Home Equity Line of Credit

This is the second of four planned posts on the subject of home equity loans.

We’re using a four part article published by the Federal Trade Commission (FTC) on their Consumer Information website. You can and should visit this site, not only to view this article but to see the other topics of information that pertain to many of us. Click here to visit.

Four part Series:

Home Equity Loans and Credit Lines – Introduction

If you’re thinking about making some home improvements or looking at ways to pay for your child’s college education, you may be thinking about tapping into your home’s equity — the difference between what your home could sell for and what you owe on the mortgage — as a way to cover the costs.

Loan or Line of Credit

Home equity financing can be set up as a loan or a line of credit. With a home equity loan, the lender advances you the total loan amount upfront, while a home equity credit line provides a source of funds that you can draw on as needed.

Shop and Compare

When considering a home equity loan or credit line, shop around and compare loan plans offered by banks, savings and loans, credit unions, and mortgage companies. Shopping can help you get a better deal.

Stay Within Your Budget

Remember that your home secures the amount that you borrow through a home equity loan or line of credit. If you don’t pay your debt, the lender may be able to force you to sell your home to satisfy the debt.

Home Equity Line of Credit

A home equity line of credit — also known as a HELOC — is a revolving line of credit, much like a credit card. You can borrow as much as you need, any time you need it, by writing a check or using a credit card connected to the account. You may not exceed your credit limit. Because a HELOC is a line of credit, you make payments only on the amount you actually borrow, not the full amount available. HELOCs also may give you certain tax advantages unavailable with some kinds of loans. Talk to an accountant or tax adviser for details.

Like home equity loans, HELOCs require you to use your home as collateral for the loan. This may put your home at risk if your payment is late or you can’t make your payment at all. Loans with a large balloon payment — a lump sum usually due at the end of a loan — may lead you to borrow more money to pay off this debt, or they may put your home in jeopardy if you can’t qualify for refinancing. And, if you sell your home, most plans require you to pay off your credit line at the same time.

HELOC FAQs  Continue reading

Home Equity Loans

This is the first of four planned posts on the subject of home equity loans.

We’re using a four part article published by the Federal Trade Commission (FTC) on their Consumer Information website. You can and should visit this site, not only to view this article but to see the other topics of information that pertain to many of us. Click here to visit.

Four part Series:

Home Equity Loans and Credit Lines – Introduction

If you’re thinking about making some home improvements or looking at ways to pay for your child’s college education, you may be thinking about tapping into your home’s equity — the difference between what your home could sell for and what you owe on the mortgage — as a way to cover the costs.

Loan or Line of Credit

Home equity financing can be set up as a loan or a line of credit. With a home equity loan, the lender advances you the total loan amount upfront, while a home equity credit line provides a source of funds that you can draw on as needed.

Shop and Compare

When considering a home equity loan or credit line, shop around and compare loan plans offered by banks, savings and loans, credit unions, and mortgage companies. Shopping can help you get a better deal.

Stay Within Your Budget

Remember that your home secures the amount that you borrow through a home equity loan or line of credit. If you don’t pay your debt, the lender may be able to force you to sell your home to satisfy the debt.

Home Equity Loans

A home equity loan is a loan for a fixed amount of money that is secured by your home. You repay the loan with equal monthly payments over a fixed term, just like your original mortgage. If you don’t repay the loan as agreed, your lender can foreclose on your home. Continue reading

How’s Your Credit?

It almost goes without saying, good credit is vital to enjoying many of the important things in life. Our homes, our children’s higher education, automobiles and many other purchases are quite often financed based on our credit.

So it is important to have and maintain good credit.  Of course, as part of that, you need to:

  • Buy only what you can afford
  • Borrow wisely
  • Pay bills on time

But there is something else you can, and should do… Continue reading

Borrow 101

Borrowing can bring a family the home of their dreams, college diplomas from the schools of choice, a ski house in Vermont, or any of the many dreams and goals we all have. But borrowing can also be disastrous. It can take away, or make unreachable, those very same  dreams and goals.

Which path a person or family follows depends on how careful and disciplined they are about credit and its use. There are actions you can take to keep your credit sound and those dreams and goals within reach.

Tri-Town Apple will stay on point for good credit discipline and sound borrowing practices. This post, our second in the “Borrow Category” (see Important Information About Credit Reports (FTC)will cover some of the basics for sound credit management from MyMoney.gov. To view this site go here.

“Borrow

“Sometimes it’s necessary to borrow for major purchases like an education a car, a house, or maybe even to meet unexpected expenses. Your ability to get a loan generally depends on your credit history, and that depends largely on your track record at repaying what you’ve borrowed in the past and paying your bills on time.  So, be careful to keep your credit history strong.

“Actions You Can Take

  • Track your borrowing habits.
  • Pay your bills on time.
  • When you need to borrow, be sure to plan, understand and shop around for a loan with a low Annual Percentage Rate (APR).
  • Learn about credit and how to use it effectively.
  • Pay attention to your credit history, as reflected by your credit score and on your credit report.

“Hints and Tips

  • Borrowing money is a way to purchase something now and pay for it over time. But, you usually pay “interest” when you borrow money. The longer you take to pay back the money you borrowed, the more you will pay in interest.
  • It pays to shop around to get the best deal on a loan. Compare loan terms from several lenders, and it’s okay to negotiate the terms.
  • When repaying a loan, it may be better to pay more than the minimum amount due each month, so you will have to pay less in interest over the life of the loan.
  • One of your most important aids when shopping for a loan is the APR – the Annual Percentage Rate. This is the total cost, including interest charges and fees, described as a yearly rate.
  • Paying your bills on time will help increase your credit score. Even if you fell into trouble with borrowing in the past, you can get on solid footing and rebuild your credit history by making regular payments as agreed.
  • You are entitled to a free copy of your credit report every 12 months from each of the three nationwide credit bureaus. Go to www.AnnualCreditReport.com or call toll free 1-877-322-8228 to order the free reports. Beware of imposter sites.”

Let Us Know

Tell us if this information is helpful Or let us know what would be more useful. Simply post a comment. We really would like to hear from you.


Important Information About Credit Scores from the FTC

Consumer Information from the Federal Trade Commission (FTC)

How Credit Scores Affect the Price of Credit and Insurance

“Ever wonder how a lender decides whether to grant you credit? For years, creditors have been using credit scoring systems to determine if you’d be a good risk for credit cards, auto loans, and mortgages. These days, other types of businesses — including auto and homeowners insurance companies and phone companies — are using credit scores to decide whether to issue you a policy or provide you with a service and on what terms. A higher credit score is taken to mean you are less of a risk, which, in turn, means you are more likely to get credit or insurance — or pay less for it.

What is credit scoring?

“Credit scoring is a system creditors use to help determine whether to give you credit. It also may be used to help decide the terms you are offered or the rate you will pay for the loan.

“Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, whether you pay your bills by the date they’re due, collection actions, outstanding debt, and the age of your accounts, is collected from your credit report. Using a statistical program, creditors compare this information to the loan repayment history of consumers with similar profiles. For example, a credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points — a credit score — helps predict how creditworthy you are: how likely it is that you will repay a loan and make the payments when they’re due.

Some insurance companies also use credit report information, along with other factors, to help predict your likelihood of filing an insurance claim and the amount of the claim. They may consider this information when they decide whether to grant you insurance and the amount of the premium they charge. The credit scores insurance companies use sometimes are called “insurance scores” or “credit-based insurance scores.”

Credit scores and credit reports

“Your credit report is a key part of many credit scoring systems. That’s why it is critical to make sure your credit report is accurate. Federal law gives you the right to get a free copy of your credit reports from each of the three national credit reporting companies once every 12 months.

The Fair Credit Reporting Act (FCRA) also gives you the right to get your credit score from the national credit reporting companies. They are allowed to charge a reasonable fee for the score. When you buy your score, you often get information on how you can improve it.

To order your free annual credit report from one or all of the national credit reporting companies, and to purchase your credit score, visit www.annualcreditreport.com, call toll-free 877-322-8228, or complete the Annual Credit Report Request Form and mail it to:

Annual Credit Report Request Service

P. O. Box 105281

Atlanta, GA 30348-5281

What can you do to improve your score?

“Credit scoring systems are complex and vary among creditors or insurance companies and for different types of credit or insurance. If one factor changes, your score may change — but improvement generally depends on how that factor relates to others the system considers. Only the business using the system knows what might improve your score under the particular model they use to evaluate your application.

“Nevertheless, scoring models usually consider the following types of information in your credit report to help compute your credit score:

  • Have you paid your bills on time? You can count on payment history to be a significant factor. If your credit report indicates that you have paid bills late, had an account referred to collections, or declared bankruptcy, it is likely to affect your score negatively.
  • Are you maxed out? Many scoring systems evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, it’s likely to have a negative effect on your score.
  • How long have you had credit? Generally, scoring systems consider your credit track record. An insufficient credit history may affect your score negatively, but factors like timely payments and low balances can offset that.
  • Have you applied for new credit lately? Many scoring systems consider whether you have applied for credit recently by looking at “inquiries” on your credit report. If you have applied for too many new accounts recently, it could have a negative effect on your score. Every inquiry isn’t counted: for example, inquiries by creditors who are monitoring your account or looking at credit reports to make “prescreened” credit offers are not considered liabilities.
  • How many credit accounts do you have and what kinds of accounts are they? Although it is generally considered a plus to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many scoring systems consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may have a negative effect on your credit score.

“Scoring models may be based on more than the information in your credit report. When you are applying for a mortgage loan, for example, the system may consider the amount of your down payment, your total debt, and your income, among other things.

“Improving your score significantly is likely to take some time, but it can be done. To improve your credit score under most systems, focus on paying your bills in a timely way, paying down any outstanding balances, and staying away from new debt.”

To view the article on the FTC web site, click here.