After completing the build your proficiency diagnostic from chapter
5 and 6 that I scored the lowest on was, ''Evaluate consumer
loan choices based on your financial needs, loan terms, and
costs,'' for chapter 5, and for chapter 6 was ''Evaluate mortgage
financing alternatives.'' These are important for me to understand
it because these are part of the major parts of finances.
When learning about these things you need to understand every
part of it.The advice I would give my friend that is trying
to buy and look for a home is, look for the right area,
what type of environment is the house, price of the home,
how much to keep it maintained, there is so much to look
at when looking and buying a new home. To determine what
is affordable is looking at what you make in a month and
average out how much all the bills would be for the house
and see if you would be able to do so.My advice for
keeping good credit would be to not apply for credit cards
back to back, applying for loans you know it's going to
be hard to pay back, don't go to the E.R unless it's
necessary; but if you have insurance it's fine. Sadly almost
everything does a credit check to see if you're good enough
for whatever it is you're applying for. Only apply for something
is it needed.The two C’s that are important in making a
major credit decision would have to be Collateral and character.
The reason for collateral being on of the important C’s is
because, you agreed to pay the company back that lended
you the money. Which you don't do so does not look good
on your credit score. Anything you own they will come take
and sell to get here money back that you sadly did not
pay back. Next, is character, this is also important because
this shows the company that's looking into you to see if
you qualify for a loan. If you ever got a loan but never
paid it back, but if you have then that makes you getting
approved for a better chance.
In real life the next car that im getting is a cash car
just because i will own it myself title in hand. I won't
have to worry about monthly car payments, high insurance and
no title in hand. But now I have leased a car twice
before the first one transmission broke on me so they put
me in a new one but I had to pay for my payments
and insurance. I prefer to get a car leased just because of
the fact that if something breaks i can take it to the car
dealership as well as a newer car. Sadly im 20 years old
and been through 2 leasing and 3 cash cars in now it
makes 3 years. So my luck with cash or leasing isn't good,
but they are right, it is all about the person.
I believe the 2 most important C's of the 5 C's are
conditioning and collateral's for multiple reasons. Starting with
conditioning, which I believe is important because it plays the
role of the base of all entire loan itself. Being as though
the conditioning includes the purpose of the loan, the amount
involved and prevailing interest rates for me this would be
important, the most important details actually the structure of
the entire loan so to speak. The conditioning will give a
breakdown to the person of everything they need to know
because it is in fact the conditions of the loan such as
interest rates and amount of principle. Lenders are more likely
to approve loans that are made for a specific purpose as
opposed to a signature loan. Collateral matters a lot for me
because collateral can help a borrower secure a loan. Collateral
is used by the lender just in case for reasons the borrower
can not repay the loan, the lender receives the collateral in
place of the funds. Most times the collateral is the thing
the borrower is borrowing for such as a house or car. My
lowest score was on buying and leasing a car. I have
actually looked into buying or leasing a car in real life
and I still don’t understand the difference. It is important to
my personal finances to understand which is better for me
and my family. I really want to know more because I
think if I understood better what the perks for leasing a
car it would work better for me.
My first advice when advising a friend on buying a home
is to minimize debt and work on making your credit score
better. Then I would advise to not only look at used and
new home but also foreclosures. When they find their perfect
are to constantly keep watch and not to rush into anything.
Credit score is incredibly important. It helps with not only
buying a home but also a car. The things that I have
found out about credit is a lot. I have learned that your
credit cards should always stay under 30%. That you should
have open accounts but also close them. Another thing is
making your payments more than 3 days early help your
credit score .
Maintaining a positive credit history is simple when you make
payments on time without fail. For every loan, this applies
and if you can always pay more than the minimum amount.
When using Credit cards, you don't want to make purchases
more than ten percent and certainly not over thirty percent of
the credit amount and make your payments on time. That is
credit utilization and will be used in factoring your credit
score. Be sure to plan how much interest you may incur
over the amount and the year for the credit. Lastly, utilize
all the perks you can that may benefit the use of that
credit you’re using.The Five C’s include Capacity, Capital, Collateral,
Character, and Conditions. All of these significant credit decisions
are important. The most important I would say is Character
and Capacity. Character because it is historically reviewing your
whole credit history and determining if you had a bankruptcy
and how long you can manage jobs. Every loan I have
used has looked into my character before proceeding. Capacity,
I would say, is second because this includes your current cash
flow assessment on expenses and if you can make on-time
payments with income and other payments you may have. Most
of every loan ran my credit and then proceeded with the
following steps. If I were to fail any of these, I would
stop there until my credit score and payment history, and
income after expenses was sufficient for the loan to be
borrowed.Between owning a car and leasing, I will choose to
own a car. Last year, my wife and I finally paid off
her car loan. We now save almost $350 a month. However,
I would consider leasing if I did not have a family and
how much I drive for work each week. But, because I
have a family, it helps add something to my asset column,
and I have that freedom for future options with an owned
vehicle.. When my score is 800, I will feel like I have
made it. I made some sloppy immature decisions in the past
with credit and I am just about done paying for them. I
have learned that credit takes for ever and then some to
build, but quick to ruin it. Some good tips I have learned
along the way are to make payments early and more than
the minimum. Early to not get penalties, more than the
minimum to avoid interest if possible. Getting confirmation I
payment went through, and reminders a head of time will
help with last minute difficulties.
I would say of the five C's, capacity is a huge consideration.
If you don't have the funds, you don't get the fun. Simple
as that. Be patient and wait until finances are ready for
the risk. Next I would say is character. If your credit
history isn't great, why should a lender let you borrow? It
really is all in goo faith, but accountability is huge here.
Owning up to defaulting is one thing, but correcting and
acting is another. Your history will eventually show through
your hard work.
I have leased a car for three years, and recently resigned
a new lease. I loved leasing because it was more affordable
for me at the time. I also have had to have a cosigner
to help me do a lease, so I am not ready to buy a
car yet. However, I would like to buy my car at the
end of my lease. I am confident that in another three years
time. I will have matured and have enough accountability and
knowledge of the responsibility I will be taking on. On the
subject of leasing versus buying, I've always looked at it in
terms of return on investment. Leasing a vehicle is less
expensive outright than buying, and as such short-term it is
a viable option. Long-term however, renting/leasing anything becomes
less desirable as the money spent into a lease yields no
returns. For example, renting an apartment in my area costs
circa $1000 a month in rent and utilities. Calculated over a
year, that's $12000 that you will never see back, which adds
up over a long term habitation. For the same unit purchased
as a condominium, the up front cost is circa $45000. Assuming
you put 15% down, your mortgage and utilities payment for
that apartment would run you around $550 a month, during
which time you would build equity for a later sale. When
selling that apartment, you can expect to make roughly 8%
per year (the area average for housing inflation). Calculating at
simple interest (in this scenario the interest would be compound
due to rising home value) after one year your cash flow
for the home (value increase vs home expense) would net a
loss of $6000 (half that of what would be spent on rent
for that twelve month lease). The same concept applies to
cars and leasing. Financially, any sort of renting is only viable
as a short term alternative to buying (or investing).
When discussing credit scores, the common misnomer is that
only individuals with money have good credit. Anyone can have
a strong credit score, as it is just a way to calculate
how likely (or unlikely) you are to default on a loan. A
piece of advice for credit I've always heard is to get a
credit card, put one recurring expense on it, and pay the
balance every month. Doing this will allow you to generate
a strong history of paying your dues in a timely and
consistent manner. This tells possible lenders that you have a
good character to repay your loans. The only other thing your
credit score can reflect is your capacity. Individuals with large
purchases using credit (housing loans, car loans etc.) can show
their capacity to repay big-ticket items over time, exhibiting their
dependability on more than just consistent small expenses. I was
unfamiliar with the credit consumer rights that are afforded me,
which resulted in my lowest score in chapter 5. It is
extremely important to have a full grasp on your consumer
credit rights that are clearly established to ensure that you are
not mistreated in any unlawful manner. My scores were rock
solid in chapter 6 so I'm pretty good to go on that area
of knowledge.My friend would have to deicide the dollar amount
that he or she can afford to pay monthly for a house
payment. He/She will need to include the cost of insurance,
property taxes, possible HOA fees, closing costs, maintenance costs,
etc. Then They will need to figure out how much money
he or she has to put down towards the home loan. He,
she, or zee will then need to figure out the maximum
affordable loan amount. Then start house hunting while keeping
in mind the local crime rates, natural disaster zones, school
districts, points of personal interests, evacuation routes, job location,
etc. Then my friend who may or may not want to be
identified as a non-binary pansexual timber wolf will also need
to consider the year and condition of the homes that fall
within the previous guidelines. Credit cards can help greatly
when utilized properly. Get a 2 to 3 credit cards and use
them for purchases that you would normally make. Then pay
them down with the money you actually have. Try to keep
the amount of credit used to hover around 10-15 percent of
the total amount on each card. Don't have more than a
couple big ticket items of debt at a time. House and car
payments are good for examples. Don't throw a boat, RV,
and some other large loan on top of the pile. Just because
you can afford it doesn't mean you can afford it. You
know what I mean. You'll drown in debt quicker than you
think. Instead, pay off one then get the next.I do not harbor
any bias towards one or more of the C's over the others.
I respect them equally, therefore I think they are all great
and necessary and I love them all .I'm a bit of an old
timer in my heart. I believe in buying a thing and owning
it. I will always buy a car and drive it till the tires
fall off. The option to lease is alluring however I will
continue scoff at people who have a new car every 2 years
and are happy while they drive passed me on the side of
the road while I pour water into my radiator. I have learned
so much from chapters 5 and 6 this week. Especially because
I want to buy my first home in 3 years. In chapter 5
my lowest score was on "evaluate consumer loan choices based
on your financial needs, loan terms, and costs. I do not
even know what to say to that one. I would not even
know where to look for this information. My guess would
be, to look at my budget first, see what I can and can
not afford. After that I believe I would then go and speak
with a lender.My lowest score in chapter 6 was on "evaluate
mortgage financing alternatives". This score does not surprise me
at all because I have never purchased a home....YET. I would
for sure want to know more about this topic because it
will show my all the different options I have and how
long of a commitment I want to have to a home. I do
not look at these low scores as a bad thing. It puts
everything in perspective when you are looking at the largest
purchase of your life.Credit score. Some people look at those
two words as something horrible and others look at those
words as opportunity. As adults, we all know that having a
good credit score also means financial freedom. To build a
good credit score you will want to have different types of
credit. One or two credit cards, mortgage, or even a consumer
loan, such as a car loan. You also want to make payments
on time. Late payments can reduce your credit score 35%.When
it comes to buying or leasing a vehicle. I personally would
buy. I do not like to have stipulations on how far I can
drive. Knowing I had to stay under a certain amount of
miles over the lease term would cause me stress. I would
never want to drive the car and it would become a stressful
money situation for me. I believe out of the 5 C's of
Credit, character and capacity are the most important. Character
pertains to your job history, education level, and financial past.
Capacity describes how much cash inflow to cash outflow per
month. If you have a high cash inflow and a low cash
outflow, your lender will be more apt to give you a greater
max out of the balance. If you show a reliable character
and a decent capacity, any lender will be willing to work
with you.
It is fun to have ownership of a car until you run out
of warranty and you have to repair it. When selling a car
that you own, the equity you already have in it will return
to you. When leasing, you have to put little money down,
and the monthly payments are much cheaper than if you
bought a car. The biggest downside is that insurance is more
expensive, and you have to drive low miles; if you reach
your miles limit, you will have to pay per mile. There is
no right or wrong choice! Personally, I would buy a car.
I have no problem worrying about repairs that will come up
because my dad is Master Diagnostic Technician. I also have
no problem driving a car until it dies. One of the concepts
I scored poorly on from chapter 5 was evaluating credit card
choices based on terms and costs. This concept is important
because unfortunately in the United States, credit card utilization
is a very important part of building one's credit history to
be able to show your credit worthiness. Knowing how to read
the terms and requirements for each card and determining which
one would be right for you and your needs is crucial.
When buying a home, it is important first to know how
much money you can allot towards housing every month. Next,
how much the other costs associated will be like homeowner's
insurance, association fees, and property taxes. Next, it will be
important to note how much money you have to use towards
a down payment and also what your closing costs will be.
When calculating all of this information, you will need to
take into account the interest rate too. You would subtract
your non-financed housing expenses (insurance, association fees, and
property taxes) from the amount you can afford for housing
per month. Then you will calculate in your interest rate and
length of the loan which will then give you your maximum
amount of house you can afford.
When you are in the process of building and maintaining
credit history, a huge part of that is making regular, on-time
payments. Also, not utilizing all of your available credit; so
having a low debt-to-income ratio is a good thing and what
creditors look for when determining if you are a good
candidate for a credit card or a loan. These two factors
make a huge impact on earning and maintaining a good credit
rating. zz
Of the Five C's, I believe that the two that would have
the biggest impact on major credit decisions are: Capacity and
Character. It will be important to know that you have sufficient
funds coming in regularly in order to make on-time monthly
payments, you wouldn't be true if you didn't have a job
(referring to Conditions). Also, your Character, or credit history,
will be looked at heavily because lenders want to know that
you have been able to successfully manage your previous credit
by making regular payments or paying off your debt in the
allotted amount of time or sooner.
I believe that when it comes to buying or leasing a car,
it is completely variable and each situation is different. So at
the time, you would have to compare the two deals and
look at the big picture (long term, after the lease is up
or would potentially be up) and take into consideration how
much the car would be worth. As I am still new to this
entire credit thing, unfortunately I do not know much about
credit, nor credit scores other than it It take time, responsibility
and effort as well as knowing how to use a credit card
in a way to where it is building but not jeopardizing your
credit score, not having to make late payments or spending
it on things that a credit card should not be used on.Myself
personally I would say buying a car is the best option. As
for me I had just bought a jeep in which i also had
a choice to lease one. As it is my dream car I would
not mind making payments on it as I am able to make
bigger payments to make the payments go down at any point
but in the end it will be mine. I believe if it is a
car you actually want such as mine, you wouldn't mind
making fair payments for it. A friend of mine leases a car,
to save money to get their future dream car in the future
which makes sense if the payments are lower but also it
isn't for that long, but in all it is up to the buyer in
all and how they are trying to go about things in general.The
two C's that I believe are most would be character and
capacity. As character it is about the person you are, being
able to show the responsibility which is where looking at
your credit comes into play. Being able to know for sure
you are able to make whatever payments that is negotiated
when speaking upon. For capacity I believe is a big one
as loaners want to be reassured when it comes to them
being repaid. As your history of paying other people back
comes into hand but also can make a big impact on if
they are willing to loan you money but also the trust they
are putting into you to pay back what has been given and
also sometimes interest as well. My personal advice for how
to build and maintain your credit for your credit score would
be to make sure you are using it, making payments on
time, and that you are not using too much of your credit.
Not only does using a certain percentage of your limit affect
your score, but so does making at least minimum payments
on time and even making sure you have something that is
going towards your credit. zz zz zz When using the five c’s,
to consider credit, the most important in my opinion are
character and conditions. Character is a very important thing to
consider when talking about credit. The character of a person
who is asking for a loan is something that can help
determine their trustworthiness and even credibility. Conditions are
very important because you don’t want to agree to something
when the conditions are unrealistic to your situation or if you
do not like the conditions for what you are asking. I
would personally say that buying a car is the better option
for me. Not only do I end up paying the car off and
having no payment left after a certain amount of time, but
I also have a good rate for insurance as well as a family
full of mechanics. Making a trip to the shop a lot easier
and cheaper for me. I am also an avid driver. I like to
go visit family a lot and go out as much as possible. I
am a very busy person as well as a very particular person
on being able to do what I want with my property. So
leasing a car means I cannot change anything about the car
to personally fit my needs, where if I own the car I
can do as I please with the vehicle. One concept from the
Build Your Proficiency diagnostic that I scored lowest in is
Evaluate credit card choices based on terms and costs. This
concept can be important to my personal finances be because
anything dealing with your credit is important. You should
understand different concepts in regards to credit to help you
when it comes to your personal finances. I would want to
know more about this because of course credit is important
and you need credit to achieve different things like purchasing
a car or a home. My friend should know that the process
of finding and paying for a home is not an easy one.
Your credit need to be in order as well as your debt to
ration and a bunch of other different factors to be considered.
I would say to make sure you pay your credit card bills
on time and be sure to pay interest as well. You want
to keep your credit score at a good score because credit
is a main factor that is considered when making decisions
like purchasing homes, cars. etc. I think the two most important
factors are Capacity and Collateral. Capacity is considered when
repaying the loan and that is important and can help your
credit score. Collateral is important because it is what is
assessed when getting a car loan and majority of us need
a car. This week i scored lowest on describe the role of
consumer credit in your financial plan in chapter 5. In chapter
6 it was evaluating mortgage financing alternatives. I can be
honest and say that these two are pretty accurate in my
everyday financial decisions. In my usual budget, consumer credit
is usually the last option for me. My house uses credit in
a sparing fashion so I may be behind the times in some
of the ins and outs. We use it for the major stuff that
either time or savings doesn't support immediately. When we
needed a new furnace, we financed because we didn't have
the 13k needed nor could we wait any with the failing
unit. When it comes to mortgage finance alternatives I can
say that I am an ameteur as well. I have only purchased
one home and as far as I knew then it was all about
having a big down payment and getting a fixed rate. It
was during the housing crash and people, mostly non-professionals,
harping on fixed rates and preapproval status. I knew to stay
away from variable rates because of the dreaded "balloon"
payment. I didn't do much research out of the aforementioned
topics. Moving forward. These two factors will and are playing
a big part in the next financial goal of my family. We
are in the market for another home and we are currently
using consumer credit cards to improve credit scores in order
to have better financial option during the next house hunt.
Also, I am nearing the end of my loan for my vehicle
and considering adding another vehicle to use for "emergencies"
such as the main vehicles breaking down of needing repair.We
all know that financing is all based on credit score. I
haven't been the best with it in the past but, as I get
older and more financially aware, my advice is to keep it
simple. Start with a secured line of credit at an amount
that is not beyond your means. Utilize that to get into the
flow of usage, payment history, and seeing interest on purchases.
After that, it may behoove you to see what offers you
bank and or credit union offers. Keeping all accounts within
the same institution my be easier to track and keep on
time and current. Lastly, after establishing a solid credit
foundation, look into getting a card with a substantial credit
limit. This is the EMERGENCY card when "life" hits the
fan. Keep it open for the oh no events that you may
not have the cash up front for. Ours is discover with no
annual fees and it is kept in the home in a safe for
the heaving lifting. Its not a perfect path but it has worked
for me and my household.As stated before I will be in the
market for a new vehicle in the future. It is my decision
that I will buy the car. I have had a small savings for
the down payment and will be financing it as I usually
do. I choose this method because I like the fact that I
own it after the loan is satisfied. I am mechanically inclined
so I save on regular maintenance costs such as oil changes
and tire rotations. I also take care of some of the
intermediate repairs such as belts, alternators, batteries, etc. Though
I cover the parts for the repairs, I hardly incur any of
the associated labor. Based on my family needs, a third
vehicle is a luxury but also a safety net. It is well
within the budget to do so and it will come in handy
if the two primary vehicles need to go in for repairs. No
need to rent one.
