Money Management

Cars have gotten expensive, and that even includes used ones. Learn what to watch out for when you purchase a used vehicle. 

Buying a car has never really been cheap (unless you were buying a true junker), but car prices these days are absolutely outta sight. For example, Kelley Blue Book found that the average new car buyer in July 2023 paid $48,334 for their vehicle. As someone who paid less than half of that for a new car the last time I bought one, that’s mind boggling — granted, I did buy my car almost 15 years ago.

One way you may be able to save money on the whole process is by buying used. Prices for used cars haven’t exactly been low, but there is a little bit of good news if you’re hoping to buy one from a dealership. KBB reported that the wholesale price of used cars (what dealerships pay for the used cars they sell) fell 2.3% in October.

So you want to buy a used car? Here are some pitfalls to watch out for.

1. Not checking your financial status first

Before you start looking at used cars, take a little time to sit down with your finances. I know, I know, it’s not sexy, but remember, a lender is going to get up close and personal with them, and you want to beat that lender to the punch. Your credit score and down payment will have the largest impact on the auto loan you qualify for and the interest rate you’ll get. And since a higher interest rate will make the purchase more expensive, it’s worth taking this time to assess your finances.

You can likely access your credit score (ideally, your FICO® Score, as it’s the one 90% of lenders use) through your bank or a credit card issuer. Go to AnnualCreditReport.com and pull your credit reports for free to see what an auto lender will find. And if you spot errors, you can ask the credit bureau to remove them, which will boost your score.

Finally, decide how much money you can put down for the purchase. Ideally, 10% to 20% shows a lender that you have skin in the game, and are therefore less likely to stop paying on your loan, leading that lender to repossess your vehicle.

2. Only considering monthly payments

Another major mistake you might make when buying a car (used or new) is thinking that an affordable monthly payment means you can absolutely afford to buy that car. Not so fast! While it’s true that the monthly payment is the biggest cost you’ll pay regularly for the privilege of owning a car, it doesn’t come close to telling the whole financial story.

Remember, you’ll also need a car insurance policy. You’ll need to pay for gas (or EV charging) and maintenance. And if something goes wrong, you might be staring at a big repair bill. This is a bigger risk for a used car because they generally don’t come with a manufacturer’s warranty. So don’t fall into the trap of thinking a car is affordable on the basis of a monthly loan payment alone.

3. Going with dealer financing automatically

The dealership where you’ll buy your vehicle likely has in-house financing. And it might even be good — the used car I bought before I got my current car came from a dealership that worked with banks you’ve actually heard of, and that’s how I first came to join the big bank I still have accounts with today.

But it’s worth exploring a few options for auto loans before you go to the dealership to see what kind of rates you might qualify for. Remember, loan interest has the potential to make your purchase a lot more expensive, so give yourself the option to find a lender besides the one the dealership works with.

4. Skipping the vehicle history report and mechanic check

Finally, don’t assume that the car you’re buying is in good shape, and I’d caution against taking a dealer’s word for it. Remember, the dealer has a vested interest in you buying that car. So ask for a vehicle history report (this will tell you all kinds of vital information, including whether the car has been in a wreck), and get a pre-purchase inspection.

If a dealer balks at the prospect of you taking the car off site to a mechanic or having a mobile inspection service show up to have a look, that’s your sign that you shouldn’t buy that car. After all, if an inspection makes you feel more confident about buying and helps the dealer close the sale, that should be reason enough to allow you to seek a third-party inspection. In buying a used car, as in all major purchases, knowledge is power.

Buying a used car rather than a new one can help you shave some money off the purchase. Just avoid the above mistakes to sidestep a major hit to your personal finances.

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Make your mortgage and car payments on time, or your credit score will feel it. Here’s what else you should look out for. 

Paying your bills on time is one of the most important things you can do to raise your credit score. According to Experian, a whopping 35% of your score is determined by your payment history, and any missed payments quickly add up against you, lowering your score.

But with high inflation and rising interest rates, some consumers’ personal finances are suffering and impacting their ability to make timely payments.

Here are which late bills will affect your credit score the most and a few additional factors that could negatively impact your score.

1. Mortgage payment

Your mortgage payment is one of the most important bills you should pay on time. Credit reporting agencies give a lot of weight to this bill, because it’s typically a person’s largest payment each month.

Creditors often report a late mortgage payment 30 days after it is due, and the late payment stays on your report for seven years. The higher your credit score, the more dramatic the effect a late payment may have on your credit.

2. Car payment

This one is increasingly important for consumers to pay attention to now that the average new car payment is a staggering $725 per month, and delinquency rates are currently at 7.3% — above pre-COVID levels — and are estimated to peak near 10% in 2024.

As with a late mortgage payment, a late car payment will severely impact your credit. Each of the three credit reporting bureaus may calculate the change differently, but it won’t be good. Creditors will typically report the late payment when it’s 30 days past due, so if you’ve missed a car payment, it’s important to call your creditor immediately and make the payment.

3. Credit card accounts

Mortgages and car loans are considered installment loans because you borrow a large sum that needs to be paid back in set installments over a period of time. On the other hand, credit card accounts are considered revolving accounts because you have access to ongoing credit, according to Experian.

Despite the difference between these two types of accounts, being late on your credit card is still terrible for your credit score. Like mortgages and car loans, your credit likely will get dinged once your payment is 30 days late, so if you’re behind, you should make the payment ASAP.

Other things that affect your credit score

Paying your bills on time has the biggest impact on your credit score (remember, 35%!), but there are also other important categories you need to consider, including:

Amounts owed: This is the amount of money you owe compared to the amount of credit available to you. For example, if you have a credit card with a credit line of $10,000 but only have a $500 balance on the card, your utilization would be very low — just 5%. Credit utilization makes up 30% of your credit score, and experts recommend you use 30% or less of your available credit — and closer to 10% is ideal.Length of credit history: The longer you have an account open, the better it can be for your score. This category accounts for 15% of your score, meaning that sometimes, keeping older credit card accounts open — even if you’ve paid them off — can be a good strategy for maintaining your credit score.Credit mix: Lenders and creditors want to see that you can handle different types of loans, so having a mix of credit cards, retail accounts, and installment loans can be beneficial. This category makes up 10% of your score.New credit: Credit reporting agencies take notice when you open multiple credit accounts in a short period, because too much new credit can indicate a risky borrower. This category accounts for 10% of your score.

If you’re having trouble paying your bills on time, check out The Ascent’s guide to paying off debt. And remember, if you’re behind on any of your bills, contact your creditor quickly to find out how you can get back on track before it reports the late payment to a credit reporting agency.

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Choosing a mortgage lender is a major step on the road to homeownership. Read on for a few pointers to find the best one for you. 

To call the current housing market “difficult” might be a massive understatement. The supply of homes for sale is still down, and mortgage loan rates are more than twice what they were in the salad days of 2020 and 2021 — as of this writing, we’re looking at an average rate of 7.5% for a 30-year fixed-rate mortgage, according to Freddie Mac.

If you’re hoping to buy a home, it’s natural to feel discouraged and perhaps even a bit hopeless about your prospects for finding an affordable mortgage loan. Thankfully, there are a few considerations you can make that will help you narrow down your prospective lenders and find the right pre-approval options.

1. Consider your credit

Your credit history is a significant factor when you’re seeking out a mortgage loan. A mortgage is likely to be the largest sum of money you’ll ever borrow in your life. The lenders you apply with will take a deep dive into your credit report on the way to (hopefully) approving you. With that in mind, you can make a few moves ahead of time to put yourself in the best possible position to find the right lender if you have less-than-stellar credit.

Have a look at your credit score before a lender does (your FICO® Score is the best option here; it’s used by 90% of lenders, and you may have access to it through a credit card issuer or your bank). And while you’re at it, head over to AnnualCreditReport.com to get copies of your credit reports from the three major consumer credit bureaus. If your credit score is on the lower side, and you have some black marks on your report, look to the best mortgage lenders for bad credit, as these lenders will be more willing to work with you.

2. Consider your down payment

Your down payment is another matter of major importance when it comes to finding a lender to work with. Some offer special programs for those with lower down payments, for example — so if you know you’ll be aiming for a 10% down payment, seek out lenders that offer flexibility in how much you can put down. Similarly, if you have a high enough credit score, you might be able to get away with just a 3% down payment on a conventional mortgage loan.

It’s important to note that a down payment under 20% will add additional expenses to your mortgage loan in most cases. You’ll have to pay for private mortgage insurance (PMI) on a conventional loan with less than 20% down. You’ll likely also have more options among the best mortgage lenders if you can make a 20% down payment.

3. Consider what type of mortgage you want

There is no one-size-fits-all mortgage loan, which is actually good news for you as a buyer — even if it means you might need to do more research and legwork before applying for different types of loans.

If you’re a first-time home buyer and your credit score isn’t the greatest, an FHA loan might be a good fit for you.If you’re a current or former military service member, you may qualify for a VA loan.Live in a rural area? Look into USDA loans. All these government-backed mortgage options have less stringent credit score and income requirements than conventional loans do.

If you have another special factor that will figure into your search for a mortgage, such as being self-employed with irregular income, you might want to seek out a non-qualified mortgage. The process for getting one of these is nearly the same as for a traditional mortgage, but you’ll likely need to provide more or different financial information to prove your income if it’s irregular, such as tax returns rather than pay stubs or W-2s.

Today’s market may be less than ideal (there’s that understatement again), but the wide selection of mortgage lenders and types of home loans could mean that the right lender is out there for you, and you’ve just got to dig a little bit to find it. Use the above pointers to help you narrow your search.

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Buy now, pay later can help you get your holiday gifts without paying a ton in credit card interest. Here’s what you need to know. 

You’ve made your holiday shopping list, checked it twice, and found the perfect gifts. There’s just one problem: You’re a little tight on cash right now. Don’t worry. A lot of people find themselves in a similar situation. That’s why buy now, pay later (BNPL) services have gotten so popular in the last few years. Below, we’ll take a look at how these services work and how to decide if you should use one to pay for your holiday costs this year.

What is buy now, pay later?

Buy now, pay later services are essentially short-term loans. You opt into one of these services at checkout and then you make multiple — usually four — payments until you own the item free and clear. The first payment is typically due at checkout and you have a few weeks to make subsequent payments. So if you bought a $200 item, you’d pay $50 at checkout, another $50 two weeks later, another $50 a month after purchase, and the final $50 six weeks after you bought the item.

BNPL providers vary in terms of what they charge for fees and interest, and some don’t charge either. One of the biggest BNPL companies, Affirm, doesn’t charge any interest as long as you agree to make installment payments every two weeks. There are also monthly payment options, though these have a different fee schedule.

Since it’s a loan, you will need to provide your Social Security number so the BNPL company can verify your eligibility. But it’s often possible to get one of these loans with fair or poor credit. And since most of these companies only do soft credit checks, they won’t hurt your credit score unless you fail to make your payments.

All of this makes BNPL an appealing alternative to credit card payments for those without a lot of cash to spare. You usually have six weeks to pay the item off in full with BNPL before your balance starts accruing interest or fees. With a credit card, you may only have a couple weeks, depending on when in your billing cycle you make your purchase. And if you can’t pay it back in full when you get your bill, your balance could swell quickly due to interest charges.

Is buy now, pay later right for you?

Whether buy now, pay later makes sense for your holiday shopping depends on how you plan to use it. If you only need it for a few big-ticket items and you’re good about keeping up with your payments, it might work out just fine for you. But if you worry you might not be able to pay it off in time, you might do better with a 0% APR credit card. Or you could try saving up for the purchase over time or using a layaway service.

If you decide to go with a BNPL service, make sure you familiarize yourself with the terms before you commit. Understand when and how you’ll be expected to make payments and what fees the company can charge you if you’re late. If you have any questions, reach out to the BNPL provider for clarification before you agree.

Be sure to keep track of how many items you buy with BNPL to ensure you’re not overstretching yourself. It can be easy to lose count, especially if you’re shopping on multiple websites. Write down how much each item was, what your payment amount is, and when each payment is due so you don’t forget.

If you don’t think BNPL is a good fit for you, there are plenty of alternatives out there. Weigh all your options before deciding which is the best course of action for you.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Kailey Hagen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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The life of a digital nomad can be exciting, but it also has its drawbacks. Learn about one hidden downside from a writer who has been nomading for years. 

If you’re the adventurous type and love to travel, being a digital nomad may sound like a dream come true. You wouldn’t be the only one who feels this way. For an idea of just how many people are interested in it, the digital nomad subreddit currently has over 2 million members.

Instead of only being able to travel a couple of weeks per year, you can make it your life. You get to see more places, meet more people, and have all the new experiences you want. And since lots of areas have a lower cost of living than the United States, a digital nomad lifestyle could help you boost your savings account, too.

I’ve been a digital nomad for years. During that time, I’ve worked in dozens of cities across nine countries. In many ways, this lifestyle lives up to the hype. It is exciting, you get to see a lot more of the world, and you could spend much less on bills, depending on where you live.

There are frustrating parts of any lifestyle, though, even when it seems like you’re living the dream. Some of the cons of being a digital nomad get talked about a lot. It can be lonely, and there’s always an adjustment period to new places. But there’s also a big downside that often gets overlooked.

A good home is hard to find

The part I dislike the most about being a digital nomad, by far, is finding places to live. You’re going to need to do that every time you travel somewhere new, and it’s a lot more challenging than it appears.

If you’ve browsed Airbnb or any other short-term rental sites, it might seem easy enough. In many cities, there are ample homes available to rent by day, week, or month, so finding a place to stay isn’t hard. But finding a quality home without any issues is. Because as I’ve learned, there’s just about always some sort of issue with rental homes.

Here are examples of the kinds of issues you could encounter.

Slow internet (this one’s especially frustrating when you’re a digital nomad and need fast internet for work)Excessive noise from neighbors, nearby bars, or streets right by the windowHomes that were a whole lot cleaner and newer in the picturesHardly any cutlery or appliances in the kitchenClogged pipesElectrical or gas issues

I’ve had all of these problems at one point or another. Sometimes they’re just mild inconveniences. But certain issues can cost you money, like poor internet that affects how much you can work.

There are even issues that can be flat-out dangerous. My wife and I spent much of last month trying to get a gas pressure issue fixed at the brand-new apartment we’re renting. The building’s engineer repeatedly told us the fact that our stove behaved like a flamethrower was completely normal. The people from the gas company told us that it was anything but normal, and actually, it could make the water heater explode. It’s fixed now, no thanks to Mr. Engineer.

Even when you do your due diligence, it’s tough to suss out every possible problem. An apartment that looked perfect may have some unwelcome surprises. If so, you’ll hopefully be able to get those fixed. But sometimes you have to grin and bear it — or move.

How to make it work as a digital nomad

To a certain extent, home issues come with the territory as a digital nomad. When you have your own place, you can set it up exactly how you like. When you’re bouncing from place to place, you’re reliant on the homeowner and property manager.

But there are ways to find higher quality homes, and to protect yourself if issues do arise. Here are the best methods I’ve found over the years.

Research the location. Read about neighborhoods in the city you’re planning to visit to learn what they’re like and how safe they are. When you’re considering a rental, search for the location online. Check it out on Google Street View and see what’s nearby. This can give you an idea of how nice the area is and if there’s anything that could cause a lot of noise at night, such as a bar next door.Look for listings with local rental agencies instead of Airbnb. In many cities, there are property management companies that offer short-term, furnished rentals. I’ve found that these often have much better prices and service than Airbnb.Read the reviews — and know what to look for. I pay the most attention to highly positive, detailed reviews and critical reviews. A brief positive review is too inconclusive. The guest may have liked the place, or they may just be the type of person who almost always leaves a positive review.Don’t be shy about bringing up issues. If there’s something wrong with your rental, mention it to the owner or manager immediately. You deserve to get what you’re paying for.Pay by credit card whenever possible. Credit cards give you an extra line of defense since you can dispute the rental payment if there’s a valid issue. For example, if a rental is nothing like the pictures, and the rental platform won’t help you, you could file a dispute with your credit card issuer. As an added benefit, many travel credit cards earn bonus points on travel purchases like short-term rentals.

If you decide to be a digital nomad, you’re probably going to run into occasional issues with the homes you rent. That’s the tradeoff for the flexibility you’ll have, and one of the reasons why digital nomads often eventually settle down. Even with those frustrations, it can be an incredible experience, as long as you’re ready for the good and the bad.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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Will 2024 be the year you take on a mortgage? Learn what to consider if you’ve got your eye on the (homeownership) prize. 

I can’t believe I’m writing this, but we are coming up on the end of 2023. It feels to me as if this year went by in the blink of an eye, but since I’ve got big plans for 2024, I’m ready for it to be over. In short, I’m planning to buy a house in 2024. And while this may not be the best time, broadly, I’m ready nonetheless.

Let’s take a closer look at the factors influencing whether you, too, should take the plunge into homeownership in the new year.

It’s not great for buyers right now

If you’ve been watching the housing and mortgage markets the last few years, you’re likely discouraged by how everything’s been going. After a pandemic-fueled buying frenzy spurred by ultra-low mortgage rates, we opened 2022 with an average rate of 3.22% on a 30-year fixed mortgage loan, according to data from Freddie Mac.

But then rates started to climb — by the end of 2022, the average rate for that same mortgage had nearly doubled to 6.42%. And following the trend line through 2023, we saw a pretty steady rise. As of this writing, that same rate is now 7.5%, per Freddie Mac. This means a far more expensive mortgage rate if you buy now. But what about next year?

What will the 2024 market look like?

I don’t have a crystal ball, but I do have the ability to find mortgage predictions from some of the biggest names in the business. For example, Fannie Mae’s October Housing Forecast predicts a slight drop in mortgage rates to just under 7% by the third quarter of 2024. The National Association of Realtors’ Economic Outlook calls for rates under 7% by the middle of the year, and perhaps as low as 6.3% by the end of 2024. The Mortgage Bankers Association is predicting a drop below 7% for all of 2024, and rates perhaps as low as 6.1% by the end of the year.

While no one is predicting a return to those 3% rates we saw just two years ago, this is a step in the right direction. Ideally, as rates drop, more homeowners will list their properties for sale, improving the inventory problem (as of September, there was just a 3.4-month supply of homes, according to NAR — a four- to six-month supply is needed to equalize the market). It makes sense that people are hesitant to give up a low mortgage rate they may currently have, even if it means getting into a different home. So it will likely become easier to find a home to buy if rates drop next year.

How do your finances look?

Regardless of how the market shakes out in 2024, your own finances and your wants/needs for a home should play a major role if you’re trying to decide if this will be your year to buy. First and foremost, your credit, savings, and income are all extremely important. Your credit score and credit profile will inform whether you’ll be approved by a mortgage lender and what rate you’ll get. Your savings determine how much money you can put down on a mortgage loan. And your income will influence how much you can afford in ongoing monthly mortgage payments.

The time to start getting ready to buy a house in 2024 is now. If your credit score needs a little work, spend some time with your credit report and look for errors that you can have removed (credit report errors are common and can drag your credit score down). Resolve to make all your bill payments on time, and try to pay down some existing debt, as this will improve your debt-to-income ratio (very important for getting a mortgage).

If you want to buy a home in 2024, you likely already have some money saved for a down payment and closing costs. If you can be more flexible with your timeline, and perhaps intend to wait until the second half of the year to strike, you have more time to save. I met my house savings goal a few weeks ago, but I’ve resolved to keep saving, because I’m well aware of how expensive homeownership will be.

So, should you buy a home in 2024?

I hate to say it, but — it depends. If your credit score is rock solid and you’ve got a robust savings account balance, it could be the right time. Be sure to shop around with the best mortgage lenders to get yourself the best rate possible, and lock in a pre-approval to make your offers on houses stronger. Good luck!

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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