A car loan is perhaps one of the best loans to be ever created by lenders. It allows you to finance a vehicle easily that can help you cut down on commute costs in the long run. If managed properly, you will end up a proud owner of a new or used car. However, if you mishandle the loan and make delays in the monthly payments, you might end up in emotional and financial stress.
You could be struggling to reach a decision. We are sharing a list of pros and cons to help you make an informed decision.
Pros
You Get a Card Without Paying a Dime Out of Your Pocket
Technically, the car you buy is paid for by the bank. Financing this loan 100% has now become a common practice. Not everyone can buy a car no matter how much money they have in their savings account. Hence, a car loan is such an attractive option.
It Improves Your Credit History
Unlike small loans that don’t add much to your credit score, a car loan allows you to improve your credit history. As long as you keep making the monthly payments on time, you will see your score increase gradually. The improvement in your credit score will help you get approved for a home loan later.
Low Rates
In most cases, a car loan is secured. Banks or lenders, such as Jacaranda Finance, typically offer a 5-year term. On a $25,000 loan at a 3.5% interest rate, you will only have to pay a few thousand dollars. Plus, with the extended period, you can divide the payments either by weeks or months.
Tax Deductions
If the car you purchase is for business, the cost of running the car and its interest payments will be tax-deductible. Your claim for the business portion cost depends on how the car is used for work-related errands.
Cons
The Bank Owns the Car Until Your Make the Full Payment
A car loan is secured where the collateral is the car itself. Meaning: if you fail to make the full payment, the lender or bank will repose the car. This could also affect your credit score and leave a negative marking on your credit history.
Depreciation
As time passes, your car’s value depreciates. The depreciation rate depends on the model of the car. In some cases, the remaining amount of the loan is higher compared to the car’s market value, which means you are paying more than its price tag. If you decide to sell the car and get another one, you will have to cover the difference between what you make from the car’s sale and the remaining loan amount you owe to the lender, and this can pose a problem.
So, you now know all the intricate details of a car loan. The pros outweigh the cons, which, in our opinion, makes the loan a great option. Just imagine getting in your car every morning rather than waiting for the bus and then finding no seat.
“Buy them pre-built or customize the floorplan?” That question is one of the most compelling aspects of a new home purchase for many people in Canada. It’s a choice that comes with complications including cost and terms associated with building your own home.
To determine which option is most advantageous for most, this guide delves into various facets of pre-constructed home purchases processes and their influence on buyers in Canada, most especially Ontario.
Taking Advantage of the Pre-Construction Process
One distinct feature of pre-constructed homes is the opportunity for buyers to deposit smalldown paymentsin early project phases and watch them appreciate over time. Individuals who purchased such buildings back then have seen these structures risen in value.
Intending buyers are encouraged to invest futuristically by purchasing newly pre-constructed homes that will appreciate some years from now, provided that the Canadian real estate market continues to expand.
Most of these residential homes are developed in the Canadian suburbs where competition is low. Is this a significant factor? Of course. These homes are more likely to be situated on larger lots and have increased living space, compared to earlier residential structures. But there is more.
Buyers don’t have to compete aggressively in bidding wars as seen in urban housing markets in locations like Montreal, Greater Toronto Area, Greater Vancouver Area, and Calgary. But before venturing on a hunt for pre-construction homes, take some precautionary measures to prevent unforeseen issues.
Understand Legal Requirements and Purchase Agreements
As with other building types, pre-construction homes come with legally binding agreements, which both parties must honour. On the surface, these agreements appear harmless and mouth-watering. However, upon closer study, some unfavourable provisions may be lurking in the fine print.
Signing such contracts on the spur of the moment without reading the fine print may lock the buyer in a never-ending cycle of disparaging commitments, most of which would be financial. In Ontario, buyers can wait within a stipulated timeframe to ascertain their decision to sign the contract.
This duration is commonly referred to as the “cooling-off” period, which is a legal obligation. The province also mandates warranty coverage on pre-construction homes, which buyers can leverage to ensure that they are not receiving a terrible bargain.
A buyer would also need to sign a purchase agreement with the builder. This legal document is a prerequisite to claiming full ownership of the pre-construction home and it comes with the Tarion Addendum, which comprises:
The Addendum — Documentation showing the critical dates
The Purchase Agreement — Purchase and sale agreement forms
Before signing the agreement, the buyer should seek legal advice from a lawyer to ensure that the transaction is fair and that the buyer is protected legally against potential difficulties.
Know More About the Pre-Construction Builder
Finding out more about a home builder is one method to guarantee that a pre-construction property does not come with any unlawful baggage. One way to do that is to use the Ontario Builder Directory (OBD).
OBD is an online database that provides detailed information about home builders in Ontario, including probable convictions for unlawful construction projects. Potential buyers can use this resource to figure which builder to consult.
Reputable builders in Ontario are licensed to construct new residential structures. They also have a track record of previous homes they’ve built, as well as genuine testimonials to back up their work.
Explore the Warranty Coverage
As previously noted, Ontario legislation provides for warranties on new houses. This coverage is available in a variety of warranties (one, two, and seven years) and caters to:
Materials
Workmanship
Defects
Ontario Building Code violations
Water penetration, and many more
Keep an eye on hidden costs
Charges may appear out of nowhere, leaving the homeowner perplexed. Purchasers may be unaware of them until a few days before closing. In certain circumstances, the fees might be as much as 6% of the initial purchase price.
To be cautious, purchasers should enquire about additional fees and create a budget to avoid unexpected expenditures such as development fees, utility installation fees, and the rest. The maximum charge should ideally be 2% of the purchase price.
Anticipate Pre-Delivery Inspection (PDI)
During the construction process, the builder will invite the buyer over to inspect the home. This is to ensure that the building meets the client’s requirements and satisfaction.In case of an unusually large project, or as a part of the pre-delivery inspection and acceptance, some aspects of the building may be examined.
The builder may furnish the buyer with detailed data in respect of the plumbers, electricians, plasterers, tiler, drainage consultant, roofing company, and other professionals, as part of the pre-delivery inspection and acceptance process. As a tip, buyers can review the PDI checklist available online to know what to examine when on a PDI.
A month before the warranty expiration highlighted in the Addendum, the buyer can conduct a second inspection. Why is this necessary? It is advisable to give the pre-construction building time to settle over the course of varying seasons.
As a result, the customer will be able to assess the structure’s performance under various situations. During this time, possible flaws in the construction may begin to show up. After the second inspection, the buyer can decide whether or not to proceed with the deal.
If Unsatisfied, Get a Real Estate Broker
Working with a real estate broker or agent, particularly one who is familiar with pre-construction properties, expedites the transaction process and guarantees a decent bargain. In most cases, house buyers are only shown model homes to get a sense of what the finished construction will look like.
Real estate brokers, on the other hand, are familiar with the ins and outs of pre-construction developments as a result of their relationships with developers and builders. What exactly does this imply? Builders and developers frequently hire real estate agents to represent them. They are, in other words, the sellers’ agents.
As a result, these professionals work in the best interests of their clients, not the buyer. They guarantee that the builders receive the best deal possible by offering pre-constructed homes at premium prices. It is then in the best interests of house purchasers to choose real estate agents who will represent their interests.
In Conclusion
Most Canadians spend a lot of money on a new house and then find out that’s not the one for them. Before buying a pre-construction house have an experienced broker or agent with a large network to strike a good bargain. A lawyer will come in handy as well. Finding the ideal agent and lawyer may necessitate an extensive search, but the outcomes are rewarding.
Financial literacy is the ability to understand and efficiently use various financial skills including financial management, investing, and budgeting. Financially literate consumers not only manage their money with confidence, but also have a better chance of handling the inevitable ups and downs of their financial lives.
It is the foundation of your relationship with money, which enables you to create a lifelong journey of learning. It will help you understand how to prevent and manage financial issues as they arise. The earlier you start, the better off you will be.
On that note, here are the advantages of financial literacy.
UNDERSTAND HOW MUCH YOU SPEND & EARN
When cultivating financial literacy, establishing a budget can give you a clear understanding of your expenses and income. Once you have a budget in place, you will be able to track your spending and revisit your spending plan regularly. With the variety of budgeting methods such as 50/30/20 plan, you can choose one that suits you best.
PAY OFF & AVOID DEBTS
Searching for the lowest interest rates when comparing loan terms can help you save a substantial amount of money over time. If you already have debt, financial literacy can help you select the best methods to eliminate your debt. You can pay off your credit card balances each month, so you do not get trapped by the interest charges. You can look for a credible expert such as a credit counselor if necessary.
WORK TOWARDS FINANCIAL SECURITY
Saving for retirement will enable you to secure your future. As you become more financially literate, you will be able to examine how much you need to save to obtain your retirement plan. You will be able to carve your action plan too.
WAYS TO BOOST YOUR FINANCIAL LITERACY
1. SET A BUDGET
Track your earnings and expenses each month by using an Excel Spreadsheet, a ledger, or a budgeting application. Your budget should include your incomes (e.g., investments and paychecks), fixed expenses (e.g., rent and utilities), variable expenses (e.g., shopping and travel), and your savings.
2. PAY YOUR BILLS ON TIME
Stay on top of your monthly bills by making sure that payments arrive on time. Consider taking advantage of automatic payments or signing-up for payment reminders (i.e., by email, SMS, or phone call).
Image Credits: unsplash.com
3. BUILD YOUR SAVINGS
Building your savings will help you reach your financial goals. Decide how much you want to contribute each month and stick to it.
4. CHECK YOUR CREDIT SCORE
You can request your credit report from Singapore’s credit bureaus. Companies assess your creditworthiness by looking at the credit score. Having a good credit score has its perks such as helping you obtain the best interest rates on loans and credit cards.
5. MANAGE YOUR DEBTS
Utilize your budget to manage your debt. You can devise a plan to reduce your monthly spending and increase your monthly repayment. Develop a debt-reduction plan such as paying for the loan with the highest interest rate first. If your debt is excessive and overwhelming, you can contact lenders to re-negotiate repayment or find a debt-counselling program.
Do you know that though CPF members’ total balance has increased from roughly S$125 billion in 2006 to S$474 billion in March 2021, only 63.6% of active CPF members who turned 55 could set aside their Full Retirement Sum (FRS) or Basic Retirement Sum last year?
Hence, to better understand Singaporeans’ attitudes towards retirement, Endowus has worked with YouGov Singapore to develop the Endowus Singapore Retirement Report 2021. The survey took place in May this year with a sample size of 1099 adults, reflecting our tiny red dot’s adult profile population.
Here are its findings.
39% of Singaporeans are worried about retirement inadequacy
The survey revealed that about 1 in 3 Singaporeans are worried about retirement inadequacy. However, the results varied between the genders. Twice as many men than women confidently agreed that they hold sufficient money for retirement.
Almost 50% of people have not started planning for retirement
While 53% of Singaporeans are planning to use or are currently using CPF to fund their retirement, almost 50% of people have not started retirement planning. This is especially true for the younger age group under 35.
Lower-incomers are less likely to plan for their retirement with CPF
Image Credits: The Jakarta Post
Another worrying factor is that those earning below S$3,000 are less likely to plan for their retirement with CPF when compared to those with incomes above S$6,000 per month. This thus also means that lower-incomers are not making full use of their CPF. It also lowers their chances of achieving the FRS for financial stability at retirement.
Only 25% are currently investing their CPF
The report also showed that close to 70% lack confidence in investing their own CPF monies. That is why only 25% are currently investing their CPF. However, most Singaporeans seek higher returns and ranked it as the most critical criteria for CPF investing.
30% are asking for tools on CPF investing knowledge
There seems to be a gap in using CPF around financial decisions; as such, a third of Singaporeans are requesting tools to help them understand the impact of their financial decisions around their CPF. Some are also appealing for resources to aid them in estimating retirement income from their CPF.
To that, Samuel Rhee, Chairman and Chief Investment Officer of Endowus, agrees. He said, “Considering these shifting time horizons and other uncertainties, more education may be needed to help Singaporeans make better use of their CPF, especially earlier in life, when savers have more time to take advantage of asset growth.”
Every family out there is different, and we ought not to compare ourselves to others. But truth be told, single-income families can lead to a heightened amount of pressure on that sole breadwinner.
Carrie Casden, financial wellness coach and president of Summit Financial Management, said, “Quite often, feelings of fear and anxiety stem from… simply perceiving that we’re out of control of our circumstances, and these sentiments can be particularly prevalent when it comes to single-income families.”
Casden noted that families usually have quite a few financial goals they’re aiming for, and that’s okay. However, if there isn’t enough income to put a checkmark beside the various aims, one must learn how to make changes.
Reorder your priorities by keeping in view the items lowest on the list. You can always come back and reassess your financials every quarter of the year.
Be aware of your money views
Image Credits: internations.org
To review your financial anxieties, it’s essential that you’re aware of your views towards money. Here are some questions to ask yourself:
Are you cripplingly frugal or overzealous with spending?
Does a “spend too much” or “don’t make enough” mindset bother you?
Do you tend to avoid talking about money because they make you uneasy?
“There are different ways to reduce anxiety based on the actual issues at hand, which is why I work with clients to help them identify their specific money archetypes to understand the origin of their anxieties and behaviours around money,” said Casden.
Develop a spending plan and track your outputs
Ann James, an accredited financial counsellor and CEO of Financial Freedom Battle Buddies, recommends single-income families develop a spending plan. This will allow individuals to have a sense of control over their money and, in turn, reduce frustrations associated with the unknown.
When it comes to tracking outputs, some of us are experts with the excel sheet. But Dr Elizabeth Dunn, PhD, a happiness researcher, advises us to focus on how purchases make one feel.
“What purchases bring your family joy and which lead to feelings of regret or sadness? Maybe a long and expensive dinner out did not end up saving anyone time, and the regret over spending all of that money on one meal was not worth the spend. But your Hulu or Netflix subscription means the entire family can have a movie night together once a week, and that brings joy to the entire family,” she added.
If you’ve tried the above methods but can’t seem to get around the stress from worrying about money, ask for help.
“Seeking assistance from accredited financial counsellors, credit or housing counsellors, or financial therapists can help alleviate feelings of shame and ultimately reframe an individual’s thoughts and relationships with money,” advised James.
