Veteran Credit Repair | How It Works

veteran credit repair

Credit Repair, Credit Scores, and Loans

Whether you’re a civilian or military member, most lenders require a minimum credit score of 620 to 640 to receive approval on a loan. In this article, you’ll learn more about how credit works for veterans, potential loan options, and how to repair a credit score to meet your financial goals.

First, Research All of Your Options.

Before we dive into credit scores and how it works. Let’s talk about the potential uses of a credit score, acquiring a loan. Understanding all of your options when seeking a loan is key to getting the best deal possible. Even veterans with fantastic credit and a 20% down payment may benefit from comparison shopping between conventional and VA loans.

Federal Benefits — Personal or Business?

Interested in buying a home? Veterans are eligible for VA home loans, which often require no down payment, no mortgage insurance, and have flexible underwriting requirements. An excellent resource to look into is the Veterans Benefits Administration website.

Ready to start a business? There are also grants, loans, and business development programs backed by the U.S. Small Business Administration. Prospective entrepreneurs look into financing by searching the Small Business Administration’s Office of Veterans Business Development website.

Assess Your Finances.

Consider all factors beyond your status as a veteran when making money decisions. The right choice for you will align with your current financial situation and goals. What are your financial plans for the next 6 months to a year? What financial habits are you looking to strengthen or stop? Make sure you’re financial goals and habits are leading you in the right direction.

Understanding Your Credit Score.

Part of assessing your financial plan includes reviewing your current credit score. The Fair, Isaacs Corporation, also known as FICO, created an algorithm for all three major credit agencies to use when calculating credit scores. This method creates your credit score by reviewing five different categories, with each category weighted.  See below for details:

veteran credit repair credit score

Credit Score Categories — Let’s Talk About Payment History.

Your payment history affects your credit score the most out of all other areas. The scoring algorithm determines if the borrower’s payments were on time and if they weren’t, how late they were. Late payments are categorized by more than 30 days late, more than 60 and more than 90. For each category, the algorithm drops the score more.

Where Does Available Credit Come In?

Your available credit is determined based on the number of outstanding credit accounts you have compared to the credit limit assigned to each account. The ideal amount of credit to use is around 30 percent of any credit limit. Scores typically improve when having a balance around this percentage. However, if an account has a zero balance, it will have little impact on your score.

Keep in mind, having a balance of more than 30 percent will result in your credit score falling.

Quick Credit Repair Options

The quickest way to repair credit scores is to focus on available credit and payment history. Make sure credit payments are consistently on time or paid no later than 30 days past due. Paying outstanding credit balances down to 30 percent of the available credit will help, too.

 


No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a one size fits all model and we tailor your needs to the right program. Help is just a free phone call away or you can fill out an appointment request. 

Contact Go Clean Credit to schedule a free consultation today.

Can You Get a Home Improvement Loan with Bad Credit in Arizona?

home improvement

Your head is spinning because there’s another issue with your new “Dream Home” that has come at you unexpectedly. You overcame the first-time home buyers with bad credit hurdle but now that you’ve moved in, it’s clear that the house is in need of work to make it a place you’re ready to enjoy living in.

Can you get a home improvement loan with bad credit in Arizona?

The answer is yes, but it may take a bit of creative thinking and work on your part to get the money you need to make the repairs happen.

First up, check to see if the U.S. Department of Housing and Urban Development has a program that you qualify for that will help finance the costs of the improvement. They have plenty of tips on how to choose through all the options whether you’re looking to do-it-yourself or hire a professional to do the desired upgrades.

Second, consider speaking with your mortgage bank to see if a home equity loan is possible. They have a vested interest as you do; improve the value of the home. Making improvements to your house may not just improve your standard of living. It could improve the house’s total value should you need to sell in the near term future.

Next, look at options in micro-lending services such as Prosper. While the interest rate of the loan may be more than government or home equity loan, your ability to appeal person to person could be the difference in getting the cash you need.

Finally, consider asking a family member or close friend to co-sign a loan with a traditional bank. By asking them to do this, you and the co-signer are both taking on the debt and the risk of repaying the loan. Their signature could give you a much better interest rate, too. It could make the difference between getting a home improvement loan with bad credit or not.

The best way to increase your chances of getting a loan through traditional banks is to improve your credit score.

Improving your score will directly affect your interest rates and remove hurdles in order to get the financing you need.

No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

6 Reasons to Avoid a Payday Loan

reasons to avoid a payday loan

Sometimes a payday loan is the best option when you’re really in a bind. If you can avoid getting one, though, you could end up better off in the long run. There are a lot of problems that can arise from getting into a payday loan agreement. Here are some of those reasons to avoid a payday loan.

6 Reasons to Avoid a Payday Loan

1. There are hidden fees

Going with a payday loan means putting up with a lot of hidden fees. For every amount borrowed, the lender will assess a charge. This charge will be added on top of the loan capital and sky high interest rates. When you agree to a payday loan, make sure you read the fine print so you know what you’re getting into.

2. Banned or highly regulated

Payday loans are regulated in many states. This is in order to ban or limit the interest rates, fees, and billing practices of many payday loan lenders. Often times lenders will take advantage of borrowers who can’t get a loan anywhere else. They will scare them into paying more than they have to because they know they need this loan and will probably still take it.

3. Aggressive lending and collection practices

Another reason payday loans are frowned upon is their aggressive lending and collection practices. Some payday loan companies threaten people with prosecution or wage garnishment. These threats scare borrowers into paying off the balance. This collection practice is ILLEGAL and, if encountered, should be reported to the Federal Trade Commission (FTC).

4. Can end up in a cycle

It’s not uncommon to see people use another payday loan to pay off a previous payday loan. Some reputable lenders try to prevent these cycles from happening by keeping a database of their borrowers to avoid rollover.

5. Many companies require access to your bank account

They claim access is necessary so they can just pull the money out of your account to make things more convenient for you. However, if you fall behind and your balance grows, they won’t stop pulling the money out. Even if it’s become too big for you to handle. This then causes a chain reaction of overdraft fees from your bank.

6. Not the best for your financial future

Payday loans are great for when you really need some money fast. Unfortunately, the high interest rates, hidden fees, and collection practices make these loans not financially smart. In fact, they could actually make your situation worse.

If a payday loan is your best option, be careful and aware of what can come with them. Contact us if you have any questions about the reasons to avoid a payday loan. We’re happy to help.


No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

The Pros and Cons of Subprime Loans

The Pros and Cons of Subprime Loans

Making a big financial step often depends heavily on whether you can get a loan. If your credit score isn’t as good as it could be, that can be tough to accomplish. Thanks to subprime loans, though, it could be possible to get that much needed loan.

The Pros and Cons of Subprime Loans

Pros

Easy Approval

Usually a person is turned down for a loan because they have defaulted on a loan before or they have outstanding debt. Banks and lenders aren’t willing to take a risk on someone if they believe there is even just a small chance the borrower won’t make their payments.

Fortunately, in the subprime market, your credit score doesn’t have to be perfect. Subprime lenders will still approve you for a loan.

Usefulness

Subprime loans are a great way for people to pay off other debts. Having outstanding debt hurts your credit score, but a lower score isn’t a problem with subprime loans. Borrowers can get a loan, use it to pay off their debt, then make payments on the subprime loan on time. With the debt gone, they can now work toward improving their credit score.

In a way, subprime loans can potentially be a gateway toward better credit.

Still struggling with fixing your score? Here are some other tips on how to improve your credit.

Cons

Higher Costs

Subprime loans are a higher risk than prime loans, as lenders are taking a chance on someone who has a history of bad credit. This means that borrowers in this market are seen as more likely to default on their loan and therefore pose a higher risk. Because of that higher risk, interest rates are also higher so the lender has some cushion in case of a default.

Processing and other fees will also be higher with a subprime loan. Lenders want to collect more money upfront in case of default.

Income Demands

While subprime lenders will be more understanding of a borrower’s credit score, they will be tougher on their income and cashflow. A borrower must be able to prove they have sufficient income or cashflow that will allow them to make their monthly payments. If they can’t provide proof, they will likely be turned down.

Do you have any questions about subprime lending? Let us know! Give us a call today at 1-866-991-4885.


No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

The Navient Lawsuit and Your Student Loans

The Navient Lawsuit and Your Student Loans

In January, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against Navient, the nation’s largest servicer of both federal and private student loans. The company was allegedly “systematically and illegally failing borrowers at every stage of repayment.” What does this mean for your student loans?

The Navient Lawsuit and Your Student Loans

Navient President & CEO Jack Remondi stated on his Medium blog, “At Navient, our priority is to help each of our 12 million customers successfully manage their loans in a way that works for their individual circumstances.” However, in their latest court documents, Navient now states that there is “no expectation that the servicer will ‘act in the interest of the consumer.'” Going further, they said contacting the company with issues didn’t mean it would necessarily act in the customer’s best interest.

The Navient Lawsuit

There’s a pretty good chance that, if you have a student loan, it may be serviced by Navient. In their lawsuit, CFPB alleged that they:

  • provided bad information to create obstacles to repayment
  • incorrectly processed payments
  • failed to resolve borrowers’ complaints through inaction
  • caused many borrowers to overpay for their students loans by illegally cheating them out of their rights to lower payments
  • deceived private student loan borrowers about requirements to release their co-signer from the loan
  • harmed the credit of disabled borrowers, including severely injured veterans

The Bureau also alleges that when borrowers could have qualified for income-driven repayment plans, Navient instead directed them toward forbearance.

To avoid falling victim to any of these situations, check out these tips for tackling student loan debt.

Navient’s Motion To Dismiss

“Borrowers could not reasonably rely on Navient to counsel them into alternative payment plans unless Navient had an affirmative duty to provide such individualized financial counseling. But the law imposes no general duty to provide information without some fiduciary relationship.”

Navient stated in court that it’s not their job to help borrowers. Their main job is to collect loan payments for creditors.

If you have questions about the Navient lawsuit and your student loans, call us today at 1-866-991-4885.


No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

How To Find a Good No Credit Check Loan

How To Find a Good No Credit Check Loan

When your credit score determines almost every major financial move you make, finding a loan can be tough when your score is low. Under these circumstances, a no credit check loan can seem very enticing. You have to be careful, though, so here’s how to find a good no credit check loan.

How To Find a Good No Credit Check Loan

First, you need to make sure this is the best option for you. Unlike traditional loans, no credit check loans typically need to be paid back within a few weeks or months, not years. They also come with much higher interest rates than traditional loans. If you can, try applying for other loans first before resorting to a no credit check loan.

Find The Right Lender

Find a traditional lender who is willing to do a no credit check loan. Although not every bank or lender will do this, sometimes you can find one who will give you a loan without checking your credit. Start with your bank, and if they don’t offer no credit check loans, call some of the other banks in your area.

Evaluate costs and fees associated with the loan. Lenders often charge high fees for giving out personal loans with no credit check. You will find loan origination and other fees worked into your monthly payments as a part of your overall loan. If you find these fees to be too expensive, don’t be afraid to walk away.

Consider doing internet micro lending services. Also known as peer to peer lending, these services can help you get loans of up to $35,000. They may to a credit check here. It’s not to disqualify you, but to determine an interest rate.

Look into getting a pawn shop loan. While not the most recommended option, it is still an option. As a last resort, you can take a valuable item to a pawn shop where they will give you money for your item as a loan. Then, you pay them back the loan, plus interest, to get your item back. If you can’t pay it back, then you don’t get your item back and the shop owner just got a new addition to their shop.

Do you have any questions regarding how to find a good no credit check loan? Let us know.

To enlist the help of a trustworthy, effective credit repair company, call us today at 1-866-991-4885!


No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

Should You Use Your Credit Card or Get a Loan?

Should You Use Your Credit Card Or Get A Loan
There comes a time when you need to make a purchase that you know is going to take some time to pay off. When that time comes, should you use your credit card or get a loan?

Should you use your credit card or get a loan?

When To Use A Credit Card

Credit cards are the better choice when making smaller purchases or consolidating smaller debts. Use them for purchases adding up to no more than a few thousand dollars that you feel you can easily repay within a year.

 

Pros

If you use a credit card with a low introductory rate on new purchases, you could end up paying very little interest on purchases for several months. Of course, you will need good credit to qualify for a credit card like this.

Many credit cards offer rewards just for buying things you normally buy like groceries, dining, gas and retail. Cards like these can  really help your savings if you make your payments on time. Just don’t forget to pay off your balance on time so you don’t lose your rewards to high interest or fall into debt.

Cons

Putting a big expense on a low-interest rate credit card might save you more money at the time, but it could hurt your credit score in the long run by increasing your credit utilization. Remember to try to use ideally around 10%, but no more than 30% of your credit line.

Credit card rates are variable, so the amount you are charged for keeling a balance on your card may change over time. If you have trouble keeping up with your monthly payments, this could mean serious trouble for your budget, and your credit score.

When To Use A Loan

Personal loans are the better option for larger purchases that will take you more than a year to repay. Also consider a loan if you feel you might be tempted to spend too much with a credit card’s open credit limit.

If you need to borrow an amount that is higher than your credit limit and that you know you will need more than 15 months to pay off, a personal loan is a better option.

Pros

Once you qualify for a personal loan, you get to choose a loan term and monthly payment amount that fits your budget. If you decide on a loan with no prepayment penalties, you can even pay ahead, if you’d like.

Many credit scoring models don’t view personal loans the same way as credit card accounts. If your personal loan is listed as an installment loan as opposed to revolving credit, it won’t be counted in your credit utilization ratio.

Cons

Applying for a personal loan counts as an inquiry into your credit. This will only lower your credit score by a few points, though. Avoid applying for several loans at the same time. Check your credit scores before you apply and try to pick a lender with credit requirements you will likely meet. You can ask potential lenders for the minimum credit score they require instead of putting in an application for a loan.

If you take out an unsecured loan, you could be hit with a high interest rate. Lenders do this to offset the risk of lending you money. If your budget is struggling, an unsecured loan is probably not the best option for you.

Do you need to make a purchase and are wondering should you use your credit card or get a loan? Give us a call at 1-866-991-4885.


No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

Tips For Tackling Student Loan Debt

Tips For Tackling Student Loan Debt

Tips For Tackling Student Loan Debt

Pesky student loan debt has its way of sticking around for what feels like forever. With interest adding even more to what you have due each month, it can sometimes feel a bit overwhelming. Fortunately, there are ways to take on your debt that can hopefully lead to less stress for you. So take a step back, breathe, and check out our tips for tackling student loan debt.

Tips For Tackling Student Loan Debt

Start saving during your grace period

This is the best time to start putting away some money for your future payments. The grace period is the time before you actually have to start making payments. Because nothing is leaving your bank account, you should consider putting some away into a savings account. Depending on the loan, you may not owe payments for six months for a Federal Stafford Loan or for nine months for a Federal Perkins Loan. That’s plenty of time to get some cash banked up before you start making payments. Be aware, though, interest on subsidized Stafford Loans begin accruing during the grace period. Make sure you check with your loan servicer if you have a private loan, because their terms may vary.

Crunch the numbers: lower payments vs less interest

Standard repayment for federal student loans typically calls for fixed monthly payments over a certain number of years depending on what your loan amount is. If you can make the shortest amount of time work, that means less interest than if the debt is paid over a longer period of time. Keep in mind that you can change your plan once a year. If your current repayment plan isn’t working out, call your loan provider to see what other options you qualify for.

Link payment to your income

The federal government offers repayment plans that limit the size of monthly payments based on your income.

The Income-Based Repayment Plan limits payments to 15% of discretionary income, which is defined as the amount your adjusted gross income exceeds 150% of the federal poverty level. Then, after 25 years, you’re done paying even if you still have a balance.

The Pay As You Earn Plan limits your loan payments to 10% of your discretionary income. Then, after paying for 20 years, you’re done. Payments through this plan can be one-third lower than the Income-Based Repayment Plan and are forgiven 5 years sooner. To qualify, however, you must have at least one loan from after October 2011 and none before October 2007.

If you don’t qualify for the first two, the Income Contingent Repayment Plan could be an option. Terms for this plan aren’t as generous and discretionary income is defined as the amount your adjusted gross income exceeds 100% of the federal poverty line. Your payment will be 20% of that discretionary income and any remaining debt won’t be forgiven until you’ve made 25 years of payments.

Get smart about payments

Make good decisions about your payments. It could lead to you paying off your loans more quickly and save you thousands of dollars. Sign up for automatic payments so you’ll be less likely to make late payments and have to pay late fees. Many lenders offer slight interest rate deductions for this.

Don’t overuse forbearance or deferment

Forbearance is easier to get and allows you to put off or reduce payments for three years or more.  Deferment allows you to stop making payments for a certain period of time in specific situations. Examples of these situations can include, but are not limited to, returning to school, unemployment, or having a baby. However, you are still expected to pay interest on these methods, either during or after the period you are using them. The only time you won’t have to pay interest is if you use a deferment on a subsidized federal loan. Only use one of these options if you find yourself in a tight spot. Don’t use either for too long because interest does continue to accrue during the period you are using them.

Be careful about consolidating

This isn’t to say consolidating is absolutely a bad thing, because it can have its benefits. For instance, if you want income-based repayment options and your lender doesn’t offer them, you might want to take that loan somewhere else to get that option. You may also consolidate to remove a co-signer from a private loan or are juggling too many loans. That being said, keeping loans separate can have its benefits, as well. With separate loans, you can potentially accelerate your repayment by paying down several small loans rather than one large one.

Do you have any questions regarding these tips for tackling student loan debt? Let us know! To enlist the help of trustworthy, effective credit repair experts, call us today at 1-866-991-4885!


No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

Here’s How Lenders Determine Your Interest Rate

Heres How Lenders Determine Your Interest Rate

Loans are a huge help when it comes to making big payments. And it’s no surprise at this point that they are accompanied by interest. Interest rates are always changing from loan to loan, though. Why is that? It all comes down to different factors that lenders look at, so here’s how lenders determine your interest rate.

How Lenders Determine Your Interest Rate

Credit Score

First and foremost, your credit score and credit history will have the biggest impact on your interest rate. Your history shows how well you’ve paid your bills in the past. If lenders see that you haven’t done the greatest job of making your payments on time, they’re going to set it up so they’re safe. The higher your credit score, the lower your interest rate. The lower your score, the higher your interest rate.

Debt-to-Income Ratio

Debt-to-Income Ratio is a measure of your ability to pay back a lender. If you have a lot of money sitting in outstanding debt, then you don’t look very reliable as a borrower, which results in less attractive terms for you. The more income you have available in comparison to the debt, however, the more confident lenders will be that you will pay them back.

Amount Borrowed and Down Payment

Lenders also determine interest rates based on how much money they have to lend you. If you’re able to pay a large portion up front, that says to the lender that you will be able to pay back the loan with no problem. On the other hand, if you borrow a large amount of money, and don’t pay much up front, that’s a pretty big risk for the lenders. This will cause them to increase your interest rate to balance their exposure.

Length of Term

The shorter the term of the loan, the quicker the lender will get their money back. This will usually result in friendlier terms. While your shorter term may result in lower interest rates, your payments will likely be much higher. If you are hoping for a little more room to breathe with your payments, be prepared for higher interest rates. The lender won’t be getting their money back particularly fast, so they need to make sure they get their money back.

Age of Vehicle (Auto Loan)

If you’re going for an auto loan, the age of the vehicle will play a role in what your interest rate is. You will typically see higher interest rates for older cars than for newer cars. That’s not what you expected, right? You would think the newer cars would have the higher interest rates because they’re new and tend to be more expensive. Actually, that’s precisely why they have the lower rates. Older cars have already depreciated quite a bit, so it’s safer for the lender to increase the interest rate in case of unforeseen circumstances.

Purpose of Property (Mortgage Loan)

Lenders also take into consideration the type of property you want the home to be. If you plan to have it as a second home or rent it out to other people, your interest rate will be higher. Otherwise, if you plan to occupy the home yourself, your interest rate will likely stay low granted all other factors are satisfactory to the lender.

Do you have any questions regarding how lenders determine your interest rate? Let us know! We’re here to help. Give us a call today at 1-866-991-4885!


No matter what your situation, Go Clean Credit has a solution. We have many credit repair programs that are available to help you overcome your credit situation and place you back on the path to financial success. Real credit restoration is not a once size fits all model and we tailor your needs to the right program, but most people can start for just $99 per month.

We have fixed price programs that get you back on track in as little as 5 months, debt resolution solutions, programs geared toward people who have had recent short sales or foreclosures and many others. Help is just a free phone call away, or you can fill out an appointment request. Contact Go Clean Credit to schedule a free consultation today.

Loan vs Lease: 9 Things to Consider Before Financing

Loan vs Lease

If you’re considering getting a car or other equipment, it’s important to know your options when it comes to financing. Thankfully, you don’t have to buy it outright. You can choose to either get a loan to pay for it, or pay for the item on lease. Here are the differences between a loan vs lease and what you should consider before financing.

Loan vs Lease:

First, let’s establish, what is the difference between a loan and a lease? A loan is when you borrow money from a financial institution to pay for something – for example, a car. You then proceed to pay back that loan to the lender over a set period of time. Once you have completely paid off the loan, you own the car. With a lease, on the other hand, you never own anything. You still make payments over a set period of time, but once that time comes to an end, you give the car back and you start the process over again.

9 Things to Consider Before Financing

Rates

Loan: With a loan, rates are usually floating. This means that as the index fluctuates so does your monthly payment. This can really help you during periods of falling interest rates, but it can also really hurt you when interest rates rise.

Lease: Unless your lease has special arrangements, payments will generally be fixed for the entire term. This can be a plus, as it can be much easier to budget and manage your cash flow.

Amount Financed

Loan: Banks usually only lend a portion of the equipment or vehicle cost. The amount they lend is about 60%-80%. It does not include the costs of shipping, training, installation, or any other soft expenses.

Lease: You can get up to 100%, which includes soft costs and sales tax. Any out-of-pocket costs are usually limited to the first month’s investment or a small security deposit.

Available Terms

Loans: Banks are typically less flexible than leasing companies. This isn’t a bad thing if you’re looking for a standard term. If you need some flexibility, though, it’s not so great.

Lease: In most cases, you will choose the terms, purchase option, and the down payment of your lease. Custom terms can usually be arranged.

Ease of Application

Loans: Most banks won’t begin to review your credit until you have submitted a complete financial package. This is regardless of the amount you are requesting to borrow.

Lease: Most places have a simple application process and don’t require extensive information before they approve the lease.

Extra Costs

Loan: Banks use fees to boost their rates of return on loans. These fees include application fees, origination fees, commitment fees, schedule fees, funding fees, and fees associated with approving and executing the loan application.

Lease: In most small-ticket leases, which are anything up to $75,000, there are no origination, commitment or application fees. Documentation fees depend on the transaction size, and can range from $195 to $295.

Equipment Types

Loan: If the bank does not understand or feels the equipment has limited collateral value, they will not finance it.

Lease: You will find that you’re able to get a lease on most equipment.

Speed

Loan: Banks are slow to make a decision on credit. It can take weeks for them to prepare your request and put it in front of the credit board.

Lease: Decisions on leases are typically quick and can be made within a day.

Collateral

Loan: Banks will usually secure their loans by requiring extra collateral such as real estate, equipment, inventory, receivables, or your house.

Lease: In most cases, the only collateral is the equipment or vehicle being leased.

Restrictive Covenants

Loan: Bank loans often require the borrower to maintain minimum financial ratios, otherwise they will call the loan. The borrower must also report on a regular basis so the bank can ensure they are maintaining the ratio. If the bank does call the loan, they have the power to limit future borrowing from them and any other financial institution.

Lease: There are usually no such restrictive covenants.

Do you have any other questions about the difference between a loan vs lease and what to keep in mind when financing? Let us know! Give us a call today at 1-866-991-4885.


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