Cleveland Second-Cheapest City to Buy a Car!

Cleveland

A new report has been released detailing the ten most and least affordable places in America to purchase a vehicle, based on a CarGurus.com analysis of over 4 million used vehicle listings.

Topping the list were Miami, Cleveland, New York and Stamford as the most affordable places while the least affordable cities were Fresno, Seattle and El Paso, Texas. Yes, Cleveland was ranked as the second-cheapest city to buy a car, at 5.75% less than the national average. Miami managed a whopping 8.02% cheaper than the national average, while Fresno was 7.8% more expensive. Overall, the analysts found that vehicles on the east coast were more affordable that those purchased on the west coast. With this information, American car buyers and sellers can make better decisions on a great investment, purchasing or selling a car. Cargurus.com allows users to compare vehicle costs in metropolitan, rural and local areas. Go here for more information on buying or financing a car in Cleveland, or you can see the full report as a PDF file here.

3 Easy Ways To Pay Off Your Car Loan Early

A car loan can be taxing. When you first get one, your credit score dips. If you bought a new car, you are automatically upside-down on the loan for at least two years. Then there is the danger of losing your job. Put it all together and you it can make you a nervous wreck. Since a car is a necessary part of life in most instances, the best thing you can do is find a way to pay off your loan early. Here are three payoff strategies that are easy to incorporate and do not require a huge additional payment every month.

Gigs For Goals

A fellow personal finance blogger on Budgets Are Sexy coined the term Gigs for Goals a while back. The concept is simple: take on extra work in the form of overtime or a side job, then set the funds aside for a specific goal. If you choose to use this method to whittle down your car loan, all you need to do is clarify your goal. Will you wait until you have an entire payment or will you send whatever you have made with your next payment? Setting the goal and sticking to it are key with this strategy.

Divide By 12

This is the way I have been paying down my car loan. I divided the monthly payment by 12, then added that amount to each monthly payment, effectively making 13 payments per year. For example a $250 payment divided by 12 is $20.83, so your monthly payment becomes $270.83. When I began doing this, my budget was very tight, so it was key to keep the extra payment fairly low. The method only adds $19 per month to my budget, it may be more for you as it is in the example above. When I am done, I will have shaved three months from my loan and saved approximately $100 in interest. While those numbers are not going to blow you away, every penny of my money that I do not pay for interest is a penny still in my account. If your budget becomes less tight, you can use this method in conjunction with the ”Gigs for Goals” to become debt free more quickly.

Round Up

You can round your monthly payment up. The amount that you round it up to depends on your budget. For example, rounding your payment up to the next hundred ($300 instead of $237 for example) may be too much for you, but rounding it to the next fifty may work ($250 compared to $237). The amount may sound small and insignificant, but you will be starting down the path toward debt reduction and saving money on interest as well.

Each of these goals is easy and does not require a huge financial commitment. They should fit into any budget without requiring a sacrifice on your part. One other thought, if you bought your car at a time when you had bad credit, you may be able to refinance at a lower interest rate, thus saving yourself hundreds of dollars. No matter how you attack your car loan, good luck!

Should You Finance a Car Before Buying a House?

In my humble opinion, yes you should finance a car before buying a house. Additionally, you should have made at least eighteen payments on at least one auto loan prior to applying for a mortgage. Here is why.

FICO Score

The most widely used credit score is built by the Fair Issac Corporation (FICO). FICO builds its score on five categories. An auto loan will give your score a boost in three areas: payment history, types of credit used, and length of credit history. These three categories account for sixty percent of your credit score. On the other hand, an auto loan will lower your credit score for 60 days after you obtain it. Any time your credit profile is requested by a lender, your score dips temporarily. Once you are approved for a loan, you score dips because it will appear as if you have new credit with a high balance.

Why Eighteen Payments?

Many experts say that making twelve on-time payments on a car loan will give you the maximum credit score boost that you are going to see. They are somewhat right, but…depending on the loan, you may still have too high a balance to see the largest increase in your credit score. Eighteen payments on a new or used car loan should take you out of any negative equity situation and get your balance in line.

Why Does It Matter?

Boosting your credit score before buying a home is important for several reasons:  loan approval, required down payment, and interest rate are chief among them. Most lenders will only offer a mortgage to the top two credit score tiers. That means that you must have a credit score above 679 if you want a traditional mortgage. Also, your credit score dictates whether you will be required to pay 5, 10, or 20 percent down for your home. Lastly, the interest rate that you will be offered is directly tied to your credit score. Since you may be paying this rate for the next thirty years, you can see how important it is to keep it as low as possible. A difference of a single percentage point can cost you tens of thousands of dollars in total interest over a thirty year mortgage.