Personal Finance Facts and Statistics

It’s often said that “numbers don’t lie”. If so, what does that reveal about personal finance in the USA? To answer that question, we’ve prepared this analysis of personal finance facts and statistics to help you understand approximately where you are in comparison with other Americans.

The information revealed in our analysis isn’t intended to make you feel insecure in any way. Instead, it’s designed to help set parameters that will enable you to see how you are doing and to make improvements where you believe it’s necessary.

We hope you like numbers because we have plenty of them! They’re a necessary evil, and they go with the territory when it comes to personal finance. We’re going to present statistics concerning multiple topics relating to income, debt, savings and budgeting, and financial planning.

Income

Median Household Income Per State

The median household income nationwide is $79,900. But there is a wide variation between the individual states. The following median household income statistics are provided by the US Department of Housing and Urban Development, as of April 1, 2021:

State Median Household Income
Alabama $66,700
Alaska $93,900
Arizona $73,200
Arkansas $60,700
California $90,100
Colorado $93,000
Connecticut $102,600
Delaware $83,000
District of Columbia $123,100
Florida $70,000
Georgia $74,700
Hawaii $99,800
Idaho $69,000
Illinois $85,000
Indiana $73,300
Iowa $79,500
Kansas $77,400
Kentucky $65,100
Louisiana $64,700
Maine $75,700
Maryland $106,000
Massachusetts $106,200
Michigan $75,300
Minnesota $93,100
Mississippi $60,000
Missouri $72,300
Montana $72,100
Nebraska $79,400
Nevada $75,100
New Hampshire $98,200
New Jersey $106,000
New Mexico $61,400
New York $87,100
North Carolina $70,900
North Dakota $90,100
Ohio $75,300
Oklahoma $67,000
Oregon $81,200
Pennsylvania $81,000
Rhode Island $88,000
South Carolina $68,700
South Dakota $75,500
Tennessee $68,600
Texas $75,100
Utah $85,300
Vermont $84,100
Virginia $93,000
Washington $91,600
West Virginia $60,300
Wisconsin $80,300
Wyoming $81,900
US $79,900

What Percent of People Represent the Highest Incomes in USA

Have you ever wondered where your income falls among wage earners nationwide? For example, you may be interested to know that if your household income is over $200,000 per year, you’re among the 10.3% wealthiest households in the country.

According to Statista, the income distribution in the US is as follows (for 2019):

How many Americans Live Below the Poverty Line?

According to the U.S. Census Bureau, 10.5% of the population – or about 34 million people – were below the poverty line in 2019.

According to the US Office of the Assistant Secretary for Planning and Evaluation (ASPE) the poverty line for 2019 is as follows (based on annual income by household size) for most of the country:

  • One person – $12,490
  • Two people – $16,910
  • Three people – $21,330
  • Four people – $25,750
  • Five people – $30,170
  • Six people – $34,590
  • Seven people – $39,010
  • Eight people – $43,430

Top 5 Richest States in the USA

Based on the table for “Median Household Income Per State” provided by the US Department of Housing and Urban Development in the first section above, the top five richest states in the USA are:

  • Massachusetts, $106,200
  • Maryland, $106,000
  • New Jersey, $106,000
  • Connecticut, $102,600
  • Hawaii, $99,800

Top 5 Poorest States in the USA

Based on the table for “Median Household Income Per State” provided by the US Department of Housing and Urban Development in the first section above, the top five poorest states in the USA are:

  • Mississippi, $60,000
  • West Virginia, $60,300
  • Arkansas, $60,700
  • New Mexico, $61,400
  • Louisiana, $64,700

Income Per Education Level

According to the Bureau of Labor Statistics (BLS), income per education level is as follows (for 2017):

Education Level Mean usual weekly earnings Annual earnings
Doctoral degree $1,743 $90,636
Professional degree $1,836 $95,472
Master’s degree $1,401 $72,852
Bachelor’s degree $1,173 $60,996
Associate’s degree $836 $43,472
Some college, no degree $774 $40,248
High school diploma, no college $712 $37,024
Less than a high school diploma $520 $27,040
Average for all education levels $907 $47,164

Median Earnings by Age Bracket

According to the US Bureau of Labor Statistics, median earnings by age bracket are as follows (for the second quarter of 2021):

Age Bracket Mean usual weekly earnings Annual earnings
16 to 24 $619 $32,188
25 to 34 $928 $48,256
35 to 44 $1,119 $58,188
45 to 54 $1,134 $58,968
55 to 64 $1,130 $58,760
65 and over $989 $51,428

Debt

Average Annual Consumer Spending in the USA

Average annual consumer spending in the USA was $63,036 in 2019, according to the Bureau of Labor Statistics.

The biggest individual category expenses were:

  • Housing, $20,679
  • Transportation, $10,742
  • Food, $8,169
  • Personal insurance and pensions, $7,165
  • Health, $5,193

Total Consumer Debt in the USA

Total consumer debt in the USA is $14.96 trillion. Those are the statistics issued by the Federal Reserve Bank of New York for the second quarter of 2021. That includes all forms of consumer debt, including home mortgages, student loans, credit cards, and auto loans.

Amount of Credit Card Debt in the USA

The amount of credit card debt in the USA is $807 billion. Average credit card debt per family is $6,270, and 45.4% of families carry some amount of credit card debt. (Source: Value Penguin)

How Many Americans Know How Much They are Paying in Credit Card Interest?

The average American household pays $1,045.55 in credit card interest each year. It’s entirely likely the average American has no solid idea how much he or she is paying, due to multiple credit cards, and the variable nature of both credit card balances and interest rates.

How Many Car Repossessions Happen Yearly in the USA

About 2 million car repossessions yearly in the USA (source: Etags.com). Vehicles are typically repossessed within 90 days of loan default (your last payment).

Total Amount of Student Loan Debt in the USA

The total amount of student loan debt in the USA is a record $1.71 trillion as of the beginning of 2021 (source: StudentLoanHero.com).

44.7 million students and graduates owe an average of nearly $30,000 in student loan debt. But student loan debts taken by parents for the benefit of their children averaged $37,200 per borrower.

How Many Americans File for Bankruptcy Each Year?

544,463 Americans file for bankruptcy each year, including 522,808 personal bankruptcies. The rest are business bankruptcies. (Source: US Courts.gov.)

Of the total, 378,953 were Chapter 7 bankruptcies, representing total and immediate bankruptcy. 156,377 were Chapter 13 bankruptcies, representing partial bankruptcies, largely settled through installment payments.

Savings and Budgeting

The Average Number of People with No Savings

45% of Americans have no savings at all (source: GOBankingRates).

How Many Americans Live Paycheck-to-Paycheck?

The information is a bit dated, but according to a survey conducted by CareerBuilder in 2017, 78% of Americans live paycheck-to-paycheck. This includes fully 10% of households with annual incomes of $100,000 or more.

How Many Americans Have a Budget?

Only 41% of Americans have a budget, according to LendEdu.com.

How Many Americans Have Enough in Their Savings to Cover a $1,000 Emergency?

Only 39% of Americans have enough money in their savings to cover a $1,000 emergency, according to a survey taken by Bankrate and released at the beginning of 2021. Most of the rest reported they would get the funds from credit cards, personal loans, or borrowing from family and friends.

Amount Paid by Americans in Overdraft Fees Yearly

Americans paid $11.8 billion in overdraft fees in 2020. Most of these fees were paid by individuals considered to be financially vulnerable. (Source: Forbes.)

Average Amount of Savings per American

The average amount of savings per American is $17,135, as of November 2020. That’s the national average, however state averages vary considerably. The average in West Virginia is $6,936 (the lowest), while the average in South Dakota is $24,497 (the highest).

Amount of Americans with Retirement Savings

50.5% of Americans have retirement savings, with an average balance of $65,000. This is according to information released by the Federal Reserve for 2019.

How Much Should You Have Saved for Retirement by Age Bracket?

How much you should have saved for retirement by age bracket is largely subjective. It’s based on your current income – assuming it’s sufficient to cover your living expenses – multiplied by a factor that’s likely to provide a sufficient amount of retirement savings by the time you reach age 65.

For example, by the time you’re 40, you should have between 1.5 and 2.5 times your current annual salary saved for retirement. But the amount you should have saved will increase with each age bracket.

The following table, provided by the investment firm T.Rowe Price provides solid guidance as to how much you should have saved for retirement at eight age brackets, ranging from 30 to 65:

The post Personal Finance Facts and Statistics appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

Current VA Mortgage Rates | December 2021

According to a weekly survey of 100+ lenders by Freddie Mac, the average mortgage interest rates fluctuated slightly week over week — 30-year fixed increased (3.1% to 3.11%), 15-year fixed decreased slightly (2.42% to 2.39%) and 5/1 ARM increased slightly (2.47% to 2.49%).

VA rates are no different. In fact, when compared to other loan types — conventional and FHA, for example — VA home loans offer consistently lower rates than for the average consumer.

Shop and compare your personalized rates with multiple lenders (Dec 2nd, 2021)

VA Mortgage Rates 2021

VA Conventional FHA
August 2021 2.88% 3.19% 3.23%
July 2021 2.94% 3.27% 3.27%
June 2021 2.92% 3.25% 3.23%
May 2021 2.98% 3.30% 3.25%
April 2021 2.95% 3.25% 3.23%
March 2021 2.72% 3.02% 2.99%

Source: Ellie Mae Origination Insight Report, June 2021

How to get the lowest VA mortgage rate

If you’re getting a VA loan, you already have a head start on getting a great deal. VA loans typically offer the lowest rates of all mortgage options.

Still, there are more ways to ensure you’re getting the lowest rate possible:

  1. Make yourself into the most attractive borrower you can
  2. Shop around for the lender that suits you best

Here’s a step-by-step guide to getting the best mortgage rate.

5 tips for strengthening your VA mortgage application

Work to improve your personal finances before you start shopping for a loan can make a big difference to the interest rate you’re offered. That’s because mortgage lenders offer the best rates to the borrowers deemed least risky.

Here are some of the variables a mortgage lender will consider when evaluating your application and determining your interest rate:

  1. Credit score
  2. Existing debt
  3. Down payment (if any)
  4. Employment history
  5. Discount points

Below, we’ll explore the steps you can take to make your application as attractive as possible — and potentially help you save thousands of dollars with the lowest interest rate.

1. Improve your credit score

Although the VA doesn’t set a minimum credit score, most lenders impose their own credit thresholds. These minimum credit score requirements vary by lender but typically range from 580 to as high as 660.

Still, there’s good reason to get your credit score as high as you can, not just over the credit score minimum. The higher your credit score is, the lower interest rate you’re likely to receive. Raising your credit scores is one of the best ways to bring your interest rate down.

To improve your score, start by requesting free copies of your credit report from the Big 3 credit bureaus. You can get these all at once at AnnualCreditReport.com. You’re entitled to one free report every year so be wary of sites that try to charge you.

Review your report carefully and have any mistakes corrected. Errors are commonplace on these and adverse ones can seriously lower your score.

FICO is the most widely used credit scoring system in the country and it determines your score based on:

  • Payment history: 35%
  • Credit utilization: 30%
  • Length of credit history: 15%
  • Credit mix: 10%
  • New line of credit: 10%

That means you can improve your credit score by:

  • Paying your bills promptly
  • Keeping your credit card balances below 30% of the credit limit
  • Not opening new credit accounts or closing old ones where possible
  • Using a mix of loan types, including credit cards and installment loans (like auto loans or personal loans) rather than relying on just one kind of credit
  • Not opening many new accounts quickly

For a deeper dive into strategies to raise your credit ahead of a VA loan, check out this article: 6 Steps to Restore Your Credit

If you’re planning to apply for a mortgage, do your best to stick by those rules as rigorously as possible right up until closing. It could make a significant difference to the overall cost of your home loan.

2. Lower your existing debt

Lenders look closely at your debt-to-income (DTI) ratio. This figure reflects the percentage of your monthly pre-tax income that goes to:

  1. Existing debt payments (including minimum credit card payments and installment loans)
  2. Other financial obligations, such as child support or alimony
  3. Projected mortgage payments and homeownership costs for your new home

For an in-depth look at how DTI can impact your borrowing, check out this article: How Does DTI Affect Loan Amounts?

DTI affects the amount you can borrow but it’s also key to determining your interest rate. The higher your DTI, the higher interest rate you’re likely to pay.

So what’s the best way to improve your DTI for the best possible interest rate? Start by paying off your debts strategically.

If you can, begin with credit card debt. Are any of your balances higher than 30% of that card’s credit limit? Bring them down to 30% (or lower!) as soon as you can. This offers the best bang for your buck in determining your mortgage rate. This is because you’re boosting your credit score and reducing your DTI at the same time.

Once you’ve done that, if you’re able, look at your installment loans. These days, most can be paid early without incurring a prepayment penalty. Confirm this with your lender before you make any early payments.

Your goal is to reduce the outstanding amounts, rather than paying them off entirely. If you do this, you can ask your lender to lower monthly payments to reflect the new balance. This way, your monthly payments will be smaller and this will be reflected in your DTI.

Paying off your debt takes time and dedication. Still, small changes can make a big difference to your VA mortgage interest rate.

3. Make a down payment

One of the biggest benefits of VA loans is that you don’t have to make any down payment.

Still, making a down payment can give you access to lower interest rates (and may reduce the amount of your VA funding fee).

If you can put together a 5% — or even 10% — down payment, you’ll likely pay a lower interest rate.

This can be very doable for existing homeowners, especially in areas with rapidly rising home prices since you’ve probably accumulated more equity in your home. That equity can be used to make a down payment on your next home.

It can be tough for VA first-time buyers to come up with such amounts. Still, if you can muster the funds, it could save you money on your funding fee and earn you a lower VA interest rate.

4. Don’t change jobs

Your mortgage lender will review your employment history when calculating your mortgage interest rate. When it comes time to apply, there’s not much you can do about your employment history. Lying on your mortgage application qualifies as fraud.

But by avoiding big employment changes in the months leading up to your application, you can demonstrate employment stability to your lender.

The lender wants to know your employment is stable and that you’ll have a reliable income stream to repay the loan.

Though it’s not impossible to change jobs once you’ve started the home buying process, it will help your application if you keep the same job in the months leading up to your application and through to closing. If you do change jobs, it’s best to stay in your field or profession.

5. Consider buying discount points

Discount points allow you to buy yourself a lower interest rate by paying more money upfront, at closing. As with a down payment, this is an option more accessible to borrowers with more money available at closing.

Still, if you can afford it, discount points can help you save money over the life of your loan.

This article will help you determine whether discount points are useful for your particular financial situation.

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Compare lenders to get the best rate

If you want to get the lowest possible interest rate on your VA home loan, shopping around for lenders is essential.

Start by looking for a VA lender who works with borrowers like you.

How do you know which lenders will work with you? Check out the lender’s website to find its minimum requirements, including credit score threshold, to see whether you’re likely to qualify.

Click here to connect with multiple VA lenders (Dec 2nd, 2021)

Request at least 3 to 5 quotes

Find at least three to five lenders and request quotes from each. The more lenders you apply with, the better your chance of finding a low rate.

Make sure that you request quotes for the same loan terms (i.e. 15-year term, 30-year term, fixed-rate, adjustable-rate, etc.) from every lender so that you’ll be doing an apples-to-apples comparison.

Review your loan estimates

Each lender is required by law to provide a quote in a standardized format called a Loan Estimate. Each LE will come in an identical format, which makes it easy for you to compare each one side-by-side. This Loan Estimate will contain all the figures you need — including interest rate and closing costs — to identify your best deal.

Take note especially of the “Comparisons” section near the top of page 3. It will show your annual percentage rate (APR), which represents your total loan costs as an annual amount. APR can help you determine which lender is least expensive in the long term when all costs — including interest and upfront fees — are considered.

Additionally, this section shows how much you’ll have paid — and paid off — at the end of the first five years, which will help you to determine the best offer.

Need more help understanding your Loan Estimates? The Consumer Financial Protection Bureau has a Loan Estimate Explainer on its website, including sample pages so you know what to expect.

15-Year vs 30-Year Mortgage Terms: Which is cheaper?

Sometimes, borrowing over a shorter period — 15 years rather than 30 years — can get you a lower interest rate.

It’s important to note that with a 15-year mortgage your monthly payments will be substantially higher because you’ll be making fewer monthly payments overall. So while you’ll save money in the long run, you’ll pay more month to month.

The difference between 30-year VA loan rates and 15-year ones fluctuates so review current rates. If you can afford to borrow for a shorter amount of time, you may earn a lower interest rate — and you’ll own your home that much sooner!

Fixed-rate vs ARM: Which is cheaper?

As with loan length, rate type is a loan term that can impact your mortgage rate.

Adjustable rate mortgages are often available at lower interest rates but keep in mind that the rate will go up at the end of the introductory period. Depending on how long you plan to keep the loan before moving or refinancing, this could be a good deal. With a fixed-rate mortgage, you’ll pay the same rate for the life of the loan but you are guaranteed an interest rate that won’t increase.

As with all mortgage terms, the most affordable option will depend on your personal financial situation.

How to get the lowest VA interest rate

To get the lowest interest rate possible on your VA mortgage, you’ll want to make yourself into the most attractive borrower possible, while also finding the lender who offers you the best deal.

If you take the time to do both, you’re likely to end up with a lower interest rate — something that could save you thousands of dollars over the life of your VA loan.

Shop and compare your personalized rates with multiple lenders (Dec 2nd, 2021)

The post Blog first appeared on MilitaryVALoan.com.

Source: militaryvaloan.com

What Is Cash-Back Auto Loan Refinancing?

Cash-back auto loan refinance allows you to borrow more than you owe on your current loan and receive the difference in cash. Because the loan is secured by your car, interest rates may be lower than other sources of cash, such as a credit card, payday loan or personal loan. Not all auto refinance lenders…

nerdwallet.com

7 Unexpected Benefits of a Good Credit Score

Benefits of a Good Credit Score

Do people understand the benefits of a good credit score? Everyone knows your credit score is important, but what exactly are the benefits?

In the United States, 28% of its citizens rely on credit when running out of money. While it’s good to use your credit, it’s not always wise to carry over a balance from month to month. If you can’t pay it back, your credit score will take a hit.

Most Americans know that your credit score is a golden ticket to a more manageable financial life. Whether you’re looking to maintain your credit score or increase it, the right motivation is essential.

That’s why we’re going to talk about the benefits of a good credit score. To keep you motivated to strive for more and let you know what’s waiting on the other side.

7 Unexpected Benefits of a Good Credit Score

We all know that having a good credit score is something everyone should want. If you need some extra motivation to increase your credit score or are curious what a high credit score will mean for you, here are the unexpected benefits of a good credit score.

1. Starting and Owning a Business

According to Forbes, consumers owed $323 billion on personal loans in 2020. The banks limited loan opportunities because of the increasing risk of default.

On a different note, loan applicants with good credit scores will have a much better chance of receiving an approval for the funds needed to set up a business or start a side hustle. Though some lenders may consider people with lower credit ratings, lenders have a habit of charging them with a higher APR (Annual Percentage Rate).

2. Less Hassle Getting Approvals

Imagine being denied something as common as a network provider subscription. Applications for basic household utilities and other post-paid subscriptions usually require credit reports. It also applies when you’re going to rent a space and need to pass a rental credit check, where the approval will depend on your ability to meet monthly payments on time.

While having a good credit score doesn’t mean you’ll get approved for every loan, it can increase the chances of approval. You can ask for new credit or new loans, and they will be quicker to grant it to you when you have a good credit score.

3. Better Risk Means Lower Interest Rates

Aside from having a better shot when applying for loans, you won’t have to worry about being charged exuberant amounts of interest with a good credit score.

Poor credit scores can lead to having the loan denied or charged at a much higher rate. Lenders assume a low credit score means it’s probably harder to settle the credit on time. It brings a higher risk that they need to offset with higher charges.

High credit scores imply that you have settled outstanding credit on time in the past. That’s why you’re charged lower interest rates on credit card balances you carry or loans you have.

It doesn’t matter if you’re looking for a personal loan, mortgage, student loan, or are carrying a balance on your credit card. Your credit score influences the interest rates at most places.

When you’re charged with a lower interest rate, you could pay off your debt faster and use the money toward other things.

4. Lower Insurance Rates

When you’re getting your mortgage or your car loan for a lower interest rate, you can also save on the insurance when you have a high credit score.

Insurance companies have their way of calculating the probability that you will make a claim, their so-called “insurance score.” The input comes from your credit report, and the variations between the two are minimal.

Insurance companies believe that when you have a lower credit score, you will file more claims. Whether that’s true or not, they base their decisions on it.

If you have a good credit score, be sure to compare insurance companies before you settle for one.

5. Great Credit Card Deals

If you have a good credit history and want to continue increasing it, know that you can get excellent credit card deals when you have a strong credit score.

These credit cards can have lower interest, offer credit card rewards, airline miles, or cash back on your purchases. It will make sure that you keep using your credit card, which will help you keep your credit score up. Plus, it will help you save money with cash back rewards.

The important thing here is that you make payments when they’re due and try to close as much balance as you can at the end of the month.

6. Room To Negotiate

It’s always better to negotiate. That’s also the case with your credit score.

When you’re looking for something specific, be sure to ask around and see if anyone can offer you a competitive rate. If you have a high credit score, you can ask companies for a price decrease or an interest rate decrease because you always pay on time and have a good credit history.

Companies have less room for negotiation when you have a lower credit score because specific standards and procedures need to follow.

7. That Special Requirement When Landing A Job

According to CNBC, 72% of employers still do background checks, and 29% of those employers check credit reports. If a poor credit report reveals bad financial habits, it may influence the decision to hire someone.

Of course, this depends entirely on the position. When you’re handling other people’s money or holding a public function, it’s more relevant than when you’re behind a computer doing web development.

Some Consumer Facts:

  • Around 21% of the American population has a good FICO® credit score.
  • In 2020, the average credit score in the US was 710. This is a record high, despite the pandemic.
  • Between 2019 and 2020, the average credit card debt decreased by 14%, from $6,194 to $5,315.
  • 35% of your credit score is based on Payment History. This may include payment information on credit cards, mortgages, installment loans (auto loans or student loans), retail accounts, and consumer finance company accounts.
Monitor Your Credit with ExtraCredit

Conclusion

There are a lot of ways to keep ourselves within the boundaries of our spending capabilities. Set a goal, spend less than you earn by creating a budget, and maintain a good credit score.

A good credit score can mean unexpected benefits like quicker approvals for credit or loans, utilities, phone plans, and even renting a place. You will get better credit card deals, pay lower interest, get lower insurance rates, and can get a loan quicker to start your own business. When you have a high credit score, make sure you negotiate your rates down, as that can save you even more. Employers will also value a good credit report, which may get you the job quicker.

If you want all of these benefits and aren’t sure how to get there, here’s tips on how to improve your credit score.

The post 7 Unexpected Benefits of a Good Credit Score appeared first on Credit.com.

Source: credit.com

What Is “Accessible Income” on a Credit Card Application?

If you’re applying for a credit card, you might stumble upon this term “accessible income.” In fact, that’s the only situation in which you will come across the term: on a credit card application. So, you need to know what it is.

Accessible income is not just income you earn from your regular job. Rather, it includes much more than that. It includes income from a wide variety of sources, like retirement savings accounts, social security payments, trust funds, just to name a few.

Accessible income can work in your favor because not only you can list income from your job, but also all types of other money you receive in a given year. This in turn will increase your chance of getting approved for the credit card, simply because you can list a higher income.

It also can get you approved for a higher credit limit, which in turn can help your credit score and allow you more spending freedom. In this article, I will explain what accessible income is and the types of income you need to include in your credit card application. Before you start applying for too many credit cards, consult with a financial advisor who can help you develop a plan.

What is accessible income?

Accessible income means all of the money that you have accessed to if you are 21 years old or older. According to the Credit Card Accountability Responsibility and Disclosure Act, lenders are required to offer you credit if you are able to pay your bill. If you do not make enough money and do not receive enough income from other sources and cannot make payments, they can reject your application. That is why they ask for your accessible income.

If you are between the age of 18 and 20, your accessible income is limited to income for your job, scholarships, grants and money from your parents or other people.

However, if you are 21 and older, your accessible income involves way more than that. It includes income from the following sources:

  • Income paychecks
  • Tips
  • Bank checking accounts
  • Savings accounts
  • Income of a spouse
  • Grants, scholarships, and other forms of financial aid
  • Investments income
  • Retirement funds
  • Trust funds
  • Passive income
  • Checks from child support and spousal maintenance
  • Allowances from your parents or grandparents
  • Social security payments or SSI Disability payments

To report that accessible income, just add them all up to arrive at a total and submit it. The credit card companies will not ask you to provide the specific source of each income

What does not count as accessible income

Loans including personal loans, mortgage, auto loans do not count as accessible income simply because they are borrowed money. So, do not list them when submitting your credit card application.

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Accessible income on the credit card application

Accessible income is only associated with credit card applications. In other words, you’re only asked that when you’re applying for credit cards. When applying for a credit card, you should take advantage of all sources of income and not just the income from your job.

So, you should make sure to gather all of the money you have accessed to that year. Not doing so means that you’re leaving other income that is just as important. As mentioned above, you should not include loans or any borrowed money.

When reporting your accessible income, be as accurate and truthful as possible. While some credit card companies may take your word for it, others may ask you to verify your income. In that case, you will need to provide hard proof like pay stubs, bank statements, statement from your investments accounts, etc…

Why providing accessible income important?

Your credit score is the most important factor credit card companies rely on to decide whether to offer you a credit card. However, your income is also important. The higher your income, the better.

A high income means that you’re able to cover debt that you may accumulate on your credit card. And the higher your chance is that they will approve you. The opposite is true. If you have a low income, some credit card companies may not approve you even if you have a good credit score. So, in order to increase your chance, you should take advantage of accessible income.

The bottom line

The only situation where you will find “accessible income” is on a credit card application. Accessible income is all income you have access to in any given year. That includes much more than your paychecks from your regular jobs.

But it also includes all types of money including checks from child support or alimony, allowances from your parents or grandparents, money in your retirement and investment accounts, etc. So, you should take advantage of it when applying for a credit card.

Speak with the Right Financial Advisor

You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post What Is “Accessible Income” on a Credit Card Application? appeared first on GrowthRapidly.

Source: growthrapidly.com

What Is a Recourse Loan?

Car loan application

In borrowing, there are two types of debts, recourse and nonrecourse. Recourse debt holds the person borrowing money personally liable for the debt. If you default on a recourse loan, the lender will have license, or recourse, to go after your personal assets if the collateral’s value doesn’t cover the remaining amount of the loan that is due. Recourse loans are often used to finance construction or invest in real estate. Here’s what you need to know about recourse loans, how they work and how they differ from other types of loans.

What Is a Recourse Loan?

A recourse loan is a type of loan that allows the lender to go after any of a borrower’s assets if that borrower defaults on the loan. The first choice of any lender is to seize the asset that is collateral for the loan. For example, if someone stops making payments on an auto loan, the lender would take back the car and sell it.

However, if someone defaults on a hard money loan, which is a type of recourse loan, the lender might seize the borrower’s home or other assets. Then, the lender would sell it to recover the balance of the principal due. Recourse loans also allow lenders to garnish wages or access bank accounts if the full debt obligation isn’t fulfilled.

Essentially, recourse loans help lenders recover their investments if borrowers fail to pay off their loans and the collateral value attached to those loans is not enough to cover the balance due.

How Recourse Loans Work

When a borrower takes out debt, he typically has several options. Most hard money loans are recourse loans. In other words, if the borrower fails to make payments, the lender can seize the borrower’s other assets such as his home or car and sell it to recover the money borrowed for the loan.

Lenders can go after a borrower’s other assets or take legal action against a borrower. Other assets that a lender can seize might include savings accounts and checking accounts. Depending on the situation, they may also be able to garnish a borrower’s wages or take further legal action.

When a lender writes a loan’s terms and conditions, what types of assets the lender can pursue if a debtor fails to make debt payments are listed. If you are at risk of defaulting on your loan, you may want to look at the language in your loan to see what your lender might pursue and what your options are.

Recourse Loans vs. Nonrecourse Loans

Bank repo signNonrecourse loans are also secured loans, but rather than being secured by all a person’s assets, nonrecourse loans are only secured by the asset involved as collateral. For example, a mortgage is typically a nonrecourse loan, because the lender will only go after the home if a borrower stops making payments. Similarly, most auto loans are nonrecourse loans, and the bank or lender will only be able to seize the car if the borrower stops making payments.

Nonrecourse loans are riskier for lenders because they will have fewer options for getting their money back. Therefore, most lenders will only offer nonrecourse loans to people with exceedingly high credit scores.

Types of Recourse Loans

There are several types of recourse loans that you should be aware of before taking on debt. Some of the most common recourse loans are:

  • Hard money loans. Even if someone uses their hard money loan, also known as hard cash loan, to buy a property, these types of loans are typically recourse loans.
  • Auto loans. Because cars depreciate, most auto loans are recourse loans to ensure the lender receive full debt payments.

Recourse Loans Pros and Cons

For borrowers, recourse loans have both pros and and at least one con. You should evaluate each before deciding to take out a recourse loan.

Pros

Although they may seem riskier upfront, recourse loans are still attractive to borrowers.

  • Easier underwriting and approval. Because a recourse loan is less risky for lenders, the underwriting and approval process is more manageable for borrowers to navigate.
  • Lower credit score. It’s easier for people with lower credit scores to get approved for a recourse loan. This is because more collateral is available to the lender if the borrower defaults on the loan.
  • Lower interest rate. Recourse loans typically have lower interest rates than nonrecourse loans.

Con

The one major disadvantage of a recourse loan is the risk involved. With a recourse loan, the borrower is held personally liable. This means that if the borrower does default, more than just the loan’s collateral could be at stake.

The Takeaway

Hard Money Loan signLoans can be divided into two types, recourse loans and nonrecourse loans. Recourse loans, such as hard money loans, allow the lender to pursue more than what is listed as collateral in the loan agreement if a borrower defaults on the loan. Be sure to check your state’s laws about determining when a loan is in default. While there are advantages to recourse loans, which are often used to finance construction, buy vehicles or invest in real estate, such as lower interest rates and a more straightforward approval process, they carry more risk than nonrecourse loans.

Tips on Borrowing

  • Borrowing money from a lender is a significant commitment. Consider talking to a financial advisor before you take that step to be completely clear about how it will impact your finances. Finding a financial advisor doesn’t have to be difficult. In just a few minutes our financial advisor search tool can help you find a professional in your area to work with. If you’re ready, get started now.
  • For many people, taking out a mortgage is the biggest debt they incur. Our mortgage calculator will tell you how much your monthly payments will be, based on the principal, interest rate, type of mortgage and length of the term.

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Source: smartasset.com