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Small business is important to Central Oregon, and to Mid Oregon. Find tips and resources for business, and information about Mid Oregon’s commercial services and business members.
Often Shorter Car Loans Are Better
When It Comes to Car Loans, Shorter Is Often Better
A longer-term loan can make even the most expensive car look affordable. But is it really more cost-effective? You may find that often shorter car loans are better.
By stretching out the loan over many years, your monthly payment is likely lower, but you could end up paying a lot more in interest. Still, many people find such loans attractive.
Auto Loans Getting Longer
In the fourth quarter of 2019, the average auto loan term was over 69 months for new cars and nearly 65 months for used vehicles, according to the Experian State of the Automotive Finance Market report. Additionally, almost 32% of auto loans funded in Q4 of 2019 carried a term of six years or more, compared to just 26% in 2009.
That’s well above the standard three- to four-year loan that used to be typical for new car purchases. Here are some of the problems with taking out a longer car loan:
Higher Interest on Longer Loans
- The longer the term of the loan, the worse your interest is likely to be. Shorter-term loans generally qualify shoppers for a better rate;
- There’s a greater chance you’ll end up underwater. Without a substantial down payment, if you total the car* or need to sell it, you could end up receiving less than you owe on the loan; and
You Might Be Upside Down
- You’re stuck with the car even if you don’t want it anymore. If you want to buy a different vehicle, you likely won’t be able to trade in your car because of the difference between what you owe and what the dealer is willing to pay for it.
If you need a longer car loan just so you can afford to buy the car, that’s probably a good sign that you can’t afford the car in the first place. Strive to keep the length of your car loan shorter to save money, and visit Mid Oregon Credit Union for preapproval on a loan before you even begin shopping.
Preapproved Loans Put You in Control
That way you know exactly how much you can afford, and you can avoid taking out a loan that’s going to be a financial burden long after the new car smell has evaporated.
If you have an auto loan from another financial institution, Mid Oregon can help you refinance to a shorter term and still help you stay with an affordable payment.
* Mid Oregon offers Guaranteed Asset Protection (GAP) Plus, which eliminates “out of pocket” expense for a deficit between loan balance and actual insurance settlement amount should your vehicle be totaled or stolen. Talk to a Mid Oregon Loan Officer for details, or call (541) 382-1795.
Roth IRAs Good for Your Savings Plan
Good things come to those who wait—for a tax break***. Although you fund a Roth individual retirement arrangement (IRA) with after-tax dollars, the money you distribute is completely tax-free as long as it meets certain requirements. And that means a really good thing—you may never pay a cent of tax on your earnings. That might make Roth IRAs good for your savings plan.
*** The IRS Says You Have Until July 15, 2020 To Make 2019 IRA Or HSA Contributions.
Tax Advantage
The Roth IRA is one of the few savings vehicles that gives you this advantage, and it’s a big one. Suppose you put $6,000 a year (the maximum contribution limit for 2019 and 2020) into a Roth IRA for 25 years at a 1% return. You would end up with $142,061—$17,063 of which would be tax-free earnings! It’s the magic of tax-deferred compounding.
You’ve seen how time plays a key role in maximizing Roth IRA potential. That’s exactly what makes the Roth so appealing if you’re just starting out with a savings plan, according to Dennis Zuehlke, compliance manager for Ascensus in Middleton, Wisconsin.
“The younger you are, the longer your money can grow before you take it out,” Zuehlke says.
Saver’s Tax Credit
Zuehlke adds that young savers are likely candidates for the Saver’s Tax Credit.
This nonrefundable tax credit can total up to 50% of the first $2,000 you put into a Roth IRA each year. To qualify, you must be at least age 18 and you cannot be a full-time student or a dependent on someone else’s tax return. And, there are income limits. For example, a single person with 2019 adjusted gross income up to $19,500 would receive a tax credit equal to 50% of the first $2,000 of IRA contributions, and a reduced credit is available up to $32,500.
Roth + Saver’s Tax Credit = Difference
“Combine the Saver’s Tax Credit with all the other tax savings of a Roth IRA and it can really make a difference,” Zuehlke says.
Ask the professionals at Mid Oregon Credit Union and Mid Oregon Wealth Management for information about IRAs. We’d be happy to help you set up a retirement plan for your future.
Understand Financial Aid Definitions
Understand Financial Aid Definitions- a Glossary
The terminology used in college financial aid award letters can be confusing. Here’s a quick guide to some frequently used terms, some financial aid definitions:
Cost of attendance: The total price of going to a particular college. It includes tuition, fees, room, board, books, supplies, meal plan, and other living expenses, such as transportation.
FAFSA: The Free Application for Federal Student Aid tells you, based on your family’s income and expenses, what you’re expected to pay out of pocket for your son or daughter’s first year of college.
EFC: Expected Family Contribution, or the amount you and your student are expected to pay out of pocket for his or her first year of college.
Grant: An amount awarded for financial aid, either from the federal government (federal grant) or from a college (institutional grant) to attend that college. A grant is “free money,” meaning you don’t have to pay it back.
Institutional scholarship: Free money you don’t have to pay back that a college offers you to attend that school for the coming year. These scholarships can be merit-based (awarded because of your accomplishments in academics, a sport, music, or another area) or need-based (to supplement your EFC).
Private scholarship: A scholarship you apply for from an outside organization.
Pell Grant: Need-based free money from the federal government.
Stafford Loan: An amount of money a college will allow you to borrow from the federal government at an interest rate the government sets. These can be subsidized (no interest accrues—is added to the balance—while the student is in college) or unsubsidized (interest accrues while the student is in college).
Parent PLUS Loan: An amount of money a college will allow parents to borrow from the federal government, at an interest rate the government sets, for their son’s or daughter’s coming year of college.
Private loan: An amount of money parents or students can borrow from a financial institution—if they’re credit-worthy—for the student’s coming year of college. The financial institution sets the interest rate. Unlike federal loans, you have to make payments on private loans while the student is in college.
Work study: An amount of money a college will pay a student for working at a qualifying job at that college. The student must find and apply for his or her own job.