How a Good Credit Score Can Save You Big Bucks (But a Bad One Doesn’t Mean You CAN’T Get a Loan)
The importance of a good credit score can’t be understated when applying for any type of loan, but the particulars of loans vary depending on whether you’re buying a home or — in this case — a car. To get the best car loan rates, many experts would advise making sure you have an excellent credit score, minimal debt and a hefty down payment.
Although that’s true enough, it can be easy to get confused about credit scores and interest rates.
You might often hear that a score of 700 or higher is an excellent credit score, but what interest percentage that equates to is unclear. The fact is, the value of credit scores is relative and depends on the lender’s standards for creditworthiness.
Get a better understanding of auto loan rates by credit score so you can adapt your financial strategy to get the best rates possible.
Keeping Score With Your Credit
To better understand what you bring to the table, find out what your credit score is. Thanks to the Fair Credit Reporting Act, you’re entitled to receive a free copy of your credit report once each year from the national credit reporting bureaus — Equifax, Experian and TransUnion. Many credit cards now offer cardholders free access to their credit scores.
Your credit score is determined by five different elements of your financial behavior:
35 percent based on payment history: how consistent you are about paying your bills
30 percent based on debts owed: how much you owe on credit cards, loans and other types of accounts
15 percent based on credit history: the length of time you’ve actively used credit
10 percent based on new credit: how many new lines of credit have you opened
10 percent based on types of credit: how many type of credit you have, such as revolving credit or installment accounts
The Higher the Score, the Lower the Rate
People who have higher credit scores are considered less of a risk — that is, they’re more likely to pay back the full amount of their loan on time — than those who have lower scores. Lenders reward these lower-risk consumers with lower interest rates. The credit score, in effect, grades a pattern of behavior and, based on this grade, interest rates are determined.
Because there are three credit reporting bureaus, you actually have three credit scores and three credit reports, each of which might differ from the others. If you get scores of 780, 707 and 804, don’t panic; there will always be minor discrepancies among your scores and reports due to the bureaus’ individual reporting criteria and scoring model. But in this case, the scores are close enough to indicate that your credit is excellent.
The same principle applies when it comes to determining the interest rate you’ll get based on your credit score: Generally, the higher the score, the lower the rate, and vice versa. For instance, MyFICO.com breaks down its credit scoring and corresponding APRs for a 60-month loan on a new car into six categories:
*Rates as of 8/30/2016
How Low Can You Go?
When it comes to securing an auto loan, always try to settle for less — in terms of APR, that is. One way to help yourself get a better interest rate on an auto loan is to print out your credit score and bring it with you if it ranks in the top tier; this could help with bargaining power. It also lets the dealer know that you’re aware of your score and what that means in terms of getting an appropriate APR.
In addition to your credit score, there are other factors that can affect the interest rate you get. Some of these include how old the car is, your debt-to-income ratio, down payment and the length of the loan term.
Because used cars depreciate — that is, they lose their original value — interest rates for loans on older cars are higher than they are for new cars. This depreciation causes a lender to be less eager to lend money to used-car buyers.
At Chase, for example, the average interest rate on a 48-month loan for a new car is 2.89 percent versus the used car’s rate, with the same terms, which is 3.19 percent.
Like your credit score, lenders also use something called a debt-to-income ratio to estimate your ability to pay a monthly loan. You can figure out your DTI by adding up your monthly debt — including loans, utilities and rent or mortgage — and dividing that sum by your gross monthly income.
Your interest rate decreases as your debt does, so it’s not a bad idea to pay off as much debt as you can before applying for financing.
Length of Term
An auto loan term refers to the time you have to pay back your loan. Simply put, you make monthly payments until the loan reaches the end of its term. Most loan terms come in a variety of lengths, such as 60 months, 48 months or 36 months.
Generally, new cars with shorter terms also get lower interest rates. The downside to shorter terms is that monthly payments are higher. If a buyer can afford bigger payments, then he’ll end up spending less money on interest than he would with a loan with a longer term and lower monthly payment.
A sizable down payment signals to lenders that you’re a less risky bet and it might even help you get a lower interest rate. The opposite is also true: Those with a small or no down payment who are asking to borrow a large sum of money are a greater possible liability for lenders. Only putting down a small down payment can lead to higher interest rates, which lenders put in place to mitigate any potential loss.
According to data from Statista, a little over 14 million households in the United States were signed up with an online trading service. With access to almost any stock, bond or securities online, online trading is a viable option to traditional brick-and-mortar brokerage firms.
What makes online trading, or e-trading, different than using a stockbroker is that with the former the trader is making all the decisions himself, while with the latter there’s input and advice from the broker. Another difference is in the fees, online trading is generally considerably less expensive than using a stock broker to make trades.
Regardless of how you trade, there’s always risk online and offline. While online trading has its benefits, there are some hazards associated with it as well.
The following list outlines the advantages and disadvantages of online trading, from access to robust online tools to the dangers of trading addiction.
5 Pros to Online Trading
One of the clearest advantages to online trading is the reduction in transaction costs and high fees of traditional brick and mortar brokerage firm. The going rate of online discount brokerages to buy and sell stocks as well to make EFT trades is anywhere between $5 and $10.
Finding even cheaper fees is possible thanks to startups, places like Motif and Tradeking which charge $4.95 per EFT and stock trade.
More Control and Flexibility
Time is of the essence – or can be, when you’re trading stocks. Naturally, this means faster access, i.e. online trading portals, is a benefit to people who know what they’re doing. With online trading, people can execute a trade almost immediately versus going through a broker.
Traditional brick and mortar brokers often require appointments, either online or in-person, just to initiate a trade. This time can be costly in the worst scenarios and just a regular inconvenience in the best ones.
Avoid Brokerage Bias
One thing you’re sure to eliminate when you take trading into your own hands is brokerage bias. Bias happens when financial advice given by brokers also benefits the broker – often in the form of payment by mutual funds and other companies for pushing their stocks.
This kind of favoritism has even caught the attention of the Securities and Exchange Commission which has called for stricter rules on brokers. What the SEC is pushing for is that brokers and advisers act purely in the interest of the investor. For many people who rely on the advice of brokers, this kind of biased advice can be troublesome and even lead to bad investments.
Access to Online Tools
Low cost doesn’t necessarily mean a shoddy product in the world of online trading. Many of today’s online trading companies are offering their customers an impressive suite of tools to help them optimize their trades.
Sites like Tradeking, for example, offer a robust selection of tools designed to give customers immediate access to valuable information. Things like interactive charts which show the performance of stocks, ETFs and indices, allow account holders not only to view but also to customize their preference. Tradeking also includse an option to see volatility and trading volumes for many underlying securities.
And that’s just one tool and one site, others like it – Interactive Brokers and Motif, are some of many. So while traders may be sacrificing the input of a broker, this kind of reachable information is decidedly valuable.
Monitor Investments in Real Time
Many online trading sites make it easy for people to see how their investments are doing in real time with live stream quotes and trade information.
Companies like Scottrader and Tradeking, among others, offer customers access to streaming data. Tradeking gives account holders access to real time quotes along with their last trade, news and more. Scottrader offers immediate detailed quotes which come with financial, fundamental and technical information for the symbols of the customer’s choice.
It’s not tough to imagine how handy this kind of up-to-the-moment data can be for traders. For some, this one-stop convenience trumps picking up the phone and calling a live broker, turning on the television or even going to a different website to get market information.
5 Cons to Online Trading
Easier to Invest Too Much, Too Fast
Because online trading is so easy – you basically push a button, there is the risk of making poor investment choices and even overinvesting.
The SEC warns investors that it takes just a nanosecond to make a trade, but real investment decisions require time. Investors who aren’t used to fast-moving markets can get caught up in the excitement and, before they know what hit them, end up losing more money than expected.
The SEC recommends that online investors protect themselves by understanding the stocks they’re buying and how to set up safeguards in fast-paced markets. One way to control what and how much you’re buying is to place limit orders; these allow you to set a specific price at which a stock is purchased.
No Personal Relationships With Brokers
By and large, online traders are on their own. They don’t have the security blanket of a broker to help them navigate the uncertain waters of the stock market. From getting help on how to create an investment strategy to understanding how the results of feedback mechanisms are affecting the market, online traders are left to their own devices to come up with this information. For some, this kind of autonomy can be unsettling.
The number one thing experts advise new online traders to do is: research. Without the help of a broker to guide you, it’s important to learn as much as you can about the companies you’re investing in. One place to start is the Securities and Exchange Commission’s filings. Public companies are required to submit detailed company information to the SEC on a regular basis, which the public can access. This data includes company finances, potential conflicts and risk factors.
Online Trading Can Become Addictive
Trading stocks is like gambling, in many ways. With stocks, the trader is speculating on the result of something – a company’s performance, let’s say, and then bets money that the speculation will be correct. Like gambling, online traders can experience a certain high, according to a recent study, “Excessive Trading, A Gambling Disorder in Its Own Right? A Case Study on a French Disordered Gamblers Cohort,” published in Addictive Behaviors, a peer-reviewed journal.
The study found meaningful parallels in behavior between people with gambling disorders and excessive traders. Some of these similarities include traders who experienced initial wins of small amounts, who then “chased their losses” and ultimately lost control of their money.
“All of them invested in very risky stocks associated with short-term trading leading to potential large gains, but also with very significant losses. The structure itself of the two activities (gambling and trading) is very close,” the study concluded.
Bad Connection Can Kill a Trade
The very nature of online trading means that you’re at the mercy, ultimately, of your internet connection. If your connection is too slow or gets interrupted you could lose out on a potentially important or lucrative trade.
The SEC recommends that people have a plan b in case they are cut off from the internet. Find out if your online trading firm has alternatives to making trades on the internet. Many firms will allow customers to use a touch-tone phone ordering system or even provide live brokers to take orders.
Computer Missteps Lead to Buying Too Much/Not Completing a Trade
Two common problems with online trading is A) assuming a trade was not completed and B) assuming it was. Both of these mistakes can cost you money. What happens to people who believe their trade was not completed is that they make the trade again and end up investing twice as much as they intended.
The second scenario is tricky when traders cancel a trade, receive an electronic cancellation receipt and then assume the trade was, in fact, canceled. The SEC reminds traders that a trade is only canceled if it has not been executed. It’s important to check with your broker on how to verify cancellations.
Using PornHub as ad space was clever. The first time. When Diesel did it in January.
Nicola Formichetti, the high-end denim brand’s artistic director, told i-D Magazine, “The message is simple: before you jerk off, look at this.”
This is a line Andy Warhol would’ve been proud of. There’s no crying or making excuses in art, people, or marketing – which, some might argue, is one and the same these days.
And now, here we are four months later with a different kind of product being peddled on PornHub, except this media stint wasn’t praised for its cleverness.
We’re talking, of course, about the Portland band Yacht (also known as YACHT, but we’re grown-ups here – so it’s just getting one capital letter like all the other proper nouns) and their fake sex tape leak to promote their aptly named song, “I Wanna Fuck You Til I’m Dead.”
Jona Bechtolt and Claire L. Evans, the Yacht duo who also happen to be in a relationship, committed to duping the public, through Facebook posts, stating that their sex tape had been leaked “due to a series of technological missteps and one morally abject person.” Then they wrote this:
Just because we are public figures does not mean we asked for this. Like anyone, we still deserve to have a choice about what we share with the world. Today we no longer have that choice. But our hope is that you fundamentally understand that choice and you choose not to view a private act that was inadvertently made public. We hope you understand that this is not a delicious scandal. This is an exploitation.
The old, tell-them-not-to-look-so-that-they’ll-look routine. Moms have been getting kids to do chores and eat carrots this way for centuries, so what if Yacht does it with a fake sex tape that they ended up leaking themselves?
Regardless of the fact that the whole thing feels like an episode of Scooby Doo for millennials, many people were annoyed that they used revenge porn to get attention. Revenge porn is a serious matter, we all can agree – but then, the best subjects for art are serious matters, right?
At first, Yacht defended their art (I mean marketing, I mean art…), by stating it was a way to “…play with science fiction, the attention economy, clickbait journalism, and celebrity sex tapes all at once.”
When that was met with everything from side-eye to flat out feature-length stories about how much they suck, the band back-peddled and issued a sorry-not-sorry apology, followed by a more sincere, PR-approved one.
The internet enjoyed much schadenfreude over the duo’s massive media failure – a true case of animals eating their own, as hip media outlets (places who would do a review on a Yacht album, let’s say) got pretty emotional in their tear down of the band.
“But most folks probably didn’t try to download it at all, because Yacht said the video was leaked without their consent. Most people are not craven and/or horny enough to watch a video whose participants are begging you not to view it. Most people don’t suck. Most people aren’t Yacht.”
And that was one of the kinder paragraphs in their scathing commentary on the fake sex tape (which, SPOILER ALERT, does not include sex at all – but aliens quietly humping to synth pop).
So here’s the big question: if Yacht was sincere in its art, then should they have apologized? Haven’t artists been pushing boundaries since the invention of art? Isn’t that the point? From Piss Christ by Andres Serrano to Marcus Harvey’s 1995 portrait of Myra Hindley people have been hating on art since…at least the 80s (I should’ve found older examples, but you get the point).
This leads to another question, how much can you trust an artist when they don’t trust themselves? And how does that affect their product?
The media consensus is that the only thing getting screwed in that sex tape is Yacht, the brand. But what if they would’ve been punk rock about it? What if they would’ve just given the finger to the media, stuck by their guns and NOT kowtowed to hipster bloggers because they were offended by something that is pretty inoffensive (we’re talking a fake sex tape with aliens)? My hunch is that they would’ve gotten a lot more respect.
The bottom line is this: by apologizing for their art they A) Never really believed in it in the first place or B) Are willing to do or say anything to be liked. And there’s nothing worse than insincerity in art. Or marketing, even if it is just something to look at before you jerk off.