How Where You Live Can Affect Your Rate Quote

insurance rates by zip code

Soon after my girlfriend and I moved into our new apartment, we discovered a big budgeting error. A letter from GEICO said our change of address added $350 to our annual car insurance cost.

The stumper is that we hadn’t left the state. We’d moved 2.3 miles away.

We all know that where you live affects how much you spend and save on a daily basis. After all, our CEO saved $15,640 after he moved to Texas, a state with no income tax.

But did you know that your address may also change what you pay for things like car insurance and student loans? Here’s how your zip code can affect various rates — and what you can do to prevent it.

Car insurance rates by zip code

After learning that my car insurance payment was increasing, I phoned a customer service representative at GEICO. The voice on the other end didn’t beat around the bush: We had moved into a lesser neighborhood, she said.

GEICO’s not the only insurance company that cares about your address. Both State Farm and AllState’s Esurance, for example, say your location is meaningful. It can reveal whether you’re more or less likely to be parked or driving in an area that has higher rates of car accidents or thefts.

Some people believe that determining insurance rates by zip code is a form of redlining. Redlining is a term used to describe how insurers may make it difficult for lower-income applicants to afford premiums.

California, Massachusetts, and Hawaii have banned car insurers from using credit scores to determine insurance quotes. In these cases, insurers use a proxy, such as a residential address, to measure risk. California insurers are also barred from using zip codes.

Where I live in New York City, however, both location and credit history are factors. Consumer Reports found that “single New Yorkers with good credit scores and clean driving records would pay an average of $255 more in annual premiums than if they had excellent credit scores.”

How to lower your premium: If you believe you have higher insurance rates due to your zip code, seek out discount and rebate opportunities from your current service provider. GEICO, for example, said we could slash $153 off our bill by completing a defensive driving course.

If these kinds of discounts don’t close the gap between your original rate and your new one, shop around. In our case, Progressive’s rates bested GEICO’s in the new neighborhood.

The state of your student loan rates

Where you live can also have a direct impact on your student loans. Paying off your student loans is easier in some states. Other states may offer specific refinancing and loan forgiveness programs for residents.

But does your address affect the APR you’ll be quoted on a new loan?

The short answer is no. Christine Roberts, head of student lending at Citizens Bank, said that her company does its best to include as many qualifying factors as possible in its underwriting process, but your address is not one of them.

Ask the customer service of other lenders — from College Ave to Education Loan Finance — and you’ll get the same answer. Lenders like these are most concerned with your credit history or the history of your cosigner. Interestingly, your credit score does not consider where you live, according to myFICO.

But your physical address can affect your student loan offers in one respect: when you’re applying to borrow from community banks and credit unions. LendKey, a top-rated lender of private student loans and refinancing, connects its applicants with more than 265 community lenders.

As a result, the address on your LendKey loan application could affect your quoted rate. It affects which lenders compete for your business. A small community bank or credit union in Brooklyn, New York, for example, likely won’t make an offer to an applicant based in Oakland, California.

Worried that your variable-rate loan will go up after you move? Your interest rate isn’t affected by where you live. Instead, it’s based on industry standards and national economic trends.

How to get a lower student loan rate: If you currently attend an out-of-state college, see whether you can score a better APR at home or close to campus. If your school’s area offers a better deal, consider moving there. Doing so could also save you big bucks on in-state tuition.

For borrowers looking to refinance their student loans, research your quote offers if you have a pending move. It may be wise to jump on — or wait for — a better rate quote that is even nominally tied to your physical address.

CommonBond is one such lender whose customer service says that your place of residence is a factor, albeit a minuscule one, in your rate quote.

Where you live affects how much you pay

Whether you’re insuring your car or paying for your education, there are tons of factors affecting your out-of-pocket costs. It’s important to be aware of them.

You may not decide to move again if you find that your insurance will increase by $350 per year, for example. But maybe it will motivate you to find a better deal — it did for me.

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