Financial Planning Archives - Norton Heath
Whether you’re trying to buy a home or looking to get a college degree, you may need to take out a loan to finance your goals. If you’re seeking out your first loan, know that borrowing money is a common practice and you don’t need a degree in economics to understand it! Learning more about loans and the different types can help you make informed decisions and take control of your finances.
Loans take many forms but they all fall within two common categories: secured vs. unsecured loans. Whether you’re approved for either type of loan depends on your creditworthiness. Creditworthiness refers to how responsible you are at repaying debt and if it’s worthwhile or risky to grant you new credit. It’s helpful to be aware of your credit prior to seeking out a loan so you know where you stand.
Now that you’re familiar with the role creditworthiness plays in getting a loan, let’s discuss the differences between secured and unsecured loans, the advantages and disadvantages of each, and which one may be right for you.
Key Difference: A secured loan requires collateral, while an unsecured loan doesn’t require collateral.
An unsecured loan doesn’t require collateral to secure the amount borrowed. This type of loan is granted based on creditworthiness and income. High creditworthiness makes an unsecured loan more accessible.
Lender can’t take property right away if you default
When it comes to deciding on the type of loan you need, it’s important to consider the advantages and disadvantages of each.
Secured loans present advantages for repayment, interest, and borrowing amount, but have disadvantages regarding a borrower’s risk and limitations of use.
Useful loan if you don’t own property to use as collateral
• Easier to qualify • No risk of losing collateral
• Less risky for borrower
• Risk losing collateral
• More risky for borrower • Higher interest rates
• Lower borrowing limits
• Harder to qualify
A secured loan may be best if you’re trying to make a large property purchase or don’t have the best credit. The piece of property that you are purchasing can be used as collateral if you don’t already own other property. Additionally, this loan is more accessible for you if you have low creditworthiness and may be more advantageous with lower interest rates.
Overall, secured and unsecured loans are each useful in different situations. Remember that the key difference is that unsecured loans don’t need collateral, while secured loans do. Secured loans are less risky for the lender and may allow for some advantageous repayment conditions. On the other hand, unsecured loans are risky for the lender, and they often come with stricter conditions that try to lessen that risk.
Sound money management is an important part of a solid financial strategy. You’ll want to have some of your money set for retirement in a traditional or Roth IRA. Still, other money might be saved for your kids’ college, a down payment on a house or other longer-term goals. And then you might have an emergency fund as well as a checking account that you use to pay your monthly bills and expenses. Each of these buckets of money can be in a different kind of account. In this article, we’ll look at some of the best checking accounts.
Before we look at some of the best checking accounts, it’s a good idea to talk about what makes for a good checking account. A checking account is an account that you would typically use to pay your ongoing monthly expenses. It is more and more rare to actually write paper checks, and instead, you would typically use a debit card or cashless payment account linked to your checking account.
With a checking account, some features to look for include no monthly or maintenance fees, a low minimum amount to open an account, the rate at which they pay interest, and any account opening bonus they might offer. The interest rate that checking and savings accounts pay is tied to the federal funds rate and usually varies over time. As of 2020, the interest rates are quite low, and many checking and savings accounts do not pay any interest at all. Also keep in mind that even if your account pays you 1% interest, you’re still losing money to inflation. So you wouldn’t want to keep any long-term investment money in a checking or savings account.
With all that being said, let’s take a look at some of the top checking accounts available.
Discover’s checking account offers 1% cash back on up to $3,000 in debit card purchases each month, which is one of the few debit cards that offer a reward on ongoing purchases. The Discover Cashback Debit account also comes with no monthly maintenance or other fees, no fees to withdraw at over 60,000 ATMs worldwide and no fees for insufficient funds.
Fidelity’s Cash Management Account also offers no account fees or minimum balances. It also reimburses ATM fees nationwide, though only offers 0.01% APY on account balances. Fidelity makes it easy to transfer money between your checking account, savings accounts and any retirement accounts you have with Fidelity. Plus, the Fidelity Rewards Visa offers 2% cash back on all purchases, which you can redeem into your Fidelity Cash Management Account or any other Fidelity account.
Wealthfront’s Cash Account offers a high-interest checking account (0.35% APY as of this writing) with no fees. And Wealthfront’s convenient account dashboard lets you easily move money between your checking account and any investment or retirement accounts that you have with them. They also offer a service where you can get access to your paycheck up to two days early if you direct deposit into your Wealthfront Cash Account
HSBC’s Premier Checking account also offers no fee on ATMs nationwide or for everyday banking transactions, but does charge a monthly maintenance fee if you don’t have at least $75,000 in combined accounts or direct deposits of at least $5,000 monthly. They are currently offering a promotion where you can earn 3% as a welcome bonus, up to $600. You’ll get 3% on qualifying direct deposits, up to $100 per month, for the first six months of having your account.