Finance Xpress

Posted by: Adam McCann

Credit card interest rates tell you how much it will cost to borrow money from a credit card company, by carrying a balance from month to month. Credit card issuers indicate that cost by displaying credit card interest rates as an annualized percentage of your balance, also known as an Annual Percentage Rate (APR). For example, if your interest rate is 20% and you carry a $500 balance, you would owe roughly $100 in interest after a year.

The average credit card offer currently has an 19.05% APR, according to WalletHub’s latest Credit Card Landscape Report. And the average rate on existing credit card accounts is 13.08%.

The good news is that credit card interest rates won’t apply if you pay your full statement balance by the due date each billing period. The bad news is there are several types of credit card interest rates to contend with. And they all have the potential to be quite expensive.

Here are the different types of credit card interest rates:

1. Purchase APR: The interest rate on things you buy with a credit card that applies when you don’t pay your statement balance in full every billing period.
2. Balance Transfer APR: The interest rate you owe on balances you move from other credit cards or loans to your card. Typically, you get a low rate (even 0%) for a certain number of months, and then switch over to the regular APR.
3. Introductory APR: This is a temporary promotional rate that some credit cards offer to new applicants for a certain period of time after account opening. It is lower than the normal APR, often 0%. The average credit card with a 0% introductory APR on purchases gives you about 10 months without interest. Balance transfer intro APRs last 12 months on average.
4. Cash Advance APR: Withdrawing money from an ATM or bank branch using your credit card triggers this rate. The average credit card cash advance APR is 21.02%.
5. Penalty APR: This rate may apply after you miss a due date. And whether it applies to future purchases or an existing balance, too, depends on how far behind you get. The average penalty APR on a credit card is 26.18%.

Below, you can find more detailed average credit card interest rates, along with additional information about how credit card interest works and how to avoid it.

Current Credit Card Interest Rates

Category	Average Purchase APR
Excellent Credit	14.19%
Good Credit	19.88%
Fair Credit	22.41%
Secured Credit Cards	19.17%
Student Credit Cards	17.63%
Business Credit Cards	17.64%
Store Credit Cards	25.48%
All New Offers	19.05%
All Existing Accounts	13.08%

Source: WalletHub’s 2018 Credit Card Landscape Report Credit Card Interest Rates Compared

If you look at your credit card’s terms and conditions, you’ll run into several types of interest rates. It’s important to understand how each works and to which balances it applies. That way, none of the payments you owe on your card will be a surprise when they’re due. Below you’ll find a comparison of all the interest rates you need to know, including their current averages.

Purchase APR

The purchase APR is the most common interest rate you’ll deal with. It applies to all the purchases you make using your credit card. You may also hear it called the “regular APR.” But you’ll never actually owe any interest as long as you always pay your balance in full by your due date. When your credit card statement closes, there is typically a grace period of about 21 days before your due date. As long as you pay within this period, you won’t owe a cent of interest.

But if you do carry a balance, you’ll owe interest at your purchase APR divided by 365 every day. And like all credit card interest, it compounds daily. That means that each day you owe interest both on the original balance and on any past interest you’ve accrued.

Balance Transfer APR

A balance transfer is when you move a debt from one creditor to another. For example, you might move the balance of your auto loan onto a credit card. Many cards will give you an introductory rate, usually 0%, for a certain number of months. When you transfer your balance to a card with a 0% APR, you get time to pay down your existing debt without having new interest build up. You’ll typically owe a transfer fee of 3%-5%, though.

Introductory APR

An introductory APR is a promotional rate an issuer gives new customers on purchases or balance transfers. This rate is usually 0% and it lasts for a certain number of months, usually 6-24. It’ll always be lower than your regular APR. It can help you finance big-ticket purchases and avoid racking up interest on an existing balance.

Once an introductory period expires, you’ll start owing interest on any remaining balance right away at your regular APR.

Cash Advance APR

When you make a cash advance, you use your credit card to withdraw money from an ATM or bank branch. You’ll need a PIN in order to do so. However, cash advances are usually a bad idea unless you’re in an emergency. That’s because the cash advance APR is generally higher than your normal APR and over 20%. On top of that, you’ll be charged a fee and there’s no grace period for repayment. That means you’ll start accruing interest at your cash advance APR immediately, compounding every day.

Penalty APR

Another undesirable interest rate is the penalty APR or default APR. This can take effect when you’ve missed at least one payment. Your issuer will apply this rate to new purchases first (with a 45-day notice). But once you’re at least 60 days delinquent, meaning you’ve missed two payments, the issuer can then apply it to all existing balances.

The penalty APR is always higher than your regular APR if it exists, but some cards don’t have a penalty rate. And it’s hard to get your original rate back. It’ll take six months of on-time payments before your issuer is required to revert the rate on existing balances. But they are allowed to keep the rate for new purchases unchanged.

How Credit Card Interest Rates Work

Several things can cause an interest rate to apply to your balance. For example, you might carry a balance between months or take out a cash advance. Once you start paying interest, it will start accruing daily. The rate per day is the APR divided by 365. You then multiply that by your balance to find the amount of interest you owe that day.

But it’s not quite that simple. All credit card interest rates compound daily. That means that each day you owe interest both on your original balance and on any other interest you’ve already accrued. So the amount of interest you owe each day will slowly increase. That’s why it’s vital to always make a plan to pay off your debt.

When Credit Card Interest Rates Can Change

There are four main cases in which your credit card interest rate might change. You have control over some of them, but others are totally out of your hands. Here are the cases in which they can change:

1. Your introductory rate expires. It’s great to get a low introductory APR, especially if it’s 0%. But these rates only last a certain number of months, usually 6-18, before the regular APR kicks in.
2. You have a variable rate. This means your rate is tied to an index, usually the prime rate that banks use to lend to their most creditworthy customers. As the market fluctuates and that rate changes, so will your card’s interest rate. You’ll know your card’s rate is variable if you see a (V) next to it. Most cards have variable rates, but some have fixed rates not tied to an index.
3. You trigger the penalty APR. The penalty APR is higher than your regular APR and can be applied when you miss a payment. It can apply to future purchases afterYou can only regain your regular APR on existing balances by paying on time for six months. Your issuer may or may not ever lower your APR on new purchases.
4. Your issuer changes the rate. A credit card company can change your interest rate for future purchases at pretty much any time, for pretty much any reason. They’re required by law to give you 45-days’ notice, though.

There’s a lot to learn about credit card interest rates, but WalletHub is here to help. You can check out our APR guide to learn more about how interest works. Consider reading up on what a good APR is as well.

Image: Trukhachev Kirill / Shutterstock

from Wallet HubWallet Hub


via Finance Xpress

You don’t have to spend a fortune to see the world. Instead, here’s a list of 8 tips and tricks that can actually save you money when you travel.

Do you love to travel? Whether it’s around the country or internationally, travel is great for your mind and soul. In fact, more and more studies are coming out saying that spending money on experiences is one of the quickest ways to boost happiness. Of course, we’re all about saving money here, so we want to be sure you’re not spending too much.

That’s why we pulled together this list of 8 tips and tricks to save money while traveling, regardless of how often or where you want to travel.

Pick the Right Destination

Saving money on travel has something in common with starting a business–it’s all about location. Choosing the right destination can get you the experience you want for a price that’s right.

But how do you find the “right” destination? The key here is to shop around. Thinking of a beach vacation? Make a list of beaches you might want to visit. Then make a quick spreadsheet of estimated costs for things like airfare or gas, accommodations, and other attractions at that destination. Chances are some of those beaches will be way cheaper than others.

For inspiration, you can always just Google “cheapest places to travel.” Plenty of travel blogs and magazines consistently compile lists of the cheapest places to travel each year. Or ask friends or family members where they’ve been recently.

Be open-minded about exploring new or out-of-the-way places, and you might be able to see a lot more of them because they’re simply cheaper to get to.

Travel at the Right Time

You can find cheap places to visit no matter what the time of year. But if you’re set on visiting certain touristy locations, timing can make all the difference. Traveling to Europe in the so-called “shoulder” season–in the spring or fall–is typically cheaper than going during peak travel season. And traveling in what is solidly the off season will be cheaper still.

Just keep in mind that sometimes these seasons are shoulder or off seasons for good reason, often having to do with weather. If you want to mostly see indoor cultural attractions, snag that can’t-resist deal for a December vacation to Paris. But if you’re aiming to lay around on the beach, be sure you’re not likely to get rained or frozen out.

Travel timing doesn’t just apply to your overall vacation timing. It also applies to the specific days and times you decide to fly. Midweek flights to and from destinations are typically going to be cheaper because fewer people are using them. So try to be flexible on your departure and arrival dates while planning your travel.

Be Creative About Modes of Travel

Sometimes you just have to get on a plane to go somewhere. But you might be able to save by using an alternative method of transportation, especially if you’re traveling within the United States.

For instance, you can often hop on a train or megabus to take you between major cities. It takes longer, but it can also be much cheaper than airfare.

Even if you’re traveling out of the country, don’t assume you can only take planes to country-hop. Trains, again, are a good option for getting between countries in Europe, and seeing a lot of the scenery as you go. Or you might consider a bus tour of the area you’re visiting. And don’t discount the potential for affordably renting a car and getting around on your own.

The key here isn’t to travel in a particular way versus another way. Just be sure you’re open-minded about this, too. Scope out the ways that locals get around, or ask other travelers how they’ve gotten around a particular city or country once they’re in it. You might be surprised at the cheap, creative solutions you come up with.

One final way to trim costs on getting from point A to point B is simply to do it less often. Instead of going to Europe and trying to cram 10 countries into 14 days, spend more time in a few places. This can be a way to really settle into your vacation and fully experience a place. Plus, it has the advantage of potentially dramatically cutting your overall travel costs.

Think Outside the Box for Accomodations

Besides airfare, your next most expensive vacation cost is likely to be accommodations. But you don’t have to go with the traditional hotel option here, either. If you do, be sure you shop around so you’re at least getting a good deal on that! But here are some other accommodation options to consider:

• Home Sharing: Sites like VRBO and Airbnb are excellent places to find cheaper accommodations, even in major U.S. cities. I recently booked a master suite with its own entrance in San Francisco for $80 per night, which is much cheaper than decent hotels in the area. Home sharing sites are also a great way to find more flexible accommodations, such as apartments that can give you access to kitchen facilities–an excellent way to cut back on your food costs.

• Crashing with Friends: Are your college friends farflung across the country or around the world? Ask close friends if you can stay with them on vacation, maybe in exchange for a few dinners out on you. You’ll save a load on accommodations so that you can afford to treat your hosts while you’re there. Plus, you can get a local’s view of the area where you’re staying, which is a great option.

• Rent an RV: RVing can be expensive, depending on the current cost of gas. However, it can also roll in your travel and accommodations, making for a fairly affordable option overall. RV travel is an excellent option for outdoorsy types. Use the RV as a base camp for your adventures, and travel the country in one.

• Look at Hostels: Youth hostels are less common in the U.S., but they’re everywhere in Europe. And despite their common name, they aren’t just for young people. Anyone with a backpack and a dream can typically stay in one of these hostels, which typically offer dorm-style accommodations, really cheaply.

• Consider a B&B: If you think B&Bs are always more expensive than hotels, you might be in for a surprise. The fact is that they are often a more affordable way to stay. Plus, they come with a built-in breakfast, which can help you cut back on your food costs while you travel.

• Tent Camp: Here’s another option for the adventurous: pack a tent. Tent camping can be an option even if your ultimate goal is to see metropolitan areas. Many such cities have tent camping locations on their outskirts, just a short bus ride from all the main attractions.

Trim Your Food Costs

One of my favorite parts of traveling is eating good food. In fact, it’s sometimes worth cutting back on travel and lodging costs to splurge on food, depending on where you travel. And you can also do a combination, by shopping for cheaper food most of the time but then splurging on a couple top-class meals while you’re on vacation.

One way to save is to ask locals where they go for a family dinner out. These are likely to be relatively cheaper restaurants, but they’re probably comparatively excellent, since locals eat at them often.

You can also get by with stopping at a grocery store for lunches and snacks while you walk around. This can save you money even if you don’t have a fully functioning kitchen in your lodgings. And if you do have a kitchen, take advantage by shopping for interesting local foods at farmer’s markets and the like and then fixing them for yourself.

Prioritize Sightseeing

Of course if you’re traveling broadly, you want to see the sights. But that doesn’t mean you need to pay for every tourist attraction in a local area. Do some digging online to see which attractions are really worth checking out. Then, pick two or three of the must-see attractions that cost money and work those into your overall vacation budget. For the rest, make a list of the free or really cheap attractions you want to see, and prioritize them so that you can set your agenda accordingly.

Use Airline Miles and Credit Card Rewards

As you’re saving up for your next trip, don’t forget to save up your airline miles and credit card rewards, too. If you don’t already have a favorite travel rewards credit card, check out this list to find one that might work well for your needs. These cards will let you rack up rewards and miles for everyday spending. (Just be sure you pay off the balance each month to avoid paying interest!)

Be sure to look for a card that works well with your typical spending patterns. If you rarely eat out when you’re at home, for instance, don’t choose a card that weights rewards for this type of spending, but choose one that gives rewards for grocery spending. And be sure to choose a card that works with the airline you’re most likely to use. Or look for programs that allow for transferring of miles between programs so that you don’t risk being unable to use your miles.

You can also use a cash back credit card to have more flexibility with your rewards. You might just choose not to cash in your cash back until it’s time to book your next trip, so you use all that cash back for your adventures.

Stick to Your Budget

It’s tempting to think really big when it comes to travel. And there’s definitely a time and place for that when it’s in your budget. But don’t start going into debt or starving yourself on grocery expenses just to travel the world.

Instead, make travel a priority by cutting other budget categories. Cut back on how much you spend on groceries. Cut the cable cord. Spend less on clothing and everyday transportation. Then, direct your savings from these categories to your travel savings.

Once you’re ready to book a trip, stick to the budget you have available. This will keep you from going into debt to travel, which will just turn into a vicious cycle.

Even if your first few trips need to be staycations or very local vacations, you can start out on a shoestring budget. Then as you free up more money to save for travel, whether by starting a side gig or paying down debt, you can get to further and more expensive locations.

The bottom line isn’t that you travel to the most luxurious, exotic locations on the planet. Instead, the point is just to get out and experience something new. Who knows where that could lead?

Topics: Travel

The post 8 Tips and Tricks to Save Money on Travel appeared first on The Dough Roller.

via Finance Xpress

Posted by: Adam McCann

If you’re among the millions of HGTV viewers who’ve seen an episode of “Flip or Flop,” you’ve probably thought about the thrill of gutting a house and turning a five- or six-figure profit. But the process isn’t as easy as the professionals on television make it look. Any experienced home flipper would caution you that transforming a fixer-upper into a profitable property is a difficult process.

In other words, don’t get your hands dirty until you’ve learned a thing or two about real estate, construction and how much damage your project could do to your wallet. Breathing new life into a low-cost property won’t necessarily return your full investment and allow you to pocket another $68,143, the average gross flipping profit in 2017. According to RealtyTrac, though, the current homeownership rate is 64.2 percent (down from a high of 69.20 percent in 2004). That may translate to fewer potential buyers off the bat, depending on the location of your property.

To help you choose the right market to list your masterpiece, WalletHub compared more than 170 U.S. cities across 27 key indicators of market potential, cost and quality of life. Our data set ranges from median purchase price to average full home remodeling costs to housing-market health index. Read on for the winners, expert home-flipping advice and a full description of our methodology.

1. Main Findings
2. Ask the Experts
3. Methodology

Main Findings

Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/23158/geochart.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="https://ift.tt/2Oxj2wm>  

Best & Worst Cities to Flip Houses

Overall Rank (1 = Best)	City	Total Score	‘Market Potential’ Rank	‘Renovation & Remodeling Costs’ Rank	‘Quality of Life’ Rank
1	Sioux Falls, SD	73.18	72	7	27
2	Nampa, ID	70.46	69	2	19
3	Boise, ID	68.89	57	8	18
4	Fort Wayne, IN	68.07	22	17	77
5	Missoula, MT	67.50	3	32	72
6	Peoria, AZ	66.83	86	9	24
7	Oklahoma City, OK	66.52	31	15	67
8	Fort Smith, AR	66.11	141	1	160
9	Des Moines, IA	65.81	79	5	66
10	Tampa, FL	65.73	37	24	49
11	Knoxville, TN	65.54	11	10	129
12	Las Cruces, NM	65.40	165	6	143
13	Greensboro, NC	65.38	25	13	113
14	Rapid City, SD	65.12	128	14	127
15	Pembroke Pines, FL	64.74	27	72	10
16	Orlando, FL	64.34	29	30	73
17	Chandler, AZ	64.22	53	53	16
18	Colorado Springs, CO	63.96	54	54	20
19	Nashville, TN	63.95	81	16	60
20	Columbia, SC	63.87	36	19	121
21	Charleston, SC	63.62	38	67	13
22	Columbus, GA	63.32	1	71	147
23	Jackson, MS	63.26	19	3	168
24	Cape Coral, FL	63.21	41	81	5
25	Billings, MT	63.12	84	44	91
26	Gilbert, AZ	62.82	74	70	8
27	Grand Rapids, MI	62.80	94	36	33
28	Lincoln, NE	62.68	91	50	26
29	Huntsville, AL	62.46	24	41	103
30	Springfield, MO	62.31	44	11	150
31	Wichita, KS	62.27	30	25	132
32	Glendale, AZ	62.22	66	22	99
33	Phoenix, AZ	61.57	68	27	87
34	Denver, CO	61.40	103	63	15
35	Tempe, AZ	61.30	50	58	63
36	Virginia Beach, VA	61.17	34	80	38
37	Columbus, OH	60.94	59	57	59
38	Raleigh, NC	60.91	116	55	25
39	Tulsa, OK	60.84	60	21	133
40	New Orleans, LA	60.63	21	46	124
41	El Paso, TX	60.50	149	12	95
42	Henderson, NV	60.48	121	42	40
43	Cedar Rapids, IA	60.42	95	34	88
44	Aurora, CO	60.15	82	73	29
45	Spokane, WA	60.06	16	48	144
46	Lexington-Fayette, KY	60.02	39	75	70
47	Shreveport, LA	59.94	4	20	172
48	Overland Park, KS	59.89	154	84	1
49	Baton Rouge, LA	59.81	2	65	161
50	Mobile, AL	59.80	64	18	157
51	West Valley City, UT	59.64	133	28	83
52	Tallahassee, FL	59.58	45	37	137
53	Little Rock, AR	59.41	107	4	162
54	San Antonio, TX	59.36	127	29	86
55	Durham, NC	59.19	62	77	54
56	Fort Worth, TX	59.04	120	56	56
57	Las Vegas, NV	58.94	118	31	84
58	Grand Prairie, TX	58.88	111	69	32
59	Jacksonville, FL	58.87	28	78	93
60	Salem, OR	58.82	35	89	47
61	Port St. Lucie, FL	58.80	77	97	9
62	Laredo, TX	58.64	122	49	126
63	Charlotte, NC	58.58	56	85	43
64	Fort Lauderdale, FL	58.56	43	66	109
65	North Las Vegas, NV	58.41	104	35	104
66	St. Petersburg, FL	58.33	32	91	61
67	Mesa, AZ	58.28	61	82	58
68	Arlington, TX	58.19	119	40	90
69	Austin, TX	58.07	145	79	17
70	Augusta, GA	58.06	18	38	171
71	Fayetteville, NC	58.01	142	39	140
72	Memphis, TN	57.63	5	43	170
73	Reno, NV	57.46	125	68	57
74	Akron, OH	57.26	65	52	142
75	Omaha, NE	57.18	98	83	45
76	Pittsburgh, PA	57.00	14	122	39
77	Chesapeake, VA	56.95	70	88	55
78	Indianapolis, IN	56.89	92	47	136
79	Louisville, KY	56.86	106	62	106
80	Winston-Salem, NC	56.81	47	60	149
81	Tucson, AZ	56.78	117	23	152
82	Richmond, VA	56.51	13	106	81
83	Tacoma, WA	56.40	26	93	111
84	St. Paul, MN	56.30	63	104	36
85	Plano, TX	56.28	123	117	4
86	Scottsdale, AZ	56.27	89	114	12
87	Cincinnati, OH	56.08	23	92	117
88	Kansas City, MO	56.05	159	51	89
89	Modesto, CA	55.89	115	61	116
90	Rancho Cucamonga, CA	55.34	105	103	23
91	Lubbock, TX	55.25	139	45	138
92	Salt Lake City, UT	55.22	164	74	46
93	Sacramento, CA	55.16	98	96	50
94	Columbia, MD	55.08	15	118	101
95	Hialeah, FL	54.76	33	94	123
96	Corpus Christi, TX	54.74	151	64	108
97	Madison, WI	54.63	97	123	14
98	Charleston, WV	54.62	158	59	165
99	Washington, DC	54.48	42	113	76
100	Norfolk, VA	54.24	48	90	122
101	Miami, FL	54.01	55	99	100
102	Birmingham, AL	53.91	8	100	155
103	Seattle, WA	53.51	40	148	11
104	Baltimore, MD	53.24	6	102	154
105	Albuquerque, NM	53.20	168	33	139
106	Toledo, OH	53.08	83	76	148
107	Portland, ME	52.93	75	119	42
108	Buffalo, NY	52.92	12	105	146
109	Garland, TX	52.79	110	95	96
110	Minneapolis, MN	52.76	73	135	35
111	Montgomery, AL	52.73	169	26	151
112	Philadelphia, PA	52.66	17	128	107
113	Huntington, WV	52.22	112	86	153
114	Ontario, CA	51.70	96	107	94
115	Irvine, CA	51.64	147	142	2
116	Newport News, VA	51.42	52	112	130
117	Riverside, CA	51.17	87	120	82
118	Fresno, CA	51.11	51	116	131
119	Irving, TX	50.93	134	121	41
120	Fontana, CA	50.91	102	138	34
121	Cleveland, OH	50.73	9	109	166
122	Santa Clarita, CA	50.26	148	127	28
123	Moreno Valley, CA	50.21	88	133	74
124	Warwick, RI	50.04	80	124	98
125	Chattanooga, TN	49.99	46	132	110
126	Milwaukee, WI	49.25	109	111	128
127	San Diego, CA	49.06	114	150	22
128	Dallas, TX	48.76	124	130	78
129	Oceanside, CA	48.74	101	143	44
130	Providence, RI	48.41	67	115	158
131	Garden Grove, CA	48.22	137	131	69
132	Houston, TX	48.11	157	101	119
133	Worcester, MA	47.87	10	153	120
134	San Bernardino, CA	47.81	78	126	145
135	Vancouver, WA	47.76	140	134	68
136	Amarillo, TX	47.70	167	108	97
137	Anchorage, AK	47.47	171	110	134
138	Stockton, CA	47.44	93	125	141
139	Detroit, MI	47.33	130	87	167
140	Chula Vista, CA	47.32	113	145	62
141	Aurora, IL	47.28	108	147	53
142	Anaheim, CA	47.18	135	136	79
143	Santa Ana, CA	47.11	131	137	80
144	Rochester, NY	47.06	129	98	159
145	Chicago, IL	47.02	89	151	71
146	Huntington Beach, CA	46.89	138	159	7
147	St. Louis, MO	46.69	7	158	135
148	Long Beach, CA	45.71	136	141	92
149	Portland, OR	45.65	162	146	37
150	Glendale, CA	45.13	146	149	51
151	Nashua, NH	44.98	166	139	65
152	Atlanta, GA	44.64	49	162	85
153	Bakersfield, CA	44.26	100	152	114
154	Manchester, NH	44.22	163	129	125
155	Honolulu, HI	43.53	156	156	52
156	Fremont, CA	42.85	153	170	3
157	San Jose, CA	42.53	144	167	6
158	Jersey City, NJ	42.35	75	166	48
159	Santa Rosa, CA	41.97	170	157	31
160	Dover, DE	41.57	172	140	118
161	Los Angeles, CA	40.97	143	160	102
162	Pearl City, HI	40.89	126	155	115
163	New York, NY	40.83	85	169	64
164	Oxnard, CA	40.70	155	154	112
165	Boston, MA	40.50	132	168	30
166	Wilmington, DE	40.03	20	163	169
167	New Haven, CT	39.04	160	144	156
168	Oakland, CA	38.74	150	164	75
169	San Francisco, CA	38.09	152	172	21
170	Yonkers, NY	37.18	71	171	105
171	Newark, NJ	35.89	58	165	164
172	Bridgeport, CT	34.60	161	161	163

Ask the Experts

Flipping houses can be a tricky business, especially for novices. For insight on the house-flipping market and advice on choosing a good property, we asked a panel of housing and real-estate experts to weigh in on the following key questions:

1. What are the most common mistakes people make when trying to flip a house?
2. What is the best way to finance a flip? Should people try to go all cash or borrow?
3. What types of people are typically well-suited for engaging in house flipping?
4. What factors — financial and otherwise — should go into the decision of whether a house is a good candidate to be flipped?
5. Is house flipping a contributing factor to the overheating of some real-estate markets? Should this type of business be more regulated?

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• Daniel E. Durden Chief Executive Officer, Pennsylvania Builders Association
• Robert M. Silverman Professor, Department of Urban and Regional Planning, School of Architecture and Planning, University at Buffalo
• Tammy Leonard Associate Director, Economics Research Group, Associate Professor, Economics Department, University of North Texas
• Robert Henry Associate Professor, University of New Hampshire
• Abhinav Alakshendra Ph.D., Assistant Professor, Department of Urban and Regional Planning, University of Florida

Daniel E. Durden Chief Executive Officer, Pennsylvania Builders Association

What are the most common mistakes people make when trying to flip a house?

Most “rookies” fail to consider all of the costs involved in purchasing, improving and reselling residential property. They fail to consider taxes, permits, loan costs and the fact that their home-improvement skills may be much more limited than they thought. New flippers often think they can dive into a hot market, make a quick buck and get out. They often fail to plan for unseen structural issues in the house, bad neighbors (of both the human and animal variety) or the carrying costs of a property that just won’t sell at the price point they wanted.

What is the best way to finance a flip? Should people try to go all cash or borrowing is the way to go?

It’s always best to play with other people’s money when you have that option. That said, even though there is much more financing available than was the case five years ago, getting a loan/line of credit or a large enough loan can be a problem. Again, it’s easy for a rookie to get financially overextended.

What type of people are typically well suited for engaging in house flipping?

Risk takers. If you have strong home improvement skills and a great work ethic and/or a great eye for homes with good bones but ugly faces; you may be well suited for flipping. But if you aren’t inclined to take risks, you should probably look for another way to invest. Many a couple with one risk taker and one security-minded individual find their way to divorce or separation over whether the game is worth the gamble. Do you really have the financial and emotional wherewithal to hang in there when improvement costs exceed your budget or when you discover previously unseen water leaks, toxic mold, structural flaws, property disputes, etc.? With the current high demand for housing, risk takers with capital – financial or human – can do very well flipping houses and that statement will remain true even if the overall economy suffers a downturn. We have a huge shortage of housing that, despite their efforts, builders will be unable to fill in the existing environment.

What factors -- financial and otherwise -- should go into the decision of whether a house is a good candidate to be flipped?

If you have a basic understanding of real estate, the broad financial calculus is fairly simple. How cheaply can you buy the home? What must you invest in it to resell it? How much will the market bear in the immediate future for that (presumably improved) house? Of course, actually making accurate financial projections for those first two questions requires some insight, research and understanding of home construction, maintenance and costs. In some ways, the third question is the trickiest or the one where the most luck is required. Every real estate decision is local and it is local on a micro level. It doesn’t matter if overall home prices in your metro are rising if they are falling through the floor in the neighborhood where you are buying. Even weak markets have star communities and the reverse is equally true. Most flippers should never try to buy and flip in neighborhoods they don’t know well. All that said, if you can master buying low and selling high you will be a king in any market.

Separate from the purely financial, there are some obvious rules of the road. If I were a flipper I would try to identify underpriced or run down properties in rising markets where the improvement costs were minimal and/or easily affordable. If the house is well-constructed and in decent shape, it may only need a face lift. Paint, new carpet and updated fixtures tend to pay for themselves with ease. If you have to start knocking down walls and adding on rooms, you had better have another level of expertise and risk tolerance.

Is house flipping a contributing factor to the overheating of some real estate markets? Should this type of business be more regulated?

I’m not an economist. While I believe that flipping can contribute to price increases in some markets – speculative home buying was a major contributor to the collapse of prices in formerly hot markets during the Great Recession – in most cases, flipping doesn’t present a problem that the market cannot address. In a stereotypical flip a married couple or a pair of friends may buy a dated property, spruce it up and resell it. As a rule, the increased price of the home will be a reflection of the increased value of the home. Of course those numbers rarely move in perfect concert; but they tend to be close enough that neither home buyers nor neighbors are harmed. One caveat - the homes should actually be flipped. If a lot of houses are bought, removed from inventory but not sold for lengthy periods of time, that can create some local market disequilibrium. As a rule, a law abiding seller and an educated buyer don’t need more regulation that will only add to the costs of the property. There is enough friction in the house-buying context already and additional costs of compliance don’t help anyone find an affordable home.

Robert M. Silverman Professor, Department of Urban and Regional Planning, School of Architecture and Planning, University at Buffalo

What are the most common mistakes people make when trying to flip a house?

Underestimating the amount of time and the cost of making improvements to property. Often, flippers do not know the full extent of needed repairs and they take longer to complete than originally planned. The other common mistake is that flippers over-estimate comparable sales prices in an area and the amount of time that properties take to sell.

What is the best way to finance a flip? Should people try to go all cash or borrowing is the way to go?

If a flipper has access to cash he or she can reduce costs of acquiring a property since there are no financing fees or interest to pay on a short-term loan. So, paying cash can lead to more profits from the sale of a property.

What type of people are typically well suited for engaging in house flipping?

People with background in real estate, construction or general contracting, and knowledge of real estate law, and also people who have cash to purchase properties with.

What factors -- financial and otherwise -- should go into the decision of whether a house is a good candidate to be flipped?

Properties selling for under-market value that are located in high demand housing markets are good candidates for a flip, especially if they are structurally sound and just in need of cosmetic updates. A lot of times these are properties that are part of estate sales. A secondary consideration might be if a house is architecturally unique, but these are often the properties that can involve greater cost to renovate.

Is house flipping a contributing factor to the overheating of some real estate markets? Should this type of business be more regulated?

Yes, and no. In some instances, flipping can inflate housing prices, since flippers will invest money in older homes and update them, then charge more the property in order to earn a profit. But that really constitutes the upgrading of the property and listing it at its new value. If someone were to purchase an older house and then pay a contractor to renovate it, they would likely pay a similar amount of money in the end and have to own the house during renovation. When experienced flippers can do renovations in a relatively short period of time and flip a house, the net effect on the real estate market is beneficial. But, in many cases, inexperienced flippers take much more time than expected to renovate properties, in some cases years. This can take housing off the market for extended periods of time and reduce the inventory of property on the real estate market. The reduction in inventory can artificially drive up the cost of housing.

Tammy Leonard Associate Director, Economics Research Group, Associate Professor, Economics Department, University of North Texas

What are the most common mistakes people make when trying to flip a house?

An important factor that is often overlooked is the relationship between a house and its neighborhood. We often hear "location, location, location" but flippers may be unaware of the extent to which that influences home prices. Significant work has shown that there are many aspects of a house's immediate neighborhood that are capitalized into its price and that often cannot be changed in the flipping process. For example, the quality of the local schools, the number of nearby foreclosures, neighborhood upkeep, proximity to local transportation and proximity to urban green spaces are all factors that are likely to impact how much a flip can command in the market. Sometimes these neighborhood factors operate on a very local scale; nearby foreclosures and/or neighborhood blight may impact home prices only in a small quarter-mile area. Awareness of these factors is often a key difference between home buyers who are flippers and home buyers who intend to be owners. By thinking like an owner, flippers can make more strategic decisions regarding the scale of a flip and also make small changes in the flipping process that yield benefits for the flip's profits and the neighborhood. For example, flippers can maintain the aesthetic appearance of the property immediately after taking ownership to improve neighborhood home values.

What factors -- financial and otherwise -- should go into the decision of whether a house is a good candidate to be flipped?

Flippers need to understand how different characteristics of the housing asset are valued in the housing market. Economists study the decomposition of house prices using hedonic price studies. Real estate practitioners have intuitive knowledge of these factors by knowing "what sells". It is important to note that while there are some generalities, the relative importance of different house characteristics in determining a house's price vary across different housing markets. Flippers should understand what the local pool of prospective buyers value most and try to add the most value there.

Is house flipping a contributing factor to the overheating of some real estate markets? Should this type of business be more regulated?

Research has shown that house flipping can help to improve neighborhood home prices; and thus if approached responsibly, house flipping can be beneficial for communities. Following the 2007-2008 financial recession, organizations such as Habitat for Humanity received some federal funding through HUD's Neighborhood Stabilization Program. When those funds were used for what was essentially house flipping, houses in the neighborhoods around the houses that were flipped increased in value and the impact appeared to be a long-term effect. We might expect these same results for house flipping that is undertaken in poorer or distressed neighborhoods. The full set of causal factors associated with overheating of real estate markets is not fully understood by economists. However, the ingredients appear to require more than simply house flipping. To the extent that house flipper add real value to the housing asset and are able to sell it at a profit in proportion to the value added, flipping should not be a cause of speculative run-ups in housing prices. Of course, flippers that take on too much risk and default on their financial obligations likely do have a negative impact on the local community and economy; these irresponsible flipping practices need to be.

Robert Henry Associate Professor, University of New Hampshire

What are the most common mistakes people make when trying to flip a house?

I think the most common mistake is that people take on projects that they are not prepared for. They see people repairing a house and the people on TV make it seem easy. It is easy for them because they know what they are doing.

Another common mistake is that they underestimate the time and money it will take to do a project the correct way. On all construction related projects one will run into unexpected issues, (rotting wood, roof needs replacement, electrical issues, old boilers, etc.). Every professional construction project has a money set aside to handle these types of issues. If they do not come up, then it is money saved. Not allocating a contingency budget is not a wise thing to do.

What type of people are typically well suited for engaging in house flipping?

The type of person that should consider flipping should have patience. Also, one should always be thinking several steps ahead as it is often necessary to order material that can take several weeks to deliver. Same is true with hiring contractors.

Abhinav Alakshendra Ph.D., Assistant Professor, Department of Urban and Regional Planning, University of Florida

What are the most common mistakes people make when trying to flip a house?

House flipping is a serious and lucrative business. The number of flippers in the market has been growing given the huge profit potential. However, there are multiple failures which can and should be used as lessons for other.

House flipping is expensive and therefore an access to low-cost financing is a must. Often investors (especially small investors) go overboard while acquiring properties and exposing themselves later when it comes to investing in fixing.

Also, often small investors don't pay required attention to holding cost which could be longer than expected.

Another most common mistake is not having enough knowledge of the local market. Some cities are simply rental markets for various reasons and some tend to be buyer's market. For instance, small university towns tend to sell more homes in May and June and smaller cities with large hospitals often see more real estate transactions in April.

Finally, having no exit strategy could be catastrophic. Things don't go always as planned and therefore having alternative options is always a great idea. A typical exit strategy would be renting till market recovers or a buyer is willing to give asking price. Often, flippers lack patience and are interested in dealing with renting hassles, in turn, incurring huge losses in the process.

What is the best way to finance a flip? Should people try to go all cash or borrowing is the way to go?

House flipping business involves plenty of risks. Financial institutions are here to reduce the risks for flippers. Undoubtedly, borrowing money reduces profit margin, however, if flip time is reasonable, the benefit of having lower risk outweighs lower profits due to interest rate payments. For some big serial investors, going all cash may make sense.

What type of people are typically well suited for engaging in house flipping?

Investors, professional contractors, and real estate agents are likely to be more successful. However, I have come across people from many different backgrounds successfully flipping houses.

What factors -- financial and otherwise -- should go into the decision of whether a house is a good candidate to be flipped?

Finding a good candidate for flip should be an exact science rather than 'hunch'.

Ideally, the starting point should involve extensive study of the local real estate market. In some markets like Baltimore and Jacksonville, ROI's are quite high (95% and 75% respectively) and at the same time, most of the markets in California have ROI's in single digit.

Also, understanding and sticking to the 70% ARV (after repair value) rule is critical. On paper, 70% ARV looks quite conservative but it has been tried and tested and it works.

Is house flipping a contributing factor to the overheating of some real estate markets? Should this type of business be more regulated?

House flipping is on the rise almost in all major markets. Economists agree that house flipping contributed to the crash of 2006-07. It would be hard to find out the magnitude of the overheating caused by house flippers during the crash, however, it's fairly easy to see the impact of house flipping on the crash. For instance, some of the most crash affected cities experienced an unusually high rate of house flipping. In 2005, almost one in five homes sold were flips. The flip rate was higher than 15% for Miami and Phoenix, two highly affected real estate market.

There is no doubt that house flipping contributes to the overheating in some markets. Therefore, stricter regulation in the house flipping market is a logical step. However, we still have not introduced any major regulation directly targeting this market. The housing crash though has introduced a sort of self-regulation in the market. The access to easy financing is gone and now we see a wave of committed and deep-pocketed investors in the market.

Methodology

In order to determine the best and worst cities to flip houses, WalletHub compared 172 cities — including the 150 most populated U.S. cities, plus at least two of the most populated cities in each state, except for the cases where data limitation existed — across three key dimensions: 1) Market Potential, 2) Renovation & Remodeling Costs and 3) Quality of Life.

We evaluated those dimensions using 27 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for house flipping.

Finally, we determined each city’s weighted average across all metrics to calculate its overall score and used the resulting scores to rank-order our sample. Our sample considers only the city proper in each case and excludes cities in the surrounding metro area.

For context, “home flipping” is a real-estate term for buying a property with the purpose of reselling it for a profit, which is generated through appreciation of the home’s value or repairs and renovations.

Market Potential – Total Points: 35

• Average Gross Return on Investment (ROI): Triple Weight (~6.56 Points)
• Percentage Change in Gross ROI of Flipped Homes (2017 vs. 2016): Full Weight (~2.19 Points)
• Median Purchase Price: Full Weight (~2.19 Points)
• Share of Home Flips: Full Weight (~2.19 Points)
• Average Days to Flip: Full Weight (~2.19 Points)
• Home Turnover Rate (2016 vs. 2015): Full Weight (~2.19 Points)Note: This metric specifically measures the percentage of all homes sold in one year.
• Housing-Market Health Index: Full Weight (~2.19 Points)
• Average Ratio of Sale Price to List Price: Full Weight (~2.19 Points)
• Real-Estate Agents per Capita: Full Weight (~2.19 Points)
• Foreclosed Homes per 10,000 Homes: Full Weight (~2.19 Points)
• Real-Estate Tax Rate: Full Weight (~2.19 Points)Note: This metric was calculated as follows: Median Real-Estate Tax / Median House Price.
• Share of Flips Sold to Cash Buyers: Full Weight (~2.19 Points)
• Share of Flips Sold to FHA Buyers: Full Weight (~2.19 Points)
• Median Year Built: Full Weight (~2.19 Points)

Renovation & Remodeling Costs – Total Points: 35

• Average Kitchen Remodeling Costs: Full Weight (~8.75 Points)
• Average Bathroom Remodeling Costs: Full Weight (~8.75 Points)
• Average Full Home Remodeling Costs: Full Weight (~8.75 Points)
• Median Construction-Worker Salary: Full Weight (~8.75 Points)Note: “Construction Worker” includes plumbers, electricians, carpenters, etc.

Quality of Life – Total Points: 30

• Crime Rate: Full Weight (~3.33 Points)
• K–12 School-System Quality: Full Weight (~3.33 Points)Note: This metric measures the share of public schools rated by GreatSchools.org with above average score.
• Share of Population with Walkable Park Access: Full Weight (~3.33 Points)
• Family-Friendliness: Full Weight (~3.33 Points)Note: This metric is based on WalletHub’s “Best & Worst Cities for Families” ranking.
• Annual Job-Growth Rate: Full Weight (~3.33 Points)
• Unemployment Rate: Full Weight (~3.33 Points)
• Median Salary: Full Weight (~3.33 Points)Note: This metric was adjusted for cost of living.
• Median Credit Score: Full Weight (~3.33 Points)
• Pace of Economic Growth: Full Weight (~3.33 Points)Note: This metric is based on WalletHub’s “Fastest-Growing Cities” ranking.

 

Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Bureau of Labor Statistics, Renwood RealtyTrac, Zillow, Houzz, Federal Bureau of Investigation, GreatSchools.org, The Trust for Public Land, Council for Community and Economic Research, TransUnion and WalletHub research.

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via Finance Xpress

Posted by: John S Kiernan

EDITOR’S RATING

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Residents of the Garden State, are car insurance costs driving you mad? You may be paying too much to insure your vehicle. Find out what other drivers in the state are paying and where you can get the best car insurance in New Jersey.

What’s the most important thing to think about when choosing an auto insurance policy in New Jersey? While priorities vary from driver to driver, there are a few key factors. Namely, you want to find a company that offers you the right amount of coverage at the right pice.

However, buying auto insurance is about more than just the price tag. It’s important to also find a company that offers excellent customer service, reliability, and even features that will protect you every time you get behind the wheel. Finding coverage that doesn’t break the bank is important, but it’s even more important to go with a company that will protect you when the time comes to file a claim.

Compare Car Insurance Plans in New Jersey

All of the research involved with finding that perfect company can make your head spin, though. Plus, it can take forever to sift through all of the data, determining how much you should expect to pay, and which company can give you exactly what you need. Luckily, that’s what we are here for.

We have invested hours of research into all things auto insurance in the state of New Jersey, bringing you this comprehensive guide. We have pored over pricing data, customer service ratings, state policies and laws, and even applicable penalties. By the time you finish reading, you’ll know the companies that can provide you the best coverage, who is likely to offer the best rates, and the laws you’ll need to follow along the way.

Let’s get started, shall we?

Our Top 5 Picks for the Best Car Insurance in New Jersey

When purchasing auto insurance in New Jersey, you have plenty of options. This is great for finding exactly what you need, but also makes the process more confusing.

That’s where we come in.

We have spent hours and hours sifting through the data in the Garden State, so that we can bring you this article. Not only do we cover everything you need to know about buying your auto policy, but we also offer our recommendations for specific companies.

In naming these five “best” companies, though, it’s important to keep in mind that these are based on our opinions and the data that we have found. Your experience may vary, especially once you take into consideration your own personal factors, driving record, and even your location.

Based on our hours of research, consumer ratings, and price quotes provided by the companies themselves, here are our picks for the best New Jersey auto insurance providers:

• Best Overall Satisfaction: USAA
• Best Customer Service: The Hartford
• Lowest Premiums: Esurance
• Great If You Have a Perfect Record: Hanover
• Best If You Have a Less-Than-Perfect Record: Allstate

New Jersey Auto Insurance Requirements

Before you ever start looking at prices, discounts, or customer service ratings, there’s one key fact you need to know: how much auto insurance coverage you are required to carry by law. Each state has a different set of rules and regulations, so you’ll need to know specifically what your own state mandates.

For drivers in New Jersey, there are a few different requirements. While you absolutely must carry a policy that meets these minimum limits each and every time you get behind the wheel, you also have the option to buy more coverage (and that’s often recommended). At the very least, though, here’s what you’ll need to carry in order to avoid being an illegal driver in the Garden State.

Standard Policy

New Jersey is unique in that they have two different categories of required coverage. The first is Standard Coverage, and is in line with the coverage types and limits seen for drivers in other states.

Coverage Type (Standard)	Minimums
Bodily Injury Liability
Death or injury of one person in any one accident	$15,000 minimum
Death or injury of 2+ people in any one accident	$30,000 minimum
Property Damage Liability	$5,000 minimum
Personal Injury Protection	$15,000 minimum

Wondering about the difference between these three requirements: bodily injury, property damage liability coverage, and personal injury protection?

Property damage liability is coverage intended for, as the name suggests, property. It pays to repair or replace someone else’s property following an accident for which you are liable. Property can include things like someone else’s vehicle, their home, buildings, objects, or even signs and structures.

Bodily injury liability is coverage intended for, you guessed it, bodily injuries. It’s meant to cover the medical and/or rehabilitation expenses of others following an accident for which you’re at-fault. There are two different coverage limits, as you’ll notice: $15,000 and $30,000. The former one is intended for the injuries incurred by one person, while the latter limit is intended for two or more people in the same accident.

Personal injury protection covers you, the insured driver, as well as others that are covered by your policy and may be injured in an accident. While the other driver’s insurance company pays for your injuries if they’re at-fault in other states, this isn’t the case in New Jersey.

That’s because New Jersey is a no-fault state. This means that each driver’s insurance company pays for their injuries, regardless of the fault of the accident. Because of this, personal injury protection can help you get the care you need, whether you or the other driver is at-fault.

Basic Policy

Thanks to the Automobile Insurance Cost Reduction Act, it was mandated that drivers in New Jersey be offered the option of a more affordable, Basic Policy option. This lower-cost insurance policy offers even less coverage than the Standard Policy mentioned above, and is technically the minimum required for drivers in the state.

The Basic Policy was designed for drivers with little or no assets, who may have trouble paying for more comprehensive coverage. This makes it a good option for students and young adult drivers who are just beginning to work and establish themselves.

Here’s what you’ll need to purchase in order to be covered under a Basic Policy:

Coverage Type (Basic)	Minimums
Bodily Injury Liability
Death or injury of one person in any one accident	$10,000 available as an option, but not included under the Basic Policy
Property Damage Liability	$5,000 minimum
Personal Injury Protection	$15,000 minimum

As we mentioned above, New Jersey is a no-fault state. This means that you will need to purchase medical benefits coverage of at least $15,000, regardless of the type of coverage you choose. This coverage is intended to pay the medical or therapy bills resulting from an auto accident in which you’re involved, regardless of which driver is responsible for the wreck.

Additional Coverage

If you choose a Basic Policy over a Standard Policy, it’s important to note that your coverage options will be limited. For example, if you want to purchase coverage for uninsured/underinsured motorists, this won’t be available to you under a Basic Policy. You’ll have to move up to a Standard Policy to even add this type of optional coverage on to your policy.

Additionally, comprehensive and collision coverage options are always available to Standard policyholders in the state. However, if you hold a Basic Policy, these add-ons may or may not be options for you, depending on the insurer you choose.

Penalties

Okay, so we have talked about the type of coverage that you’re required to carry every time you get behind the wheel in New Jersey. Now, let’s talk about what will happen if you fail to meet these requirements and get caught.

First and foremost, you should know that whether you don’t buy a policy at all or if you buy a policy that doesn’t meet the state’s mandated requirements, you’ll be considered an illegal driver. Uninsured and underinsured drivers get treated the same in most cases.

If you are caught driving without the mandatory liability coverage, there will be penalties involved. In fact, this is one of the biggest driving offenses in the state, and it’s punished accordingly.

If you are stopped for a moving violation or found to not be carrying adequate coverage following an auto accident (even if you’re not at fault), here’s what you can expect in terms of penalties for a first violation:

• A fine of at least $300 and up to $1,000
• Community service
• DMV surcharges of $250 for at least three years
• A mandatory license suspension of one year

For subsequent violations, the penalties just get worse. After your second violation, you can expect the following:

• A fine up to $5,000
• A mandatory jail sentence of 14 days
• 30 days of community service
• A mandatory license suspension of two years

After your two-year suspension is up, the DMV won’t just reinstate your license, either. Instead, you’ll need to apply to the Director of the Division of Motor Vehicles for reinstatement.

It’s not only fines and penalties that should worry you when driving without valid auto insurance coverage, though. There’s also the concern of getting in a car accident.

If you get in a wreck and don’t have adequate insurance coverage, you can expect to receive a citation. Following that, the penalties above will kick in, and your license will be suspended accordingly. More importantly, though, is that you’ll need to pay for any damages that may have been caused to others or their property, if you’re at-fault for the accident.

Had you carried adequate auto insurance coverage, your policy would have paid for most, or all, of these expenses. However, since you don’t have auto insurance, you’re now on the hook for the bill. If you can’t afford to pay out of pocket, you’ll likely be sued. This means that your assets–such as your home, vehicle, savings accounts, and more–could be taken away.

But let’s say that you’re driving uninsured and are in an accident that isn’t your fault. No, you won’t need to pay for the other driver’s vehicle or injuries, and their insurance coverage should pay for yours (assuming that they are covered appropriately by a policy of their own). However, if you don’t have adequate coverage in the state of New Jersey, you’ll actually lose your right to sue for damages and/or injuries following the accident.

This means that if the other driver doesn’t have auto insurance or doesn’t have enough coverage to pay your bills following an accident for which they’re at-fault, you can’t even sue them for their assets to cover it. If you fail to maintain state-minimum insurance, you essentially waive your right to sue them. This could be devastating.

Proof of Insurance

As is the case in most states, it won’t be a secret if you allow your auto insurance policy to lapse. In fact, insurance companies are required to notify the New Jersey Motor Vehicle Commission when policies lapse or are cancelled, so they know if drivers are lacking valid policies at any given time.

Thanks to this, you can rest assured that the officer will already know whether or not you have active auto insurance following an accident or during a traffic citation. However, even with this reporting system in place, you are still required to carry proof of your insurance coverage with you every time you get behind the wheel. Failure to do so can result in a citation.

Whether you buy your very first policy or simply renew an existing one, you’ll be given proof of insurance. This comes in many forms, depending on the insurance company and the type of policy purchased. You may get a laminated insurance card mailed to you, you may be emailed or given access to a PDF that you can print out, or you might be able to download an app with mobile access at your fingertips, or all three. However, even if you download an app and have a digital card saved, you’ll still want to keep a hard copy in your vehicle at all times. If your phone dies or is damaged in an accident, you’ll still need to access that proof of coverage when asked.

Regardless of the form of your proof of insurance, it will have a few specific things listed. These include the:

• Name of the insured
• Vehicles covered under the policy
• Policy number
• Dates of valid coverage
• Insurance company’s name, address, and phone number

It may also include your coverage limits or other important details about your exact policy.

Average Cost of Coverage in New Jersey

Once you decide how much auto insurance coverage you need and what you expect from your insurer, it’s time to compare prices. For many drivers, this is one of the most important factors, in fact, and you want to make sure that you get the best possible rate for the coverage you choose. So, let’s take a look at what you can expect to pay when buying auto insurance in New Jersey.

According to data from QuoteWizard, the average auto policy in New Jersey costs $1,265.69 annually. This is considerably higher than the national average of $889.01, so that’s something to keep in mind as you go into your search. Of course, this average takes into account all policies purchased in the state, regardless of the vehicles they drive, the history of the driver(s), the area in which they live, and even the amount of coverage chosen.

This $1,265.69 average can be broken down further, though, to give you a better idea of what you can expect. For example, New Jersey drivers spend an annual average of $869.57 on liability-only coverage. This means that if they purchase the state’s most basic, required auto insurance, they’ll pay about that much each year. Drivers also spent an average of $381.86 on collision coverage (covering their vehicle if they’re in an at-fault accident) and $131.35 on comprehensive coverage (if they want to be protected no matter what happens to their vehicle or how).

All in all, New Jersey drivers pay about $104.72 a month for their auto insurance.

Coverage	Rates
Liability	$869.57
Collision	$381.86
Comprehensive	$131.35
Total Cost Per Year	$1,265.69
Price Per Month	$104.72

Of course, these numbers are just averages. You can (and should) expect that your own policy will vary from this, based on any number of personal factors. Your location, driving history, vehicles covered, and even your age and marital status can all affect premiums.

Plus, there are discounts offered by some companies that you may or may not qualify for, such as safe driver discounts, student discounts, multiple policy discounts, and even discounts for having more than one driver on the policy.

Cheapest Car Insurance in New Jersey

I know you’ve been wanting to know the answer to this question: which company has the cheapest premiums in New Jersey? Well, we’re here to help you find out.

Of course, this isn’t exactly a black-and-white question, but you probably already realized that. While one insurer may be the absolute best when it comes to insuring a high-risk driver (like that 18-year-old in a sports car or the woman with three accidents in the last two years), it may not offer the best price for your parents. There are variables at play, even when talking about the “cheapest” insurance company in the Garden state.

We didn’t want to leave you hanging, though, so we did some research. We wanted to figure out which companies were consistently priced the lowest, as well as which ones offered the best rates for different types of drivers. Then, based on your own factors, you at least know where to start.

Let’s take a sample driver, who we will name Tom. Tom is 30-years-old and single. He has a clean driving record, drives a 2013 Chevrolet Malibu, and lives in Lakewood.

Very Cheap Cae Insurance

Here’s what we found when we started shopping around for rates for Tom, based on standard, state-minimum coverage.

Insurance Company	Annual Premium
Farmers	$913
Penn National	$996
Esurance	$1,236
Allstate	$1,404
Progressive	$1,412
Encompass	$1,740
Metlife	$1,864
Mercury	$2,288
Plymouth Rock	$2,663
Foremost	$2,968

How different would Tom’s premiums look if he lived in Newark instead?

Insurance Company	Annual Premium
Farmers	$1,543
Esurance	$1,832
Progressive	$1,904
Penn National	$2,124
Allstate	$2,550
Metlife	$2,626
Mercury	$2,964
Encompass	$3,210
Plymouth Rock	$3,267
Foremost	not given

As you can see, Tom is stuck paying considerably more for the same coverage, just for living in a more metropolitan area. Either way, though, it appears that he can bank on Farmers and Esurance for consistently having more affordable coverage.

Cost of Auto Insurance in New Jersey

So, how much can you expect to pay for your car insurance in New Jersey? Well, that’s difficult to say. After all, there are literally hundreds of answers to that question, based on your own personal variables.

Things that impact your premiums include your:

• Age
• Gender
• Marital status
• Driving record
• Education
• Vehicle(s) covered
• Whether your vehicle is financed, leased, or paid in full
• ZIP code
• Whether you own or rent your home
• Miles driven each year and the purpose of those miles (work commute, pleasure, etc.)
• How much coverage is desired

That’s why it’s impossible to truly give someone an accurate estimate of their auto insurance costs, without knowing each of these factors. Of course, as we already talked about above, the average auto insurance price tag runs about $1,265 a year, across the entire state. If you’re only interested in New Jersey liability coverage, your average steeply drops to just under $870.

We’re not really keen on leaving things that simple, though, so let’s try to narrow down your estimate just a bit more. That way, you can go into your auto shopping journey with at least an idea of what you should pay.

Without knowing all of your personal information, this will be difficult. So, we created four different driver “profiles” to use. Each example driver represents a specific demographic, allowing us to easily compare rates based on the kind of driver one could be. While none of these four drivers is likely to be a perfect match for you and your own personal tidbits, you can still use this as a rough guide before looking for your own coverage.

Our Subjects

We’ve taken four example drivers to use in this pricing example. They all live in Clifton, NJ, in ZIP code 07011. We chose this city because it ranks pretty average in the state when it comes to annual auto insurance costs. This makes it a more accurate indicator, versus choosing a more metropolitan area.

First, we have Little Timmy. He’s a young driver stereotype: 22-years-old, in college, renting an apartment, and has two speeding tickets under his belt from the last couple of years. He drives about 15,000 miles a year in his 2012 Chevy Impala (which is financed), and has average credit.

Next, we have John and Jane Smith, 42. They are both college grads with good credit, who own their home. They drive a 2011 Chevy Equinox (paid off) and a 2014 Toyota Sienna (financed), and drive about 16,000 miles a year each. Neither has any speeding tickets, but Jane did have a small fender bender last year.

Straight-Laced Sally, our third subject, is an insurer’s dream. She’s 35, owns her condo, has excellent credit, and is a college grad. She drives about 10,000 miles a year in her 2010 Toyota Camry and has a clean driving record.

Last but not least is Grandpa Joe. He’s 65 with a clean driving record and good credit. He owns his home and his 1998 Honda Civic, which he drives about 8,000 miles a year.

As we already mentioned, you probably aren’t a perfect match with any of these four subjects. However, there’s probably one you can most relate to. So, with that said, let’s see how their premiums compare in the state of New Jersey, and which insurance companies offer the best rates for each. (Quotes provided by The Zebra and Insurox)

	Little Timmy	John & Jane Smith	Straight-Laced Sally	Grandpa Joe
Plymouth Rock	$566/mo	$117	$64	$77
Mercury	$680	$376	$213	$127
Penn National	not given	$178	$110	$82
Allstate	$310	$215	$100	$80
Hanover	$885	$118	$55	$43
Foremost	$702	not given	$164	$92
Metlife	$710	not given	$141	$97
Progressive	$478	$267	$72	$110
Encompass	$1,110	$320	$195	$185
Esurance	$399	$298	$168	$79

As you can probably tell, the results can vary quite a bit from insurer-to-insurer, just based on your own personal information. However, there are some patterns we can derive. For instance, Hanover was one of the most affordable (if not the most affordable) company for everyone except Little Timmy. And Allstate offered competitive pricing across the board, even if they weren’t the cheapest.

Based on what we see with these results, we can assume that one’s driving record plays a significant impact on premiums (poor Little Timmy had better save his pennies or just plan to take the bus!), followed by age.

New Jersey’s Unique Car Insurance Rules

Every single state puts a unique spin on auto insurance laws. New Jersey, of course, isn’t the exception. There are a few rules and regulations that you’ll find in the Garden State that are different from other states in the country.

Let’s take a look at what you can expect to find when buying insurance in New Jersey, some of which might be different from what you’ll find elsewhere. Some of them might even impact your coverage choices and premiums.

New Jersey’s High-Risk Automobile Insurance Option (NJPAIP)

If you’re a high-risk driver in New Jersey–which usually means that you’ve already lost and/or been denied coverage due to a DUI, accidents, or other driving record issues, or that you’ve failed to pay your premiums with a previous policy–you might not be able to find an insurer that will approve you for new coverage. In this case, you’ll need to turn to the high-risk coverage option offered in the state: PAIP.

NJPAIP was designed for drivers who have had their coverage cancelled, non-renewed, and/or have been denied for a new policy due to certain factors. Since all drivers in New Jersey must carry state-minimum liability in order to get behind the wheel, the PAIP option is a last resort.

As with most state-run, high-risk programs, PAIP doesn’t actually offer insurance policies. Instead, they will match you with an NJPAIP Certified Producer, which is an insurer who will offer you coverage.

Credit Can Be a Factor

As is the case in many states, your credit can be a determining factor when it comes to calculating your auto insurance premiums. New Jersey is one of those states, as you may have already guessed.

This means that potential insurers have the option to run a soft inquiry/credit check on you when calculating your coverage pricing. This shows them your financial history, account status (especially with other insurance companies), and overall creditworthiness.

While insurers can use your credit history to help determine premiums, they cannot cancel existing coverage or deny you coverage based on what they find. They can only adjust your price accordingly.

Your ZIP Code Matters

In most states, your exact location matters. In fact, it’s one of the most important factors when calculating your premiums, as metropolitan areas present a higher risk for insurers than more rural areas. Because of this, your premiums can change when you move to a new city, or even just to a new neighborhood that has a different ZIP code.

Your ZIP code is a secondary factor to things like your personal driving record, age, and the vehicle you drive, but it will have an impact on your premiums in New Jersey.

You Have Low-Income Options

If you live in New Jersey and are eligible for Medicaid based on your income, you could also qualify for the state’s reduced-cost insurance program, SAIP. This program, the Special Automobile Insurance Policy, offers limited auto insurance coverage to residents for a lower price.

In fact, if you qualify for SAIP, you can get medical-only coverage for only $365 a year. The purpose of the initiative is to prevent drivers from foregoing buying insurance based on limited financial resources.

To learn more about SAIP, visit the website here.

Top Car Insurance Companies in NJ

Now, you might be wondering who the most popular auto insurance companies are in the Garden State. Well, you’re in luck–we’ve done the research to find the six insurers with the largest market shares.

Of course, the most popular option doesn’t always equal the best one. Let’s take a look at how each company compares in terms of their financial security and their measured customer satisfaction.

Customer Satisfaction

Being the most popular company says something, as does having the best price. However, your satisfaction with an insurance company ultimately comes down to how well they perform when you actually need them. If their customers are usually happy, there’s a good chance that you will also be happy if you purchase a policy from them.

So, of course, we took the time to look into each company’s actual customer satisfaction ratings. We also looked at their financial security ratings, ensuring that you choose a company that can be there if and when you need to file a claim.

To measure each of these, we looked at two leading authorities in the industry: JD Power and A.M. Best. Both of these companies are respected and provide a comprehensive view of each insurer so that you can make the most informed decision.

State Farm

First up is State Farm, the largest auto insurance shareholder in the state. This company holds a leading 11.1% of the market. It doesn’t rank the highest in customer satisfaction, though:

• A.M. Best: “A++” (Superior) financial strength rating and “aa+” long-term issuer credit rating
• JD Power: #13 in the region (out of 14) with only a 2-star overall satisfaction rating

Progressive

Next in our list–in second place–is Progressive, which insures 10.8% of the New Jersey market. Unfortunately, it also brings up the rear of JD Power’s study:

• A.M. Best: “A+” (Superior) financial strength rating and an “aa” long-term issuer credit rating.
• JD Power: #14 in the region (of 14 companies compared) with a 2-star overall satisfaction rating

Allstate

Bringing in a strong third place is Allstate. They’re in the middle of the pack for both the number of drivers insured, at 9.3% of the market, as well as their satisfaction ratings:

• A.M. Best: “A+” (Superior) financial strength rating but “aa-” long-term issuer credit rating.
• JD Power: #8 in the region with a 3-star overall satisfaction rating

Liberty Mutual

Liberty Mutual accounts for 9% of the New Jersey auto insurance market share. Here’s what customers think about the company:

• A.M. Best: “A” (Excellent) financial strength rating but “a” long-term issuer credit rating.
• JD Power: #12 in the region with a 2-star rating in overall satisfaction

Plymouth Rock

The next company, Plymouth Rock, covers only 7.8% of the New Jersey auto insurance market. This makes it the fifth-most-popular insurer in the state. It boasts a few other impressive 5s, however, especially when it comes to satisfaction ratings:

• A.M. Best: “A-” (Excellent) financial strength rating and an “a-” long-term issuer credit rating.
• JD Power: #5 in the region with a 5-star overall satisfaction rating

USAA

This members-only company is known for its excellent service and insurance products. Since it’s only available to military members and their families, though, it’s a little less popular. Therefore, USAA holds only 3.7% of the state’s market share. What it lacks in market share, though, it makes up for in satisfaction ratings:

• A.M. Best: “A++” (Superior) financial strength rating and “aaa” long-term issuer credit rating
• JD Power: #2 with a 5-star overall satisfaction rating

Need More?

Buying auto insurance can be confusing, whether it’s your first policy or your tenth. If you have more concerns about buying coverage in the Garden State, or have specific questions about the laws of the state, you can visit the New Jersey state auto insurance website.

Topics: Auto Insurance

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