fantastic rates on mortgage and auto loans!

Your Turn: Based on your own experience, why do you think it’s important to get preapproved for a loan? Share your thoughts with us in the comments!

SOURCES:
http://www.investopedia.com/mortgage/pre-approval/ 
https://www.nerdwallet.com/blog/loans/advantages-of-getting-pre-approved-for-a-car-loan/
https://www.google.com/amp/s/www.zillow.com/mortgage-learning/pre-approval/amp/

Feeling Stuck In Your Car Loan? Might Be Time To Shop Around!

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Bills are a lot like bad weather. They’re going to come anyway, so you might as well not try to fix them, right? For some bills, that’s the case. For others, though, you can make a big difference in your monthly budget with a little legwork. 

One of the bills you can change is your car payment. Refinancing your vehicle loan can lead to a lower monthly payment, a shorter term, or both! It depends on a wide range of factors, including the value of your vehicle, how much you owe on your current loan, and your credit standing. 

If any of these factors have changed since you bought your car, you owe it to yourself to check out your refinancing options. Let’s look at some common life changes and when they might be cause to look at refinancing. Read on to learn about three scenarios where refinancing makes sense for your car or truck:
 

1.) Your credit improves
One of the biggest factors in determining your auto loan status is your credit score. When your lender is building a loan package, a credit report is pulled as a central part of that process. That number helps define your interest rate, whether or not you’ll have to pay a premium for insurance, and what other fees your lender might charge.
It’s worth keeping a copy of the credit report your lender pulled. That can let you see if your credit score has improved. It can take as little as nine months of steady repayment to boost your credit score, and that could result in a cheaper loan if you refinance.
If you didn’t have much experience with credit when you purchased your vehicle, refinancing can do you a world of good. Interest rates as high as 18% are common for borrowers who have little to no credit history. Having even a few months of solid payments on your side can cut that rate in half or more.
2.) You didn’t shop around before you borrowed
Many people feel railroaded throughout the car-buying process. They pick a car they like, then they are told what the price is, what the monthly payment is and everything else. It may seem like the choice of lenders for your car loan is predetermined.
Dealers tend to have a smaller range of lenders with whom they work exclusively. Those lenders know they have limited exposure to competition, so they can charge slightly higher fees and interest rates. By doing your own comparison shopping, you can save quite a bit on both the loan and any ancillary insurances or warranties you may have purchased. Dealer rates tend to be 1 to 1.5% higher than those offered at smaller lenders, like credit unions.
If you’ve never shopped around for a car loan, it’s definitely worth doing. By getting multiple offers, you can ensure you’re getting the best price available for your loan. Try to do your shopping inside a 15-day period. Otherwise, the multiple checks on your credit could negatively impact your credit score.
3.) You need to change your monthly payment
You may be in a much better financial situation now than when you bought your car. You may have a better job or more security. You may have paid off credit card or other debt. All of these things free up how much you can pay per month.
Most people don’t go into the refinancing process looking to increase their monthly payment, but you can save yourself money in the long term by committing to a faster repayment plan. If you can afford to pay more per month now, you can pay off the balance on your car faster. Shorter term loans usually also have lower interest rates, since the lender assumes less risk in making the loan. Once the car is paid off, you’ll have all that money to devote to other saving or spending priorities.
On the other hand, if money is tight, it might be a good idea to refinance into a longer term. While you might end up paying more in interest, you can reduce your monthly payment and save the money you need right now.
Your Turn: What do you do to save money on your car payment? Let us know your best tips and tricks in the comments, and don’t forget to stop by Destinations Credit Union to find out how refinancing can improve your financial life!
SOURCES:
http://www.bankrate.com/loans/auto-loans/10-steps-to-your-best-deal-on-a-car-loan/
http://abcnews.go.com/Business/long-improve-credit/story?id=33695732
https://www.learnvest.com/knowledge-center/ask-credit-karma-how-does-my-auto-loan-refinance-affect-my-credit/
https://www.creditkarma.com/article/refinancing-credit-effects
http://www.bankrate.com/auto/5-situations-when-it-makes-the-most-sense-to-refinance-your-car/ 

The Government’s $3 Trillion Dollar Plan

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So, whatever happened to that interest rate hike?  It was supposed to happen all spring, then all summer, and now we’re supposed to be fully confident that the Federal Reserve is going to raise interest rates by the end of 2015.  But so far, it hasn’t.  On one hand, that’s great news: You still have time to lock in a fixed-rate mortgage or take out a low, fixed-rate home equity loan to pay off those credit cards before the rates go up. By the way, if you’re interested, that’s only a click away.  

On the other hand, it’s a little worrisome.  Raising the prime interest rate is how the Fed tells us that the economy is doing well and it’s time to save money.  So, why haven’t we seen an interest rate hike? The answer is more interesting than you might think, because it involves a multinational chain of events and a $3 trillion gamble with your tax dollars on an interesting new idea. It’s an idea that falls somewhere between efficiently practical and boringly immoral, just as many decisions often are when they’re made by folks who have spent too much time staring at spreadsheets and not enough time breathing fresh air.

To explain what’s going on, we need to flash back six years.  At the height of the financial crisis, the two biggest concerns for the long-term future of the American economy were the resiliency of the big banks and the incredible number of home foreclosures.  If the banks couldn’t get their balance sheets straight, they couldn’t loan money, which would mean that anyone who wanted to buy a home, start a business, or go to college would suddenly find themselves without a loan to do so. Meanwhile, those on the brink of foreclosure, trying to keep their businesses afloat or finishing their education might lose everything they’d worked to acquire.  Of particular concern to the government were American homes, because our homes represent the largest part of our wealth, are essential to our well-being and buoy our retirement accounts.  Unfortunately, investment products built on inadvisable home loans were the centerpiece of the financial crisis, making the protection of our mortgages a difficult task.

The government’s solution was to bail out the banks, but to do so in a way that we hadn’t tried before.  Normally, the Fed puts money into the economy by buying government bonds from banks by using money it creates on a computer in its offices.  Fed managers tap on their keyboards, change a few spreadsheets, and poof, money is created.  In the aftermath of the financial crisis, however, they decided to create money by buying mortgage bonds, which made it easier for government money to flow to beleaguered homeowners, thereby protecting Wall Street and Main Street at the same time.  

However, the Fed can’t just create money without enduring some repercussions. Usually, it has to either remove the money from the economy over time, which can slow down an economic recovery, or watch as inflation eats away at the value of the dollar, causing people to dip into their savings and work harder for less actual pay. Neither option is fantastic.
This time, the repercussions could be even worse.  Because the Fed has tied the $3 trillion it created over the last six years to mortgage bonds, removing the money could cause a spike in mortgage rates. After all, that $3 trillion has been paying part of your mortgage for the last six years; that’s a profit for your lender that’s been passed on to you.  If the Fed chose to remove the $3 trillion and raise interest rates, we could see a spike in mortgage rates that all but guarantees young people will rent their homes for their whole lives.  If you were planning on selling your house in time for retirement, it could cripple the value of your home, because the same buyer who had $250,000 wouldn’t have more money, but they would have to pay more to their lender.  Not fantastic.

All year, the Fed has been staring down this crisis, warning us that it would have to raise rates, all the time hoping that doing so wouldn’t kill the housing market. Then, a really odd set of circumstances kept it from having to do so.  Twin financial crises in Europe and China drove international investors to the dollar. As they sought to sell other currencies, they propped up the value of the dollar, delaying the effects of inflation and buying the Fed more time.  

Now, a new plan has emerged, which is where a really interesting idea comes into play.  What if the Fed didn’t take the money out? Instead, it’s started paying the banks to keep savings with Washington, just like your savings account (except thousands of times larger).  The idea is that, as long as inflation is being kept under control through foreign investment, our central bank can pay about $30 billion a year in interest for financial institutions to store money. That money makes the banks want to save, which takes money out of the economy, which they pass on to some customers in the form of higher savings rates and making them want to save as well. Suddenly, the money has come out of the economy, inflation isn’t a risk, and everyone along the way is getting paid for doing so, especially big banks and their shareholders.  

Reminder: that’s your $30 billion per year.  Another reminder:  $30 billion was the budget request to keep Pell grants in line with inflation … over the next 10 years.  You’re paying the mega-banks 10 times what you’re paying to keep college funding from shrinking.

It’s a short-term solution, obviously.  Voters don’t love their tax dollars being spent to reward the same banks that caused the financial crisis, and those banks, by definition, are the ones being let off the hook.  Europe and China won’t buy dollars forever, particularly if it doesn’t look like the Fed is raising rates (which would help foreign investors who are saving their greenbacks).  At some point, the money is coming out of the economy.  Ten years from now, the Fed says, it will all be gone.  The only question is, how fast it will come out, which means we’re still waiting to hear when the prime interest rate is going up.

And that brings us back to today.  We’ve been told to expect a rate hike by the end of the year, and when it comes, it’ll cost you more to pay off your credit cards.  If you’re in a variable rate mortgage, your monthly payment will eventually go up.  The best move today is the simplest one, which is transferring over to fixed-rate loans.  Do it today, so you can save thousands of dollars.  Then, once you’ve locked in your rate, let your congressperson know that you don’t love your tax dollars continuing to bail out the mega-banks six years later.  

Sources:
http://www.nytimes.com/interactive/2015/business/economy/fed-interest-rates.html?_r=0
http://www2.ed.gov/about/overview/budget/budget16/budget-factsheet.pdf
http://www.nytimes.com/2015/10/27/us/politics/congress-and-white-house-near-deal-on-budget.html
http://budget.house.gov/fy2016/
http://www.npr.org/sections/money/2015/10/23/451228005/episode-659-how-to-make-3-trillion-disappear
http://www.theatlantic.com/business/archive/2011/04/the-destruction-of-money-who-does-it-why-when-and-how/236990/  

Dealer Auto Finance Scams

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So, you’re buying a car.  You’ve made it past the tedious comparison shopping, you’ve finished the  detail-oriented research and you’ve even endured the haggling with the salesperson.  Your tongue probably tastes like that terrible coffee they use in every car dealership in America, the kids are probably getting cranky and it’s pretty likely you’re thinking about everything else you could have done with your weekend.  But, it’s almost over.


“I just gotta go in to see the finance manager, sign some papers, and we’re on our way home.”  That feeling of relief washes over you, you let your guard down, and you don’t even realize until too late that you’re suddenly in a much higher monthly loan payment or longer term than you’d planned for.  What, in the name of Lee Iacocca, just happened?

The stereotype of car dealerships usually involves a salesman with a pencil moustache and a polyester jacket who lies through his nicotine-yellowed teeth about undercoating or telling you how the used car you were looking at has only ever been driven to church on Sundays.  That guy is easy to spot.  If the salesperson lies to you, you have some legal protections.  If you Google before you go, you’ll even know most of the tricks the salesperson might roll out. What you’re less protected against are the tricks that happen in the finance office. Below, we’ll talk about what to look for and how to avoid dealer finance scams so you don’t spend too much on your next car.  

1.)  Keep your wits about you.  Never let your guard down at the dealership.  Every person there wants to make money off of you and they’re very competitive.  Even if he or she says that they don’t want or receive commission on your particular sale (“I just need to hit my quota” or “One more sale puts me at my bonus, I’ll take a loss on this one”), that person is almost certainly a very competitive person who’s going to be comparing notes with his or her coworkers this afternoon.  

The finance office is designed to put you at ease, so you’ll lower your guard. The finance office is probably in a different part of the building, with different lighting and ambience.  The offices may be appreciably nicer, with actual walls instead of cubicles, some of which may have art hanging on them.  Clearly, the person you’re talking to is important, having been in such a nice office for so long.  

And that’s what should scare you.  The people in the finance office are often not financial experts by trade; after all they don’t need to do your taxes or invest your money.  They only have to understand one transaction.  Therefore, many dealerships will send their best salespeople to finance classes so they can have a smooth closer at the end of each transaction.  Don’t let the gray hair fool you; the person in front of you is just as competitive and sharp as the one on the sales floor.  After all, to get this office, the finance officer had to be really fantastic at making sales.

2.)  Know your credit score.  There are a lot of reasons to know your credit score before you make a large purchase, including the fact that you should check your credit report for irregularities fairly often, whether or not you’re buying anything.  When you buy a car, it’s especially important.  Finance managers like to use customer ignorance against them, and if you don’t know your up-to-date credit history, then they’ll smell blood in the water.

While the most obvious example is to try to charge you more than you need to pay, you might not expect that another classic is to offer you a loan at a far lower rate than you deserve.  The idea is to offer you a rate so low you can’t say no, then wait a few weeks before telling you that the financing unexpectedly fell through.  Don’t worry, he or she will tell you, you can keep the car.  There’s a clause in your contract that says “subject to financing,” so he or she found a different lender. The good news turns sour, however, because your new rate is through the roof and you’ve already signed the contract and taken delivery of the vehicle.

Don’t take a loan at a rate that’s too good to be true.  If you’re tempted by an offer in the finance office, ask how long it’ll be valid. Then, take it home and show it to your lawyer, so someone you trust can tell you if it’s on the up-and-up.  If you don’t want to pay your attorney’s rate, you can also bring it to us.  We’ll take a look, let you know about any potential pitfalls, and we might even be able to beat that rate or provide a better term, saving you even more money. Remember, if they say that the deal expires today (particularly on the weekend) or that you can’t take your contract with you, it’s almost certainly because they don’t want you to take the time to think about what you’re doing.

It’s never a good idea to trust someone who doesn’t want you to think. Get your credit score for free once a year from annualcreditreport.com.


3.)  Walk in with an offer.  Then, walk out with an offer.  The best way to get a fantastic rate on a loan for a new or used car is to finance through Destinations Credit Union.  We aren’t looking to make a profit, we’re looking to support our members.  We’re also trustworthy – it’s why you’re here in the first place, after all – so you know our great rates aren’t scams.  So, come see us first and you can walk into the dealership with your loan financing already approved (or apply online and note that it is a preapproval).  You’ll know how much you can spend, taking the pain out of negotiating. You’ll also know what interest rate you’ll get and have a pretty good assurance that your monthly payment will be manageable.  Plus, you’ll only need to run your credit score once, so you don’t have to worry about losing points from looking it up too often.  

Don’t let the salesperson know that you’ve already gotten financing, though. The dealership knows how much it wants to make on the transaction, and it doesn’t care if that money comes out of the trade-in, the sale, or the financing. If you know how much your trade-in is worth and you have your financing taken care of, then the only place they can make money is on the sales price.  If they know that, they’ll be less flexible on the sales price.  Let them think that if they give in a little on the sales price, they’ll be able to make it up in financing.  

But you also need to be able to walk away.  Just like any other part of the sale, whomever can walk away controls the deal.  If the terms of the loan the dealer offers you sound great, thank them and take them with you and let’s compare notes.  We’re here for you and we promise to burn the midnight oil figuring out what we can do to make the best deal you can get.  

This might all seem a little excessive.  Maybe you’re good at negotiating, you’ve looked up all the dealer scams and dirty tricks, and you can get the loan really close to what you want.  You’re only off by $50 or so, and if you just sign the papers you can take the car home tonight and be done with the whole process.  

Remember, $50 may not sound like much, but over a 60-month loan, that’s $3,000 plus interest.  Who would you rather see pocket that $3,000:  the dealership or your family?  To put it another way:  if your child racked up $50 in extra data charges on your phone bill, how would you feel?  What if he or she did it every month for five years? Let’s beat the finance office together.

Buying a Used Car Part Two: Loans and Negotiation

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If you missed part one of our guide to buying a used car, take a moment to click here and check it out.  We covered choosing the right car, understanding the value of the vehicle and many aspects of the process up to the point you sit down with the person from whom you’ll make a purchase.

Question:  Do I really have to negotiate?  It’s such a terrible experience and I feel so intimidated. 

Negotiating a car sale isn’t most people’s cup of tea.  If you’re buying from a dealer, it means sitting down with someone who may have more experience than you do, particularly with car sales.  It doesn’t have to be an intimidating process, though.  You have all the power in the transaction:  you can buy a car from the first person or the 10th, while the salesperson needs to make every sale he or she can. 

Question:  How can I make the negotiation go smoothly?

Know your price – The Internet is a fantastic resource.  Once upon a time, the salesperson knew more than the customer about car prices, and that was particularly true of used cars.  Now, you can determine the price you’re willing to pay before you ever walk in, and refuse to pay one cent more than that.  If you want, you can even email back and forth between multiple salespeople, letting them bid against each other.   

Don’t say too much – There’s very little you can say to make a negotiation go better, but there’s a lot you can say to make it go worse.  You’re not going to cause the other person to have a sudden change of heart and cut you a better deal, but you might give the clues they need to know they can hold out for more money.  If in doubt, don’t say anything.  It can be difficult, particularly when the silence is awkward and tense, but saying nothing is often the right thing to do.

Walk away – It’s an old saw in sales: “He or she who can walk away controls the deal,” and it’s been passed down from bullpen to bullpen because it’s true.  If you aren’t willing to walk away and leave the salesperson without a sale, then what incentive does he or she have for lowering the price?  It feels terrible to spend an entire Saturday on car lots and still wake up on Sunday without a car, but you need to get over it.  When you go out to buy a car, make a resolution to wait a week before you buy.  That will make it easier to walk away and give you time to make sure you’re certain of your purchase.  If you wait, you might even get a phone call during the week with a better price, particularly if it’s near the end of the month or if it’s been raining.  Is it worth a few day’s wait and another day’s work to save a few hundred dollars?  In most cases, it is. 

Question:  Should I finance the car at the dealer? 

One of the keys to negotiating a car deal, whether at the dealership or from a private seller, is securing the best financing available.  After all, even one percent difference in your interest rate can be worth hundreds, or even thousands, of dollars over the life of the loan. 

Get your financing first – The best way to get the best rate is to borrow from your credit union.  Our auto loans have fantastic rates, and we’re not trying to sneak in any hidden charges or fees.  If you come to us first, you can make a clear plan for how much you can spend, so you’re not surprised when that first payment is due.  We can also tell you how much you’ll need as a down payment, and we might even have some good tips on who you can trust in town.  You can start the pre-approval process online. 

Hopefully, if you’re planning on buying a used car, you’ll save money and get a vehicle that will make you happy for years to come.  If not, feel free to trade your vehicle in and start the guide over from the beginning. And remember, you’re always welcome to talk with your partners at Destinations Credit Union for more information and guidance to make your car buying experience as enjoyable as possible.

Buying A Used Car, Part One: Finding The Car

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You’ve probably heard that a car is the second-largest purchase the typical American makes after their home, but that’s not really true.  It might seem like it, since the median home price in the US was just under $190,000 last year, while a new Honda Civic starts at about one-tenth as much.  When you look a little deeper, though, you’ll probably only ever own one home at a time, and when you sell it, you’ll get your money back. You might even make a profit on the sale.
With a car, though, the life expectancy is just under a decade, it has limited resale value, and many families own several automobiles. Because of facts like these, the actual cost of car ownership over a lifetime can be staggering. More specifically, you can still expect to spend a minimum of $120,000 (in 2015 U.S. dollars) per driver over the course of a lifetime. That number goes up if you trade in your cars in less than nine years or if you drive a vehicle that’s nicer than an entry-level coupe.  A two-car family who drives a new pickup truck and minivan and trades in every five years can expect to spend roughly three-quarters of a million dollars on their cars in their lifetimes.
So why do we assemble a team of professionals to buy a house and then spend weeks or months agonizing over our decision, but dedicate little more than a Saturday afternoon to buying a car?  This guide is meant to help bridge the gap between the seriousness with which we tend to take home buying and car buying.  It’s meant to make an important financial decision easier, but it is just a simple guide.  When you’re done, be sure to talk to Destinations Credit Union before you head to the dealership.  We can get your loan secured, walk you through the buying process and make sure you walk onto the lot ready to hold your own with whatever slick salesperson greets you. 
Question:  Why am I buying a used car? 
Answer:  Maybe you’re not.  Some people only want to buy new cars. New cars have time left on their warranties, can be customized to exact specifications of the buyer and help reduce uncertainty.  If those are important to you, you might be willing to spend the extra money to buy a new car.  Grab a copy of Consumer Reports’ 2016 car buying guide, or pay the $6.95 for a one-month subscription. Consumer Reports is generally fantastic and its car guide is still better than anything you’re going to find online for free.
Buying a used car is a much better value for most people, however.  Few products lose their value faster than a car, whose value plummets the minute it’s driven off the lot.  Maybe buying dinner at a fancy restaurant loses its resale value more quickly than a new car, but little else does. Buying a one- or two-year-old vehicle can save thousands of dollars off the sticker price of a vehicle, but even buying a used version of this year’s model can be a windfall, because someone else has paid for the initial depreciation once the vehicle lost its new car smell. 
Question:  How do I know if a used car is in good condition?  I don’t know much about cars. 
Answer:  Even if you know a lot about cars, you should take it to someone who knows as much or more about cars as you do.  You’re not going to be objective, because your bias toward a car you like (or your desire to just be done with test drives) will lead you to overlook flaws that a neutral observer will not. Dealerships will usually let you take a used car to a mechanic you trust, which is your best bet to make sure the car is in good condition. 
Question:  What if I’m not buying from a dealer?  What if I’m buying from a friend or off of Craigslist? 
Answer:  If, for some reason, you can’t take the car to a mechanic – which should make you skeptical – or if you want to find out about a car before you meet up with the seller, ask for a CarFax report.  They cost around $50 and will tell you about all sorts of things you’ll want to know.  Many sellers will foot the cost of the CarFax, because they can still use it for the next potential buyer even if you don’t buy the car. 
Question:  Anything else I can do to protect myself? 
Answer:  No matter if you’re buying from a dealer, a friend, your pastor or the reanimated corpse of Henry Ford himself, you should always take a car for a test drive.  Find a route that simulates your morning commute; don’t just go on the route the dealer wants to take you. Take some left turns.  Accelerate to freeway speeds.  Ride in the back seat for a while.  Make sure you actually like the car before you spend thousands of dollars on it.
There are few feelings worse than writing a sizable check every month for something you resent.  Just ask anyone who’s paying off student loans but not using their degree.
The first part of buying a used car is not the most fun, that’s for sure.  It’s all about research and preparation.  If there’s anything we all hate more than driving around to used car lots, it’s homework.  But this is the best way to make sure you get a car you’re going to love for a long time, which means the more time you put in now; the longer you can wait until you have to do it again.  

In our next installment, we’ll go over the negotiation process, including everything you could want to know about financing.  If you’re planning to buy a car this weekend, the most important thing to know for now is that you’ll want to come see us about our auto loans before you go to the dealership. If you’re looking to research a particular model, our AutoSmart buying service may help. It can save you hundreds or even thousands of dollars to talk to us first.  You can find our rates and apply online here.

Sources: 
http://web.consumerreports.org/cars/v1.html?EXTKEY=SG72C00&gclid=Cj0KEQjwkeiwBRCzmo-wiKL49pEBEiQAhvGKYR5ohiXqwx6y0ifJ4370XmXyp6vp5rCY6KQC3StG2b8aAqCX8P8HAQ http://www.cars.com/go/advice/Story.jsp?section=fin&story=car-loans-how-long&subject=car-loan-tipshttp://www.huffingtonpost.com/2014/03/13/median-home-price-2014_n_4957604.html

http://automobiles.honda.com/civic-sedan/

http://www.chrysler.com/en/town-country/?sid=1037056&KWNM=%252Bprice+%252Btown+%252Bcountry&KWID=43700005857714820&TR=1&channel=paidsearch

http://www.latimes.com/business/autos/la-fi-hy-ihs-automotive-average-age-car-20140609-story.html

http://www.ford.com/trucks/f150/?searchid=199279626|11841765906|17527972|&ef_id=VZinGAAABSKGYTa4:20151011161224:s

10 Facts About Credit Unions

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In preparation for International Credit Union Day, October 15th, we thought we would share a few facts about credit unions. Being a member of a credit union is a coup for your finances for many reasons. Here are just a few facts that make credit unions a great option. 

Fact #1: President Roosevelt signed the Federal Credit Union Act in 1934 to promote thriftiness and prevent usury during the Great Depression. 
Fact #2: Credit unions are insured. Most credit unions are insured by the National Credit Union Administration (NCUA), which provides essentially the same coverage on funds as does the FDIC. If the word “federal” is in the name, they are insured. If not, check with your credit union. It may be state-chartered and/or have private deposit insurance.  Destinations Credit Union is chartered by the state of Maryland and Federally insured by NCUA.
Fact #3: Eligibility is fairly flexible at most credit unions. Most require residency in a certain community, city, or state, or that you are employed by the credit union’s sponsor company, also known as a Select Employee Group (SEG). But requirements are pretty broad on most, making eligibility at a credit union a possibility for almost anyone. 
Fact #4: Credit unions are not-for-profit institutions and are owned by the people they serve, not by a few shareholders. 
Fact #5: Credit unions can offer better rates on savings accounts, lower interest rates on loans, and little or no fees on accounts because they return their profits to the member/owners.
Fact #6: The credit union’s board of directors, which is elected by members, can set loan limits in an effort to help the credit union grow. 
Fact #7: Credit union members have democratic control of the credit union and can attend and participate in regular and special membership meetings. 
Fact #8: Nonmembers benefit from credit unions too. Competition for low rates keeps banks’ fees in check, thereby benefiting nonmembers. 
Fact #9: With more than 5,000 credit unions across the globe and access to tens of thousands of ATMs, credit unions are increasingly convenient on a national scale.  Destinations Credit Union is part of a national shared branching network, giving you access to your accounts all over.
 

Fact #10: Once you are a member of a credit union, you stay a member for as long as you maintain your deposit account (share), regardless of whether or not you continue to meet the original eligibility requirements.

It’s Not Time To Panic

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It’s time to be calm, but you know that already.  The market has had a crazy week, filled with ups and downs flowing at a quick enough pace to ensure – if you were going into a meeting to discuss market forecasts – you really couldn’t write up an actionable plan.  You could have just as easily relied on an iPhone and a Magic 8 Ball.


Analysts don’t like that kind of uncertainty, so if you feel like the advice you’re getting on TV is aimed at making you panic, you’re probably right. However, don’t let other people’s panic make you panic.  In fact, when everyone else is panicking, it’s the calm person who can actually get something done.  


But the markets will open tomorrow and something could happen. Who knows? And if that something does happen, how do you keep from entering into a panic mode?  How can you resist the urge to pull all your money out of savings or rethink your entire retirement?  We’re going to explain why staying calm is the most important thing you can do, but let’s first play a game.  It’s really quick and it simulates the market using actual history.  

The rules: Start with $10,000.  You can sell once, you can buy once, and then it tells you how much you made or lost.  Open this link in a new tab by either copying and pasting or right clicking on the link (options will vary depending upon your web browser):

http://qz.com/487013/this-game-will-show-you-just-how-foolish-it-is-to-sell-stocks-right-now/
 

How did you do?  Did you play it a few times?  Did it go better when you sold your investments when the price dipped?  That game is based on market trends for the last 35 years or so, and the only real way to win is to just not sell.  Your money will go up and up and up.  The market rewards calm. Here’s why you should relax:


The Fed knows what it’s doing.  The new administration at the Fed has kept interest rates low, and many analysts have been expecting a rate hike throughout 2015, with some of them even predicting two increases.  A rate hike would be bad news for Wall Street, and the same market prognosticators who claim the sky is falling are pointing to an impending rate hike as “Exhibit A” that your retirement is doomed.  First of all, there’s no guarantee that a rate hike is coming. Even if the Fed raises the prime interest rate, it may be good for your stocks, because uncertainty over interest rates is part of the reason the market has taken a hit.  A rate hike, particularly a modest one, could calm fears about the uncertainty of interest rates in the future.


A rate hike also helps your savings.  Every dollar in your savings accounts – from money markets to IRAs – will get stronger when there is a higher prime interest rate.  So, if you’re convinced interest rates are going to take a bite out of your investments, your best move is to simply decrease the portion of your portfolio in stocks and put more of it into various savings products at Destinations Credit Union.  We’ve always had very competitive dividend rates on our savings accounts.  If the Fed raises interest rates, that usually means good news for savers.


China’s problems won’t hurt us.  While their currency is in crisis, and that has spilled over into other market sectors, it’s premature to panic over market instability at the world’s largest manufacturer.  The economic interconnection between the US and China, the world’s two largest economies, is not the kind that allowed the 2008 financial crisis to spread so quickly. In fact, it’s the kind that prevents that type of spillover.  In general, they manufacture goods and we market/buy them.  The stronger our currency is relative to other countries, the cheaper we can find consumer products.

For example, if Walmart were an independent nation, it would be China’s fourth largest trading partner.  Our largest brick-and-mortar retailer stands to profit, as do their customers.  In other words, if you leave your retirement funds in your savings and trust your credit union to take care of you, you can probably find everything you were going to buy for less, so you don’t need as much cash to live on while you wait for the market to recover.  You can spend less without making sacrifices.


The other benefit to the US economy stemming from China’s hiccup is that it likely means durable goods will sell well. Families that have “made do” with a lukewarm refrigerator or the world’s slowest dishwasher can find replacement appliances at more affordable prices. To put it in simpler terms:  You’re finally going to replace that stove you hate, and so will your neighbors.  You’ll save money on it, and the American businesses that design and sell that stove are going to enjoy the profits.  Those companies will turn the profits into increased manufacturing, which will help stabilize the Chinese economy.  The durable goods sector is going to help buoy the stock market, which will help the overall economy in the process.


If you want to take advantage of this temporary window, talk to us about a home improvement loan. Remember, if you want to make these kinds of household investments or take advantage of cheaper prices on the parts and supplies that go into other home improvement projects like patios and even driveways, lock in a fixed-rate loan now, before the Fed hikes interest rates.


In the end, market forces are driven by consumer confidence, and your household economy is no different.  Think back to that game you just played. Waiting out temporary market downturns or moving your money to safe savings programs are the only way to consistently grow your money in the long-term. Put your money with someone you trust, take a deep breath, and stay calm.

If you need a calming mantra, try this:  “New washer.  New dryer.  New washer.  New dryer.”
Sources:

http://www.forbes.com/sites/greatspeculations/2015/01/30/wal-mart-and-china-a-story-of-missing-customer-trust/

http://money.cnn.com/2015/08/26/news/economy/china-economy-stock-market-fears/

http://www.thestreet.com/story/13264176/1/what-me-worry-why-you-shouldnt-panic-amid-market-crash.html

New School Year’s Resolutions

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Ah, autumn.  That wonderful time of year when the leaves change color, football takes over the television for five uninterrupted months and students head back to school. Alright, it’s not actually autumn, it’s August. It’s still summer outside, and more of the country is watching grass turn brown than observing the leaves transitioning to orange. School is starting, though, and you’ve probably already gone through a lot of the rituals that accompany a new school year, so you may be in a back-to-school mood. 
Here’s a tradition you might not have tried: Have you made a new school year’s resolution?
We’re not talking about those promises you make to yourself every year about doing homework on Friday nights or not wearing sweatpants to class.  Have you made a resolution for this year that you actually intend to keep?  Now is the perfect time to make a change, while you’ve got a new planner just waiting to have milestones and goals written into it.  We’ve got some tips to aid you in keeping your resolution this school year.
 
First, set a clear goal.  Goals are only as useful as they are attainable, and goals are only attainable if they’re clearly articulated.  For example, “I want to eat better” is an admirable goal, but it’s difficult to figure out if you’ve actually done it or how that affects your decisions. Eating two cookies is better than three, for example, but would you have eaten three cookies before?
That’s why it’s important to be specific. Instead of saying, “I want to be better with money so I won’t need to eat toast sandwiches at the end of the month,” try making a resolution like “I won’t date freshmen” or “I will set a budget every month.”  You can tell if you’ve set a budget even if you don’t always do a good job of following it.  Having a tangible goal gives you freedom as well.  Are you being good with your money if you buy a latte every once in a while?  Who can tell?  But if you have a budget, you can clearly see when you can afford a latte, and what else you might have to give up to get it. 
You also need to keep the goal simple enough so it is achievable.  “I’m going to work out for two hours every day” sounds great … for about a week.  Then it sounds like a hassle.  What do you do for two hours every day that you’re willing to give up?  Sleep? Homework? Xbox?  An easy to achieve resolution might be something like “I will spend Monday afternoons cleaning,” or “I’ll save $1,000 to put a down payment on a car within a year.”  Saving $1,000 might sound harder than working out, but it’s really not.  Put $85 per month away for a year or $43 per month for two years.  Even if you make minimum wage, $43 is only about one day’s salary each month.
It’s easy to fool yourself into believing you’re living up to your resolutions, which is why you need someone to keep you accountable and help you out when you need it.  That’s a place where Destinations Credit Union can really help.  We’ve got internal experts in budgeting and financial counseling partners who’d love to talk to you, and we offer great rates on Kasasa Cash Rewards Checking, Savings Certificates, Holiday Club accounts, and all sorts of savings plans to make saving for that down payment even easier.  We also have tools, such as MoneyDesktop and simple budgeting software.

Shop Local!

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Your credit union is built on the idea of people helping people.  You already know we can do a better job looking after your money than a mega-chain bank that answers to shareholders, because we know you and our community.  So why give that up when you find a bargain online?  Shopping locally is better for the community, better for the environment and the best way to find something unique that can make all of your friends say “wow.”  

Shopping locally benefits your community. 

When you shop locally, the money you spend stays in the community.  Buying a new pair of shoes from a local shop takes dollars out of your pocket and puts them into the pockets of a local resident, of course.  What you might not consider is that those dollars get spent by the business owners as well, and they’re also likely to spend their money locally.

American Express estimates that about 68 cents out of every dollar spent in local shops stays at home, and if that dollar is spent locally three times, it means that – for every dollar you spend at local shops – $1.45 goes back into the community.  It’s what economists refer to as the multiplier effect, and it’s very powerful.

Fun fact:  The multiplier effect is why the government is still willing to make pennies, even though minting them costs more than one cent.  The multiplier effect is powerful enough to justify all that loose change in the jar next to your bed, and it’s powerful enough to make shopping locally a force for change.

Of course, that money doesn’t just go to shopkeepers and restaurant owners. The local government takes out its share in local taxes.  Even if you hate the idea of taxes, and we all may grumble in April, local taxes go to schools, firefighters, and other services in the area.  Buying dinner at a local bistro can be the reason the town has enough money to fix the potholes on your street. Not a bad dessert.

 Shopping locally is better for the environment. 

You already know about the danger of greenhouse gases and the effects of global warming.  If you don’t remember anything else, you probably remember Al Gore’s visual of a polar bear floating away. What’s easy to forget is that everything you buy had to come from somewhere.  If you’re drinking imported spring water from Fiji, that water flew halfway around the world.  If your new pants were made in China, they racked up frequent flyer miles, too.

It’s really hard to avoid foreign manufacturing, but many local businesses have locally made goods for sale, which eliminates at least one flight your product might take, saving on fuel and greenhouse gases.  Even if the product you’re buying was manufactured overseas, buying it locally can shave a flight or two off the product’s carbon footprint.

Shopping locally is the best way to find hidden gems. 

There’s nothing quite like the feeling of finding something your friends have never seen before. Whether it’s jewelry from a local metalsmith, a purse from a local boutique or pottery from a local artisan, local shops have the best potential for one-of-a-kind, where-did-you-get-that, I-love-it-so much uniqueness out of any shopping you can do.  Anyone can get on Amazon or check out a department store.  It takes a real connoisseur with a real eye for style to shop locally and find the best products.  Show off your personal style with buys from local artisans. The Parkville Towne Fair or the many ethnic festivals are great places to look for local crafts.

One final benefit of shopping locally is that many of your finds come with a story.  Those earrings might be from a local artist who got the inspiration from the nursery rhyme her mother told her, or those plates might borrow their pattern from the artist’s love of pop art.  Whatever the story, local artists will tell you how they came up with their unique designs.  Part of the fun of local shopping is the connections you can build with local artists, and hearing their stories is part of it.

San Francisco started recognizing the historic contributions of local businesses by listing important shops on its historic registry.  Looking around Parkville and Baltimore, which businesses would you nominate for historic status?


And, don’t forget to keep your banking local.  Destinations Credit Union (along with many other credit unions and local banks) is right here in Parkville offering world-class financial services and access wherever you travel.  We’re owned by our members and the money is invested back into our residents and our communities.

Check out the Parkville/Carney Business Association to see many local businesses who support our community.

Sources: 

http://ilsr.org/why-support-locally-owned-businesses/  
http://www.usatoday.com/story/money/business/small%20business/2014/11/21/small-business-strategies-shopping-local/19259277/ 

http://money.usnews.com/money/personal-finance/articles/2011/10/28/how-consumers-and-communities-can-benefit-from-buying-local