Equity Finance » High Interest Rates

Saving For Hard Times

admin — Wed, 11 Nov 2009 13:01:36 +0000

Saving for rough times is a crucial part of your financial planning as having some spare cash stashed in an easily accessible place to cover disasters is a good idea. At a certain point common sense dictates that you’re going to run into an unforeseen expense and not having funds to pay for it you’re going to have to use poor borrowing practices. The average surprise cost when such events do occur is thought to run a few thousand dollars however whether it’s a gigantic amount or a very minor amount a disaster fund is needed to cover it.

You don’t need to hide this money under the mattress for it to be available. The best way to conserve this fund is by using a quick access savings account that pays a good rate of interest and hopefully is tax exempt. You could set up a simple bank transfer and allot a small amount into your bank account each pay check. You should also be sure that your savings account is low risk as you wouldn’t want to lose the money by trying for high interest payments. For example: don’t invest the money in the stock market, as stocks and shares can change in value, depriving you of much needed money at a critical moment.

Treat any interest your disaster account earns as a perk and not the main reason for having the account. In a pinch you’ll need quick easy access to your money and this is more useful than a little more money in interest can ever bet. Do not allow your disaster fund to grow into a fortune as the extra money would be more wisely invested, growing more in a better investment vehicle. Keep just enough to cover a rainy day so a few thousand should be more than enough.

Don’t be tempted to use your existing account to create up your rainy day fund. Your existing account makes it easy to “borrow” from the savings without knowing it and this usually means you won’t have enough money when you really need it. Also most checking accounts don’t pay high interest rates. To avoid the accidental spending of your disaster fund keep your checking account for normal bills and expenses.

By: Joe Duggins

Compare Home Equity Loans

admin — Sat, 29 Aug 2009 09:33:23 +0000

When looking for a home loan using equity as security or for a mortgage, you will really need to compare the options that are available to you so that you don’t end up on the losing end. First, get to know about the two different types:

• Fixed rate home equity loan
• Home equity lines of credit (HELOC)

The first loan is one that is fixed. What you need to understand is that when you compare home equity loan offers like these, you will see that the term of the home equity loan is fixed and not the rate. This can be either 10 years or 20 years.

The next thing to figure out is when you can get either of the two loans. There are a few cases and these include:

• You taking out fixed rate equity loan or a HELOC to help you consolidate a debt. This is usually a higher rate debt like credit cards that have high interest rates.
• You taking out fixed rate loan or a HELOC and use that loan as a down payment on a second home or another property that you would like to invest in.
• You getting a fixed rate loan using equity from your home or a HELOC that can be used as another mortgage which is added to the previous mortgage on a purchase that you made on a home or on refinancing.

These are also the reasons why you should make sure that a home loan using your equity as security is the right thing to do.

By: Elija James

Using a Home Equity Loan to Pay Off Credit Cards

admin — Mon, 13 Jul 2009 20:27:27 +0000

The majority of Americans carry some sort of credit card debt. Unfortunately, many of us carry so much debt at such high interest rates that it becomes difficult to make a difference in the amount we owe, even when we send a payment to the credit card company each month. Falling behind just makes it worse, with late fees and finance charges added on to your next statement- and often a late payment will result in an increase in your interest rate. High interest rates quickly add up and result in our monthly credit card payments doing little or nothing to reduce the balance. It’s a vicious cycle that can be difficult to get out of.

One effective solution for getting off the credit card rollercoaster if you are currently a homeowner, may be to obtain a home equity loan and use it to pay off your high interest credit card debt. Homeowners often take home equity loans to make home improvements, figuring that the improvements will increase the value of their home and therefore make the loan worth it, but why not take a home equity loan to eliminate high interest debt and make it easier to pay your monthly expenses?

The Benefits of Refinancing Credit Cards with a Home Equity Loan

There are a number of benefits of credit card refinancing, with the most obvious one being the decrease in interest rates you are paying. The other primary benefit is the fact that you aren’t incurring more debt when you pay off your credit cards with a home equity loan – you’re keeping the amount you owe the same and moving the debt to a more affordable repayment method. If you had previously been struggling to make several individual payments every month, using a home equity loan to pay off your credit cards will result in a consolidation of your debt, making it easier to pay.

Additional benefits of refinancing credit cards with home equity include:

eliminating variable interest rates and getting a fixed interest rate

obtain a tax benefit with an interest rate tax write-off on home equity loan interest that could not be done with credit card interest

consolidate a number of monthly payments into a single, often lower, payment

easier record keeping, write and mail one check a month and make one transaction in the check register rather than multiple.

Disadvantages of Paying Off Credit Cards with Home Equity Loans

Like everything good in the world, there are also some disadvantages to using a home equity loan to pay off credit cards, that you’ll want to consider, though. For example, once you pay off the credit cards, you suddenly have lots of room on them to charge new purchases! This can be extremely tempting, and if you’re not disciplined, you could end up charging more debt and making your situation even worse (because now you have the home equity loan PLUS the additional high interest credit card debt!)

It’s a good idea to either get rid of the credit cards by cutting them up, or by placing them in a fire safe box in your home so that you aren’t tempted to pull them out of your wallet when you’re out shopping. Refinancing the credit card debt with a home equity loan can give you the opportunity to live credit card-debt free. Most financial advisors do not recommend calling to physically cancel the accounts right away, because reducing the amount of “available credit” will often have a negative impact on your credit score.

By: Debbie Dragon