Can money buy love and happiness?

Money is everything, but it’s also not everything. We know, “that’s a little confusing”, but hear us out.

We love and need money. Whether we like it or not, our world revolves around it, both on a planetary and individual level. Though money both prompts and funds most of our life choices, there are also non-economic elements; things like health, purpose, love, peace, and happiness within the human experience that motivate us to behave in certain ways. Though they are separate from money, and are achievable without, achieving these non-economic goals can be, and typically are, integrated somehow with having money.

Since it’s Valentine’s Day, many of us have love and happiness on our minds, as those factors seem to be associated quite a bit – especially this time of year.

And, since we’re advocates of strong personal finances, it seems prudent to discuss money’s role in achieving these important goals.

Money and dating

Most of us want to have lots of money, love, and happiness. For the single population especially, one or all of these elements could be missing or in need of improvement. So, can money buy love and happiness?

The answer is: yes and no.

Happiness

According to a study, money can buy happiness. Money buys happiness when used to purchase free time, e.g. a vacation, certain days off, and having more time to explore oneself and one’s interests. Removing (even temporarily) or reducing daily time stresses can increase happiness. Since “time is money”, cash is typically involved in buying time.

So, sure, money can and does buy happiness, but only to do a degree. Another study on the relationship with money and happiness determined that higher income is associated with less daily sadness, but not more daily happiness.

“Money buys freedom from worry about the basic things in life” (Psychology Today); it creates circumstances that induce happiness, but it is not completely fulfilling.

Love

Unlike happiness, research does not show that money is able to purchase love itself. However, according to an article by Psychology Today, money might not be able to buy  love, but it can increase the chances of love. There’s two reasons why:

Attraction.

There are two genres of money-related attraction. First, there are those who are attracted to people with money. Money makes life easier. For those who seek stability or a comfortable lifestyle, money is an attractive element that can eventually lead to a loving relationship. Next, there are those who are attracted to similarity (most people). Studies show that not only are we more attracted to those who are similar to us, but also to those with whom we share similar attitudes and habits about money. Essentially, we are hard wired to be attracted to financially compatible partners. This makes sense because money habits are related to personality traits, and strong couples tend to have compatible personalities.

Favorable Circumstances. 

Money generates circumstances that are more favorable to love such as stability and lack of concern over basic needs.

Dating Big Picture

Money, in fact, cannot make you fully happy or fall in love, but that it can help you get there. So, if you’re single, here’s some tips to help you attract what else you’re seeking.

  • Maintain or build your income.
  • Develop good financial habits and budgets.
  • Seek those who do, too.
  • Buy happiness in stability, free time, and life experiences.
  • Good luck out there. Love is in the air!

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Loan-To-Value (LTV) Ratio: What it means for you

Many terms and acronyms may be thrown around during the loan approval process, especially when refinancing. Unless you’re well-versed in personal finance and banking, you may not fully understand the information you receive. In order to be a more informed and conscious consumer, it’s important to know what some of those terms mean. One of the most commonly question acronyms is “LTV”, or loan-to-value ratio.

LTV is a number that compares the value of the asset to the loan that it secures. Put another way, when you purchase a car, your lender issues a loan plus interest to help you make the deal. Technically, because your lender issued the funds to purchase the car, that car is collateral in the event that you default on your payments. So, LTV is the ratio that determines the level to which the asset will pay off the loan.

A more common phrase associated with LTV is being “upside down.” When a borrower is “upside down,” it means that they owe more than what the car is worth. People who are “upside down” have a high LTV.

So, why is LTV important?

LTV is an assessment of risk. Lenders are notorious for favoring less “risky” applicants for loans. They assess a number of criteria (credit score, LTV, DTI, and others) to determine the likelihood that each person will make their payments, on time, for the duration of the loan. After all, lenders want to get not just their money back, but also the interest rate on top of that.

LTV determines risk because in the event that the borrower defaults, it determines the return on the loan that the collateral’s value would provide. A higher LTV means that the asset is less likely to pay off the loan, and that’s why higher LTVs are less likely to be approved for refinancing.

I might have a high LTV. Am I doomed?

You’re not doomed. A high LTV will make your loan application less appealing for lenders, but isn’t guaranteed that you’ll be denied. Instead, your lender may give you a higher interest rate or add certain stipulations onto your loan in order to mitigate risk.

There’s more to the story

Though LTV ratios are an important component in lender decisioning, it’s not the only piece to the puzzle. Offers are typically based on the combination of several factors, so even if you have a high LTV you could still be eligible for refinancing.

We always advise customers that the earlier you refinance your current loan, the better. Because cars lose value relatively quickly, the sooner you refinance, the less likely you are to have a higher LTV ratio.

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A Guide to Auto Refinancing

Debt-To-Income (DTI): What it means for you

 

 

A Guide to Auto Refinancing

steps-to-sell-your-car

Many people associate financial changes with stress, especially when it comes to refinancing a loan. Some expect the process to be a hassle, some stress because they don’t know what to expect, and, more rarely,  some feel perfectly comfortable. Regardless of which category you identify with, we created a guide that should provide you with helpful knowledge to keep you informed about what to expect, make the process as simple as possible, and, of course, to help save you money.

1. Do it sooner than later.

Because interest accrues every day, and since  your vehicle becomes less valuable with every mile, the longer you wait, the higher loan-to-value (LTV) ratio you’ll have. LTV is an important factor for lenders when deciding to make you an offer.

2. Expect to have paperwork. 

No matter whether refinancing with rateGenius or another company, paperwork is a tedious, yet necessary, part of the process. Refinancing requires the coordination and cooperation between different lenders and bureaucracies across the United States, which can sometimes require extra documentation and a bit of patience. Luckily, we do our best to alleviate as much stress as we can by handling the rest of the process.

3. The process is typically quick, but sometimes it can be tricky. 

This is the case especially for lease buyouts and for transfers of ownership.

4. Apply with accurate information. 

This is one of the most important things to keep in mind, as it can determine the ease of your refinance process. Lenders base their decision and offer on the information provided in customers’ applications. Sometimes, however, once customers complete and submit the documents for their accepted offer, the information does not match their application. This can result in rescinded offers,  therefore requiring new approval (or not), and new documentation to coincide with that approval. This significantly delays the process, and will likely result in a different rate than you originally agreed to. Always make sure that what you enter into your application is correct; that the name you enter matches your driver’s license, and that you list your income and vehicle’s mileage with 100% accuracy.  

5. Do your own math. 

This is a general rule of thumb for all things financial.  Though we provide accurate and in-depth explanations of loan terms to our customers,  it always feels reassuring to do the math yourself to make sure you understand and agree to the terms.

6. Keep making payments.

 If you have any payments due during the interim between your old loan and your new loan, still make the payment. If there are any funds left on your old loan after your new lender pays it off, your old lender is legally obligated to return that money to you. 

7. Credit is a factor, but not the only factor. 

Many customers believe that if they have great credit, that they’ll be automatically approved for a new auto loan. However, that’s not necessarily true. Though credit is an important consideration, lenders mostly care about things like DTI (debt-to-income ratio) and LTV (loan-to-value ratio). DTI is essentially the lender’s assessment of risk in your ability to afford the auto loan payments. LTV is your lender’s determination about how much you owe on your previous loan versus how much your car is worth. Put another way, it indicates your proximity to being upside down on your loan.

8. Select automatic payments. 

Many lenders offer perks for customers who select automatic payments on their new loans. Some perks include lower auto loan rates, which can save some people hundreds of dollars over the life of their loan.

From the Desk of Roger Douville

Lending Policy Pitfalls

Of course you must have loan procedures that provide your lending staff the guidance they need to make sound lending decisions for your institution. However, I suggest your procedures should be structured much like how Captain Barbossa (from Pirates of the Caribbean) views “Parley” – the rules are more like “guidelines”.

In each lending institution, there is always at least one staff member who takes these loan procedures literally. They are the sticklers for procedure; the black and white brigade; the “no gray area there” people. Much time is likely spent coaching them about what makes each loan applicant’s circumstances unique and how to find a way to approve a loan rather than deny a loan request in haste.

But have you ever considered the members of your staff that use your loan procedure to make ill advised loans, just because they can? Just because your loan procedure allows you to go to 50% debt ratio on a 710 Beacon Score, doesn’t mean you should! Does the exception for LTV make sense for this borrower with this collateral for that term? Every deal is unique and one-off. Your underwriters are there to mitigate risk while providing yield. Remind them to look into the deal rather than at it.

All the best,

Roger Douville

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Auto loan rates to rise in 2018: What it means for you

tips-save-money-buying-new-car

As we enter a new year,  economists have made their official predictions about what 2018’s auto industry has in store. Overall, interest rates will likely increase for subprime borrowers.

In recent years, lenders have offered decent rates on auto loans, even to subprime candidates, in order to boost sales and respond to the increasing price of new cars. However, the Federal Reserve increases interest rates if they believe there are too many risky loans funding sales. This increase in meant to deter subprime borrowers to prevent another loan bubble like the infamous crash in 2008.

In an article in Forbes, credit-reporting agency TransUnion forecasted that lenders will continue to prioritize lending towards “lower risk, better-qualified borrowers” in 2018.

So, what does that mean?

According to the Washington Post, these increased rates should only slightly effect rates for those with good credit. However, that may not hold true for riskier borrowers. Auto loans, especially on new cars, may be unaffordable for many within this group. Some trends that may arise from this shift are:

  1. Bigger down payments.
  2. Purchasing used cars instead of new.
  3. Longer loan terms.

With these predictions in mind, it’s important that you make the best choices for you and your wallet when considering a new (or used) car. And not to worry – refinancing can help. 

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