Pros

• Potentially fast funding
• No prepayment penalty

Cons

• Doesn’t disclose specific interest rates, with disclaimer that it’s an “expensive form of borrowing”
• Late and insufficient-funds fees
• Not available in all states

What you need to know about a personal loan from National Small Loan

National Small Loan is an online tribal lender that offers small loans ranging from $100 to $1,200. (First-time applicants won’t qualify for loan amounts more than $500.) National Small Loan lends to people in every state except Arkansas, Connecticut, New York, Pennsylvania, Virginia, Washington, West Virginia and Wisconsin.

The company says it doesn’t use the three major credit bureaus — Equifax, Experian and TransUnion — to evaluate applications, but it does use other national databases.

Here are a few more things to keep in mind if you’re considering a personal loan from National Small Loan.

Doesn’t disclose its potentially high interest rates

National Small Loan doesn’t publish potential interest rates on its website, instead saying your rate will be disclosed in your loan agreement if you’re approved. But it’s common for short-term loans, including from tribal lenders, to come with APRs that soar into the triple digits — and the company does say its loans are “an expensive form of borrowing” and not “intended to be a long-term financial solution.”

National Small Loan says your interest rate and fees will be determined by factors including your credit and payment history, debt, income and employment status.

But since National Small Loan doesn’t offer a process to prequalify for a personal loan, you won’t know what your interest rate might be until after you’ve applied. 

You don’t need good credit to qualify

National Small Loan says that you don’t need a “great” credit score to qualify and that it doesn’t pull credit reports from the three major credit bureaus to check your credit. But it does check your credit through other national databases.  

And just because you may qualify doesn’t make a loan from National Small Loan a good idea. You’ll want to take a close look at your budget and calculate the total you’ll pay for your loan after fees and interest.

Expensive fees

When you repay a personal loan, it usually consists of the principal payment as well as interest charges and any fees you’ve accrued. But if you have financial troubles, you may face extra fees from National Small Loan.

For instance, the company charges a $25 insufficient-funds fee if your payment is returned or not honored. And if your payment isn’t made within a day of when it’s due, you’ll face a $30 late fee.

No prepayment penalty

If it’s financially possible, it’s a good idea pay off your loan early. National Small Loan won’t charge you prepayment penalties or fees.

A closer look at a National Small Loan personal loan

Here are a few other things to know about National Small Loan.

• Fast funding may be possible — If you apply with National Small Loan and are approved before 2 p.m. Eastern time Monday through Friday, the company says your loan will typically be funded within 24 business hours.
• Small-dollar borrowing — While some personal loan lenders have minimum loans of $1,000 or more, you might not need to borrow that much. National Small Loan offers loans as low as $100.
• Vague repayment terms — National Small Loan doesn’t detail how short or long repayment terms may be. This makes it difficult to estimate what your loan payments may be until after you’ve applied and been approved for a loan.

Should I get a National Small Loan personal loan?

National Small Loan makes it a point to say it offers personal loans — which it calls installment loans — not payday loans. But that doesn’t mean its loans are affordable. In fact, the company itself calls its loans “expensive.”

And since you won’t even know an estimate of your APR until after you apply, you should consider National Small Loan only as a last resort. It’s better to shop around and compare rates from multiple lenders before you make a decision.

You may want to consider a payday alternative loan, which certain federal credit unions offer to members. Several apps — including Earnin and Dave — also could be much more affordable solutions with better terms for people who need to borrow small amounts of money.

How to apply with National Small Loan

You can apply online with National Small Loan — there are no storefronts to visit. There are a few things you’ll want to know about the application process.

• To be eligible, you’ll have to be at least 18 years old, have a source of income and an active bank account.
• You’ll need basic personal information to apply, like your full name, date of birth, phone number, Social Security number and address.
• National Small Loan will contact you by phone or email, and if approved, you’ll receive an electronic contract to sign.

Not sure if National Small Loan is right for you? Consider these alternatives.

• Earnin: The Earnin app lets you borrow up to $100 a day if you meet eligibility requirements. There are no mandatory fees or interest. Instead, you’ll tip what you think is fair.
• OneMain Financial: If you want to check your potential rates, you can apply to prequalify for a personal loan from OneMain and it won’t hurt your credit scores. (Just be aware that your rates and terms may differ from your prequalified rates and terms, and you may face a hard inquiry if you submit an official application.)

If you’re hoping to skip the fee, you’re in luck — there are personal loans with no origination fee. Check out a few of the options we think are most notable, organized by the features that makes these loans stand out.

• Best for borrowing small amounts: PNC
• Best for large loan amounts: Wells Fargo

Best for borrowing small amounts: PNC

Why PNC stands out: Not all personal loan lenders offer small-dollar loans, but PNC does. You can apply for a personal loan with a loan amount starting at just $1,000, which might be a good alternative to a payday loan. (Terms may differ on Credit Karma.)

• Co-applicants allowed: If you don’t have perfect credit, you can apply for a loan with a co-applicant, which might help you qualify for a loan or lower your interest rate.
• No option to apply for prequalification: PNC doesn’t offer a prequalification application to let you preview potential terms. Instead, you’ll need to complete a formal application to see if you’re approved for a loan.
• Personal lines of credit available: PNC also offers personal lines of credit if you’d rather have access to revolving credit. Just remember that PNC’s personal loans have fixed rates while its lines of credit have variable rates.

Read reviews of PNC personal loans to learn more.

Best for large loan amounts: Wells Fargo

Why Wells Fargo stands out: Wells Fargo offers unsecured loans, and its maximum loan amounts are higher than what you’ll find at some other personal loan lenders. Wells Fargo offers unsecured personal loans up to $100,000.

• Customers only: You’ll have to be a Wells Fargo customer for at least 12 months to apply for a personal loan.
• Direct payments for debt consolidation: If you want to consolidate debt such as high-interest credit cards, Wells Fargo can pay off your creditors directly — as long as you request this option at a branch or over the phone when you apply.
• Co-applicants allowed: You can apply with a co-applicant, which may help you qualify or get more favorable loan terms if you don’t have strong credit.

Read reviews of Wells Fargo personal loans to learn more.

What you should know about personal loans with no origination fees

A personal loan with no origination fee can save you from having to pay a fee just to have your application processed. But that doesn’t mean a loan with no origination fee is automatically your best bet.

When you compare loan options, you want to zero in on the proposed APR. Your APR gives you a better sense of the true cost of your loan because it includes fees plus the interest rate. If you have a competitive APR offer, an origination fee might be worth it for you.

You’ll also want to keep in mind that the origination fee might be taken from your loan proceeds, meaning you won’t get the full amount you asked for. If you get a $10,000 loan with a 2% origination fee, you’ll actually receive $9,800 if the fee is taken from your loan amount.

Consider all fees when you calculate how much you want to borrow.

How we picked these loans

After reviewing more than a dozen personal loan lenders that don’t charge origination fees, we  considered several things to help complete this list: availability, fees, repayment options, ability to add a co-applicant, prequalification option, loan amounts and other lender perks.

Pros

• Search for loans based on credit scores, location and needs
• Easy-to-navigate website
• Checking estimated loan rates won’t hurt your credit scores

Cons

• Doesn’t provide loans directly
• Even though there are many lenders, no guarantee you’ll qualify for a loan offer

What you need to know about Fiona loans

Fiona doesn’t offer personal loans directly. Instead, it’s an online marketplace that shows you various lending partners based on information you provide. To search for a loan, you’ll need to provide several pieces of information, including the following:

• Your credit scores (excellent, good, fair or poor)
• Your ZIP code
• Your loan purpose (debt consolidation, credit card refinance, home improvement or special occasion)
• Your desired loan amount

The Fiona platform is free to use. You can also search for credit cards, student loan refinancing offers and online savings accounts on its platform.

Search by credit scores

With Fiona, you can search for a loan based on your credit scores and needs. Fiona says you might qualify for a loan — even with poor credit — which it considers as a score below 620.

One major benefit of using Fiona is that you don’t have to apply on different loan providers’ websites to compare personal loans. This can save you time and energy.

Fiona doesn’t directly provide loans

Since Fiona loans doesn’t offer personal loans directly, you’ll need to go through a few more steps to see if you prequalify with a lender. You’ll fill out a short form online, which includes information like your income, to see if you’re eligible for any personal loan offers from one of Fiona’s lending partners. And if you receive any offers, you’ll be able to complete a formal application through the lender’s website.

Just remember: While any offer you receive could be considered a prequalification, it doesn’t automatically mean you’ll get final approval for a loan. It only gives you an idea of whether you might be approved for a loan and at what terms. In other words, it’s not official until it’s in the fine print of a loan agreement (which you’ll want to read thoroughly before you sign!).

You may not prequalify for any loan offers

Shopping for a personal loan through Fiona doesn’t guarantee you’ll be able to prequalify or qualify for any loans. Even if you do qualify, you won’t necessarily qualify for the loan amount you want or at a competitive interest rate. You may still need to look elsewhere for a personal loan.

Checking potential rates won’t hurt your credit scores

Fiona uses a soft credit inquiry when it checks for offers with its partner lenders. That means your credit scores won’t be negatively affected when you check for loan offers through Fiona. But if you decide to formally apply for an offer, that lender will likely perform a hard credit inquiry to verify your information and determine whether you’re approved.

A closer look at a Fiona loan

Here are a few other things to think about when you’re shopping for loans through Fiona.

• Origination fees: You won’t face any application fees from Fiona. But some lenders may charge an origination fee, which may be deducted from the amount you receive from the lender.
• Easy-to-navigate website: Using Fiona isn’t difficult. The website is intuitive, and you can shop for loans based on different factors, such as by credit score, loan amount or loan purpose.
• May see multiple lenders in minutes: Since Fiona is a marketplace and not a direct lender, you can browse several lenders at once. You can also preview the estimated terms of the loan, including APR and your estimated monthly payment.

Who is Fiona good for?

The Fiona marketplace could be a good option for people who want to browse several potential lenders at once. But remember: Fiona isn’t a direct lender, so you’ll have to submit an application directly with any lenders that you’re interested in to finalize any offer.

The loans that you can find on Fiona’s platform can be used for …

• Debt consolidation
• Credit card debt refinancing
• Home improvement
• Large purchases

Since each lender offers different repayment terms, interest rates, loan amounts and fees, you’ll want to review the disclaimer, terms and conditions of each offer before making a final decision to apply.

How to shop for loans on Fiona

To shop for a personal loan through Fiona, you’ll complete a short form online. But remember: Fiona isn’t a direct lender, so you’ll have to submit an application directly with any lenders that you’re interested in to finalize any offer. You’ll need to provide your personal information, including …

• Loan amount
• Your credit rating
• Loan purpose
• Name and email address
• Date of birth
• Whether you rent or own
• Education completed
• Address and phone number
• Employment status
• Annual income and pay frequency
• Social Security number

Not sure if Fiona is right for you? Consider this alternative.

• Peerform: Peerform is a peer-to-peer lender that tries to match you with institutional investors that want to fund personal loans.

Pros

• No prepayment penalty
• Potentially fast funding
• Multiple ways to apply

Cons

• High interest rates
• May charge an origination fee
• Limited availability

What you need to know about a Speedy Cash loan

You can apply for a Speedy Cash loan online, over the phone or at one of its storefront locations across the country. Speedy Cash offers payday loans, title loans, lines of credit and installment loans. In this review we’ll focus on its personal loans, which Speedy Cash refers to as installment loans.

While payday loans typically require repayment by your next paycheck, installment loans usually have longer loan terms.

High interest rates

You should look for a personal loan with an interest rate of 36% or less, according to the National Consumer Law Center. But you’ll find that even Speedy Cash’s lowest APRs far exceed that, with rates in the triple digits. For that reason, you should only consider a Speedy Cash loan if it’s a true emergency and you’ve exhausted all other options.

May have an origination fee

Some states require an origination fee — an upfront fee charged for processing your loan application. Speedy Cash’s origination fees can vary depending on where you live.

Potentially fast funding

If you’re approved for a loan in person, you may be able to get your loan funds deposited directly into your bank account as soon as the same business day. That could be a benefit if you’re facing an emergency expense, such as a car repair.

Limited availability

Speedy Cash doesn’t operate in many states.

Speedy Cash offers online installment loans only in Alabama, Colorado, Illinois, Mississippi, Missouri, Nevada, New Mexico, Ohio, Oklahoma, South Carolina, Texas and Wisconsin.

Terms are inconsistent

Terms for a Speedy Cash installment loan vary depending on the state.

Take note that if you live in some states, you may have to make semimonthly payments on your loan. This could potentially put a strain on your budget if you’re looking for a loan that you can pay back over time with one payment each month.

A closer look at Speedy Cash loans

Here are a few other features to keep in mind if you’re considering an installment loan from Speedy Cash.

• No prepayment penalty — If you want to pay off your loan early, Speedy Cash won’t charge a prepayment penalty. This could help you save interest costs.
• Multiple ways to get money — Along with direct deposit, Speedy Cash lets you pick up your money at a storefront location (if there’s one near you). You also can get your loan funds on one of three types of prepaid debit cards, called Opt+ cards. But keep in mind that there may be fees depending on how you decide to get funds.
• Automatic payments allowed — You can set up automatic payments so that your payments are automatically deducted from your checking account each month.

Who is a Speedy Cash loan good for?

Considering its limited availability, a Speedy Cash loan may be a good loan option only if one of these situations applies to you.

• You live in one of the states where it offers installment loans.
• You want to borrow a small amount — but remember that the loan amount available depends on your state.
• You can pay it off quickly. Since its APRs can be very high, you should consider a Speedy Cash loan only if you don’t have any other options to cover an emergency expense.

How to apply with Speedy Cash

The application process for a Speedy Cash loan is fairly straightforward. Here’s the personal information you’ll need when you apply.

• Your full name and birthdate
• Valid ID
• Home address
• Steady source of income
• Open bank account

Speedy Cash will perform a credit check once you apply — which could negatively affect your credit scores by a few points.

Not sure if Speedy Cash is right for you? Consider these alternatives.

• Earnin: Earnin is an alternative option for emergency cash. It’s an app that allows you to borrow against your paycheck without fees or interest.
• Upstart: Upstart might be ideal if you want a lender with a prequalification option that considers more than just your credit scores.
• Payday alternative loans: Federal credit union members can consider these emergency cash options, which have limits on fees.

Different types of debt are right for different budgets and needs. According to the Q2 2019 Household Debt and Credit report from the Federal Reserve, revolving debt is the most commonly held type of debt in the U.S. And the most common type of revolving debt is credit card debt.

There’s also nonrevolving debt, like the debt carried on installment loans like auto loans, student loans and personal loans.

Let’s take a look at some examples of revolving debt and when carrying it might make sense for you.

What is revolving debt and how do people use it?

Revolving debt is made up of the balances you carry on any revolving credit lines you have open. Carrying debt is not unusual. In fact, according to the Federal Reserve, Americans were holding $1.05 trillion in outstanding revolving debt at the end of 2018 — an increase of nearly 19% in just four years.

According to a study by the Consumer Payments Research Center, the more credit that someone has, the more debt they carry. The same study also shows that age doesn’t seem to significantly affect spending until people are in their 70s, which the study points out is when credit utilization falls below 20%.

Common examples of revolving debt include any balances you owe on the following types of credit:

• Credit cards — If you’re approved for a credit card, you’ll have a credit limit that dictates the most you can spend on your card. As you pay off your credit card balance, you’ll free up more of your credit line for future spending. Just keep in mind that any balance you carry usually accrues interest.
• Personal line of credit — Similar to a credit card, a personal line of credit gives you access to a preapproved amount of money. You’ll usually apply through a bank or credit union and have a certain amount of time to draw from the account. As you repay what you owe, you’ll free up more of your line of credit to use.
• Home equity line of credit (or HELOC) — Like a personal line of credit, a HELOC allows you to borrow up to a preset limit and then pay back what you borrow with interest. But with a HELOC, you borrow against your home’s equity, which is used as collateral. You’ll usually have a “draw period” when you can spend money and a “repayment period” when you must repay any outstanding balance with interest.

Is carrying revolving debt a good idea?

Revolving debt may be helpful, if you’re careful about how you use it. Mishandling revolving debt — say by missing payments or using too much of your available credit — can hurt your credit.

Revolving debt may help you build your credit if …

• Your credit utilization stays low. Too much revolving debt can affect your credit scores. Generally, you want to keep your credit utilization below 30%. But if you’re close to maxing out your limit, your credit scores could drop. Even if you have to carry a balance from one billing period to the next, try to keep your credit utilization under this 30% threshold.
• You make payments on time. Payment history is one of the biggest factors in determining you credit scores. Missed payments may cause your scores to take a hit, and you could be charged a late-payment fee.

It’s also a good idea to pay off your balance on time and in full every billing period. It can help you stay on top of what you owe so that you don’t get buried in interest charges. With credit cards, as long as you pay off your entire statement balance on time each month you shouldn’t see any purchase interest charges on your account.

Revolving debt may not be right for you if …

• You need a lot of money right away. If you need to cover a major expense or finance a big home repair, you can still apply for revolving credit. But you may want to consider nonrevolving credit like a personal loan, which comes with a fixed timeline to repay what you owe.
• Your credit history is less than perfect. Lenders are less likely to approve you for a line of revolving credit or offer ideal interest rates if you don’t have proof of a solid credit history. If you’re approved, you may face a high interest rate, which means carrying a balance could cost you a lot in interest.
• You constantly hit your limit. Credit utilization can have a significant impact on your credit scores, and a high credit utilization rate may tell lenders that your finances are stressed.

What’s next?

Taking on revolving debt, whether it’s through a credit card or line of credit, may be a good way to finance a large purchase — if you have the means to repay it.

If you don’t have good credit, you may want to pay down any debt you already have before applying for a new credit card or loan.

All loans aren’t created equal. If you need to borrow money, first, you’ll want to decide which type of loan is right for your situation.

As you begin comparing loans, you’ll find that your credit is often an important factor. It helps determine your approval and loan terms, including interest rate.

To help you get started, we’ll review eight types of loans and their advantages. We’ll also discuss things you should watch out for as you make your decision.

1. Unsecured personal loans
2. Secured personal loans
3. Payday loans
4. Title loans
5. Pawn shop loans
6. Payday alternative loans
7. Home equity loans
8. Credit card cash advances

1. Unsecured personal loans

Personal loans are used for a variety of reasons, from paying for wedding expenses to consolidating debt. Personal loans can be unsecured loans, which means you’re not putting collateral like a home or car on the line in case you default on your loan.

Best for debt consolidation and major purchases

If you have high-interest credit card debt, a personal loan may help you pay off that debt sooner. To consolidate your debt with a personal loan, you’d apply for a loan in the amount you owe on your credit cards. Then, if you’re approved for the full amount, you’d use the loan funds to pay your credit cards off, instead making monthly payments on your personal loan.

Depending on your credit, a personal loan may offer a lower interest rate than your credit card — and a lower interest rate could mean big savings. It may help to get an idea of what the average debt consolidation rate is.

A personal loan may also be a good choice if you want to finance a major purchase, like a home improvement project, or you have other big costs like medical bills or moving expenses.

Watch out for credit requirements and interest rates

Since unsecured personal loans don’t require collateral, lenders usually turn to your credit reports and credit scores to help determine if you’re a good candidate for a loan. In general, people with higher credit scores will be eligible for better loan terms.

You may be eligible for an unsecured personal loan even if you have fair or bad credit. But you may want to shop around to make sure the interest rate and monthly payment is affordable for your budget.

2. Secured personal loans

To get a secured personal loan, you’ll have to offer up some type of collateral, like a car or certificate of deposit, to “secure” your loan.

Best for lower interest rates

Secured personal loans often come with lower interest rates than unsecured personal loans. That’s because the lender may consider a secured loan to be less risky — there’s an asset backing up your loan. If you don’t mind pledging collateral and you’re confident you can pay back your loan, a secured loan may help you save money on interest.

Watch out for potential loss of assets

When you use your collateral to take out a loan, you run the risk of losing the property you offered as collateral. For example, if you default on your personal loan payments, your lender could seize your car or savings.

3. Payday loans

Payday loans are short-term, high-cost loans that are typically due by your next payday. States regulate payday lenders differently, which means your available loan amount, loan fees and the time you have to repay may vary based on where you live. And some states ban payday lending altogether.

To repay the loan, you’ll typically need to write a post-dated check or authorize the lender to automatically withdraw the amount you borrowed, plus any interest or fees, from your bank account.

Best for emergency cash when you don’t have other options

Payday loans are usually $500 or less. Getting a payday loan may be helpful if you’re in a pinch and don’t have savings or access to cheaper forms of credit.

Watch out for high fees

Payday loans have high fees that can equate to annual percentage rates, or APRs, of around 400% — much higher than personal loan APRs, which average around 10% to 11% for a 24-month term, according to the Federal Reserve.

4. Title loans

If you own your car, you may be able to take out a car title loan. You can typically borrow between 25% and 50% of your car’s value. Title loan amounts often range from $100 to $5,500, according to the Federal Trade Commission, and you’ll usually have to repay your title loan within 15 to 30 days. If you don’t, your car could be repossessed.

Title loans typically carry high APRs in the triple digits. If you’re approved, you’ll have to hand over your car title until you pay back the full amount of the loan, including fees.

Best for fast cash when you don’t have other options

If you own your car outright and truly don’t have another way to borrow money, a title loan can give you access to cash you might otherwise not be able to get for an emergency.

Watch out for vehicle repossession

If you can’t pay back your loan according to the terms in your agreement, you may continue to rack up fees while your lender continues to hold onto your car title. Eventually, the lender may be able to repossess your vehicle.

5. Pawn shop loans

A pawn shop loan is another fast-cash borrowing option. You’ll take an item of value, like a piece of jewelry or an electronic, into a pawn shop and borrow money based on the item’s value.

Loan terms vary based on the pawn shop, and interest rates can be high. But some states have stepped in to regulate the industry. Plus, you usually won’t get your pawned item back until you pay back the loan in full, though the amount of time you have to repay the loan varies by state.

Best for small loan amounts with no credit check

The average pawn shop loan was around $150 in 2017, according to the National Pawnbrokers Association. If you don’t think you’ll qualify for a traditional personal loan, you may want to consider a pawn shop loan. You won’t need a credit check to get one and they may be less risky than a payday loan or title loan.

Watch out for sale of your possessions

If you don’t pay back your loan in time, the pawn shop could sell your items. You may also get hit with fees and additional costs for storage, insurance or renewing your loan term.

6. Payday alternative loans

A payday alternative loan is a short-term loan offered by some federal credit unions. A PAL is designed to be more affordable than a payday loan. Payday alternative loan amounts range from $200 to $1,000, and they have longer repayment terms than payday loans — one to six months instead of the typical few weeks you get with a payday loan.

Best for lower interest rates

If you’re considering a payday loan, see if you qualify for a payday alternative loan first — you’ll likely save money on interest. A federal credit union can’t charge application fees for more than the cost to process your loan application, with a max of $20. Payday loans often charge $15 for every $100 borrowed, which can equate to an APR in the triple digits.

Watch out for membership requirements

To qualify for a payday alternative loan, you’ll need to be a member of a federal credit union for at least a month. If you’re struggling to pay for something right away and aren’t a credit union member, you may want to look for another option.

7. Home equity loans

A home equity loan is a type of secured loan where your home is used as collateral to borrow a lump sum of money. The amount you can borrow is based on the equity you have in your home, or the difference between your home’s market value and how much you owe on your home. You typically can’t borrow more than 85% of the equity you have in your home.

Best for personal loan alternative

Since you’re using your home as collateral, your interest rate with a home equity loan may be lower than with an unsecured personal loan. You can use your home equity loan for a variety of purposes, ranging from home improvements to medical bills.

Watch out for default

Before taking out a home equity loan, make sure the payments are in your budget. If you default on your home equity loan, your lender may foreclose on your home, putting you out of a place to live.

8. Credit card cash advances

Your credit card may offer a cash advance, which is a short-term loan that you borrow against your card’s available balance.

Best for paying cash

Not all businesses accept credit cards, so if you don’t have cash on hand to pay for something you need, a cash advance may be a good option.

Watch out for fees and high interest

Even though you’re using your credit card, you won’t necessarily have the same interest rate on a cash advance as a normal purchase. You may begin accruing interest as soon as you withdraw the money — and you’ll likely face a processing fee.

What’s next?

Before you think about borrowing money, set your budget so you know what you can afford to pay back on a monthly basis. If you’re consistently running into money troubles, think about contacting a credit counselor or reassessing your expenses.

Hear from an expert

Q: What would you recommend for someone who needs a loan but has no credit?

A: Start to try and build a credit history by setting aside some income each month as savings, and then using the savings as a deposit for a secured credit card or loan.

— Joshua Bernstein, Assistant Professor of Economics at Indiana University Bloomington

As you start to explore vehicle options, it’s a good idea to first determine how much car you can afford. Start by reviewing your monthly budget to see what works with your cash flow. Then compare cars in your price range.

To lower your monthly financial obligation, you’ll probably want to contribute a down payment by trading in your old vehicle, paying part in cash or a combination of both. As a general rule, aim to make a down payment equal to 20% of the car’s value down for a new car, and at least 10% down for a used car.

Why should I save for a car?

The more money you’re able to put into a down payment, the less you’ll need to borrow and the lower your monthly payments could be. Having lower monthly payments can allow you to put more money into other obligations, like your rent or mortgage, student loans or credit card debt.

A larger monthly payment may be harder to afford if a financial emergency arises. And if you skip your car payment, you may fall behind on your car loan, which could lead to auto loan default and repossession. In turn, that can hurt your credit and ability to take out loans in the future.

If you’re able to pay cash for your car, you won’t have to take out a loan at all.

How to save money for a car

If you’ve recently had car troubles and need a new one right away, you may not have as much time to save as someone who is just starting to think about buying a new or used car.

But that doesn’t mean you should buy a car on a whim. Here are a few ways you can save for a car.

1. Set a budget

It’s hard to gauge what car you can afford if you haven’t checked the numbers yet. Go over your income and monthly financial obligations, including your rent or a mortgage payment, utility bills and student loans.

You may also want to track your expenses to get an idea of how much you’re spending on things like groceries, eating out and shopping.

Calculate how much room you have in your budget for a car payment. This will help you determine how much money you should save for a down payment. A common rule is that you shouldn’t spend more than 15% of your monthly net income on a monthly auto payment.

2. Save automatically

If you haven’t set up a savings account yet, that may be a good place to start. When you’re setting up a savings account for the first time, try to find a high-yield account that offers a competitive interest rates and low fees.

Having a savings account that is separate from your checking account can help you keep track of exactly how much money you have for a down payment for your car. One bank account may make it more difficult to keep track of your car savings as money comes in and out to pay for other things.

When you set up a standalone savings account, you can also set up automatic contributions for when you get paid, which could make it easier to keep track of your new funds. Doing so can help give you a clearer picture on what you can afford.

You could also try a money-saving app to help automate your savings.

3. Get a side job

If your full-time job just pays the current bills, you may be able to take on some extra work to start saving for a car. Getting a side job can help you save extra.

A side job may include selling homemade goods online, working as a virtual assistant or delivering someone’s groceries. Earning a little extra cash can go a long way, giving you the chance to put more toward a car, borrow less money and possibly lower your monthly payment.

4. Cut out extra expenses

If your current budget doesn’t give you much room to save for a car, see where you can lower your expenses — or cut them out completely. That doesn’t mean you have to permanently go without something, but it may make sense to trim costs for a set period so you can save.

For instance, it may help to stop using your credit card for certain purchases you feel aren’t truly necessary. Try limiting your credit card spending to things like gas and groceries for a few months. If you’re not using your gym membership, cancel it for now and hit the pavement around the neighborhood for free instead.

5. Trade in or sell your old car

Trading in your vehicle to help fund your next car purchase is often a good option to lower the overall amount you’ll owe on your new vehicle.

To get the most money, you’ll want to compare what different dealers will offer you for the car. Research what your car is likely worth on sites like Edmunds and Kelley Blue Book to see if your trade-in offer seems reasonable.

But be cautious about negative equity on your current car before you decide to trade it in. Negative equity means you owe more on your car loan than what your car is worth.

And it’s a good idea to research selling the car yourself to a private party since it could help you earn more money from the sale.

Bottom line

If you have the time and resources to devote to saving for a new car, it’s often a good idea for your finances. Spend as much time as you can saving now so you can borrow less later.

While saving for a new car can feel a bit overwhelming, you do have options to get started. Break down your goal into measurable targets, and you can be on the road to savings.

A manufacturer’s warranty is a carmaker’s promise to cover certain problems with your vehicle. The warranty is usually valid over a certain period of time or miles.

When you buy a car, you want to know it’s built to go the distance. That’s why automakers may provide manufacturer’s warranties with your purchase, which if provided is usually built into the price of your new car.

The warranty should also outline what the carmaker handles in the event something breaks down in your car. Not all car warranties are the same and can vary based on many factors, including vehicle type, type of warranty and manufacturer.

• What is a manufacturer’s warranty?
• Can my used car still be under a manufacturer’s warranty?
• What’s the difference between a manufacturer’s warranty and an extended warranty

What is a manufacturer’s warranty?

When you make a big purchase like a car, the manufacturer will often offer a warranty. This is a promise that the company stands behind its product and that it will correct certain problems — often through repair, replacement or refund.

Your manufacturer’s warranty may cover major vehicle parts, like the car’s battery, seat belts or air conditioning system. And if you’re leasing, the manufacturer’s warranty may even cover parts on your leased vehicle.

A new vehicle limited warranty

Many new cars include a three-year or 36,000-mile manufacturer’s warranty (whichever comes first) from your date of purchase that covers items that break down. Systems that fail because of general wear and tear or routine maintenance items typically aren’t covered.

Powertrain limited warranty

Powertrain warranties typically last for five years or up to 60,000 miles (whichever comes first). Your car’s powertrain typically includes the engine, transmission and drive components.

Make sure to carefully ready your car’s manual, which can tell you what’s not covered in your car’s warranty. For example, a 2019 Toyota Camry booklet lists certain conditions for its New Vehicle Warranty under which it’s not liable for repairs, like the following:

• Fire, accidents or theft
• Abuse or negligence
• Misuse (like racing)
• Improper repairs (like fixing something yourself and doing it incorrectly)
• Alteration or tampering, like using non-Toyota accessories
• Lack of or improper maintenance (like using the wrong fluids or fuel)
• Installation of non-Toyota parts
• Airborne chemicals, tree sap, road debris, rail dust, salt, hail, floods, wind storms, lightning and other environmental conditions
• Water contamination
• Problems caused by normal wear and tear

Tires can have a separate warranty not attached to a regular limited warranty with new cars.

Can my used car still be under a manufacturer’s warranty?

If you’re buying a used car, there’s still a chance it could have a manufacturer’s warranty that’s valid. But it depends on the car you’re buying.

The Federal Trade Commission requires all used car dealers to post a buyer’s guide on the vehicle’s side window. There are several pieces of information you’ll see, including the following:

• Warranty: The car manufacturer’s warranty may still apply, or a manufacturer’s used vehicle warranty or other type of warranty may apply. A box will be checked or unchecked for each. If you have the option to pay a fee to get an additional service contract, it’s known as an extended warranty.
• Implied warranty: An implied warranty is provided by state law and not something you’d typically see in your contract. There are two common types of implied warranties. One is “warranty of merchantability,” which basically says a car is supposed to run and if it doesn’t, the dealer must fix it until it runs (unless it was sold “as is”). The other is a “warranty of fitness for a particular purpose,” which means the car is suitable for a certain use, like hauling a trailer.
• As is: There is no warranty. If you buy a car “as is,” nothing is covered by the carmaker or dealer (though depending on your state, certain implied warranties may apply). But you may have the option to buy a dealer-service contract within a certain number of days of purchase. 

What’s the difference between a manufacturer’s warranty and an extended warranty?

A manufacturer’s warranty covers specific things guaranteed by the carmaker. If available, it’s usually included in the cost of the car and ends after a certain amount of time or after you’ve hit a specific number of miles.

An extended warranty is sometimes also referred to as a service contract and isn’t technically a warranty as defined by federal law. An extended warranty’s costs are added on top of the price of your vehicle and typically don’t include regular maintenance.

Before you buy an extended warranty, ask your dealer (in writing) about what’s covered and what the costs of repairs may be without one. It may not be worth the investment.

Bottom line

If you buy a new or used car, it’s important to understand your warranty coverage. Make sure you read through the contract provided by the dealer that details what the manufacturer or dealer is liable for. That way, you’ll have a better idea of whether you’re covered or if you have to pay for a pricey repair.

A statement credit is one of the ways a credit card company might issue cash back or rewards you’ve earned.

In basic terms, a credit is the opposite of a payment — you get money credited back to your account instead of borrowing it to pay for a purchase.

Statement credits can show up on your monthly credit card statement, often in both a list of transactions and as a category of account activity.

How you might receive a statement credit

When you receive a statement credit, it could come in a few different forms. Here are some of the some common ways to get one.

Returns

When you return a previous purchase, whether online or in person, the money you get back will typically go to the credit or debit card you used for the original sale. When this happens, the returned amount will be added back to your card account balance as a statement credit.

Cash back rewards

Many credit cards offer cash back, with statement credit as one way to redeem your rewards. If you redeem this way, the redemption amount should post to your account as a statement credit that decreases your card balance.

But keep in mind that not every credit card offers the same ways to receive or redeem cash back. Some might let you pick from options including statement credits, checks and deposits into a bank account, and others might limit your options to just one method.

Travel rewards redemption

Credit card companies issue travel rewards in many forms, but one is by allowing redemption for previous purchases.

Credit card perks

Sometimes simply using your card for specific purchases is enough to get a statement credit. Many rewards credit cards offer statement credits as reimbursements for advertised perks.

For instance, it’s common to see premium credit cards offer automatic travel credits or a credit for a Global Entry or TSA PreCheck application fee. In these cases, you simply make the relevant purchases with the credit card, and then the statement credit should appear on your account.

What happens when your account statement shows more credits than purchases?

If you receive more back in statement credits than you’ve made in purchases, then your account should show a negative balance. In that case, you don’t owe anything — in fact, the lender owes you money. When this happens, you can let the balance remain on your account to cover future purchases or request the money from your card servicer via check, depending on the lender’s policies.

Is statement credit always the best option?

Now that you know what a statement credit is and how you might earn one, it’s important to remember that it’s not always your only option for getting money back from a purchase or rewards program. Whether you choose to redeem via a cash back, travel rewards or perks program, consider the option that suits your lifestyle best.

If you’re having trouble finding a statement credit you think you’ve earned, consider contacting your card’s customer service line for a deeper explanation. Credit card companies often handle their systems differently, and it can be beneficial to find out how yours works.

When you take out a loan, your payments are primarily broken up to pay for two main portions of the loan — the principal and the interest.

Think of the principal as the money you borrowed from the lender. The interest is the amount it’ll cost you to borrow that money. Both amounts go down as you make payments over the life of the loan. You can use Credit Karma’s loan amortization calculator to explore how different loan terms affect your payments and the amount you’ll owe in interest. 

Loan principal vs. interest

If a loan principal is determined by the amount you’ve borrowed, then the interest you pay back on the loan is considered to be the cost of borrowing that money.

Your original interest payments will often be structured as a percentage of the principal. The annual percentage rate (or APR) you get depends on both the lender’s policies and your creditworthiness — the higher your credit scores and the stronger your credit history, the more likely it is that you’ll receive a lower interest rate.

How is the principal paid back?

When you start to pay off a large loan, most of the minimum monthly payment you make will be on the interest, and then some will go toward your principal. That’s because the higher your principal, the higher the interest — and interest owed gets paid first.

Your monthly payments can stay about the same (as long as you pay at least your minimums on schedule), but how much of your payment is allocated to each portion will change over time. As your payments continue, you’ll slowly start to pay more in principal and less in interest — the lower your principal, the less interest grows.

Some loans allow for “principal-only” payments. These are usually extra monthly payments on top of your minimum amount. You can set up your monthly payments as usual and then make an additional payment to go toward just your principal.

Some lenders require notice if you want an additional payment to be applied only to the principal instead (and not interest). Not every lender offers principal-only payment options, so make sure you check with yours before sending that extra check.

There may be a way to structure your payments to pay all of your interest first, too. But it might not be the best idea. Your interest wouldn’t decrease since you wouldn’t be paying down the principal.

How to identify your loan principal

Your loan’s monthly statement will usually show you a breakdown of how much money you owe toward your principal balance and how much you owe toward any interest or fees.

For instance, the U.S. Department of Education shows that your student loan account statement can be broken down by interest rate, monthly payments, daily interest (the interest that gets added to your loan daily), and principal balance.

You can also see your loan principal on your mortgage statement.

If you have trouble determining where your payments are going, contact your lender for more information.