Home Equity Loans, Home Equity Line of Credit and Student Loans

Interest Only Home Mortgage Loans - Good Or Bad Idea?

2005-12-11T14:19:00.000-08:00

Is an interest only home mortgage loan a good or bad idea for financing a home? These loans have become very popular and are one of the many different kinds of financing available for property.

Opinions vary as to whether an interest only home mortgage loan is a good idea for the average home owner, with valid points being made on both sides. If you are in the market for a home you need to consider all the finance options available to you, together with your ability to repay them.

Here are some interest only mortgage loan pro and cons to look at both sides of this kind of financing.

If you are employed full time, single and making a good salary then an interest only home mortgage loan may not be the best financing for you. That's because you could pay off your loan at a lower rate of interest and in less time with a different kind of loan program.

On the other hand, you could save a lot of money by only paying the interest. It is possible that if you invested this in a safe investment you would not only have enough to pay off the principle on the mortgage, but would also gain a little capital for yourself at the same time.

This of course is a gamble, because how many people will actually invest the savings? However, if you have no other financial responsibilities, it's one you might find attractive.

If you work in seasonal employment, like in the tourist industry, you may find that paying an interest only monthly mortgage payment allows you the freedom to pay a minimum amount when you are in "off season".

But during the time you are working, you can make accelerated payments off the principle in addition to the interest.

The risk of paying an interest only mortgage loan repayment is that the principle is not being repaid. Unless the price of homes in your area rises, you don't build up any equity in your home.

Paying the monthly mortgage payment on an interest only mortgage can become like paying rent. You don't have the safety net of being able to sell your home to raise cash if you are faced with some emergency in your life.

As a young professional just starting out on your own, this might not be an issue you need to consider. But if you are married and have a family, you should seriously consider the implications of not having the kind of mortgage that allows you to build a financial safety net.

Home equity gives you a form of financial security that can come in handy if you really need to use it. This should be a consideration when deciding which home loan to choose.

A lower monthly mortgage payment will always look attractive on paper, but consider all the implications carefully before taking the option of an interest only mortgage loan as a way of financing your home.

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What You Need To Know About Mortgages

2005-10-23T20:45:00.000-07:00

Business stuff can be downright confusing especially when confronted with rates, numbers and the banking jargon that seem alien language to you. Still, you do not really have much choice as loans, interest rates and mortgages are words that you can either understand and study or risk losing the roof over your head.

What is a mortgage?

Mortgages is a legal and binding contract that indicates that you have agreed to use your house as security for a loan made. Upon signature, the lender will hold the title deed of the property until after you pay all the money that you owed plus interest. If in case, you are not able to make mortgage payments, the lender has the right to sell the property.

What are mortgage payments

To make it easier for you, the lender will give you opportunities to pay your loan in installment. Some will ask for a down payment, which is a lump sum that you have to pay in order to reduce the amount of money that you have to pay in a certain period of time. The balance of the loan will be divided according to the payment period stipulated in the legal contract. Often, people choose monthly payments as these are easier to the pockets. Others opt for annual payments.

What makes up the mortgage payment?

If you think that you only have to pay the amount that you loaned and nothing else, think again. There are a lot of additional costs in getting a mortgage. In addition to what you originally owed, which in banking terms, is called the principal, you also have to pay for the interest, the property tax held in an escrow account and hazard insurance to protect you from fire, storms, theft and even flood. And unless you have at least 20 percent of your home’s value paid for, you still have to get a private mortgage insurance, which can be really expensive. Some people avoid this by opting to pay for more than 20 percent in their initial down payment.

What are the types of mortgages?

As the name suggests, fixed-rate mortgages offers interest rates that will remain as it is over the entire life of the loan. The 30-year-fixed rate may be a good option for people who will be staying at their home for many years as the payments will relatively be the same. The downside, however, is that interest rates are at their highest level in this kind of scheme as compared to shorter payment scheme pf 20-year and 10-year-fixed-rate.

Another type of mortgages is the adjustable-rate. Unlike the fixed-rate that basically maintains the interest rate, the interest rate of this type is dependent on the market rates and economic trends. Often, the starting interest rate for this is a couple of percentages lower than the interest offered in fixed-rate but because of market dynamics, it can go several points higher in a course of a few years.

To protect you from skyrocketing interest rates, the terms of the mortgage contain a clause that limits the increase of interest rates to a certain level. This is called the caps. Often, the limit is set at a certain rise in interest per year.

The balloon mortgages is a variation of the fixed-rate mortgage except that at the end of a certain payment period, you are required to pay for the remaining balance of the loan, which is often called the balloon payment. This is a good deal especially for people who plan on selling the property and refinancing it again.

What other options are there for home-owners?

The government and the business sector offers a variety of loans that people can avail of to help them. Government loans, for instance, help lower the costs of mortgages.

One of the agencies that offer such is the Federal Housing Administration, which is part of the Department of Housing and Urban Development. The FHA offers a financing program for mortgages that has significantly lower interest rates. While the FHA will not in essence be paying for the loan, it will nevertheless serve as your guarantor. This makes people who do not really fit the traditional bill and requirements able to get a loan. Other agencies like the Veterans Administration and the Rural Housing Service, offers help to niche markets.

by: Frederic Madore

No Money Down Loans

2005-10-04T19:00:00.000-07:00

You want to buy a home but you do not have money for a down payment or for closing costs? Well, just forget it. At least that is what you have probably been told by people who think they know what they are talking about, but simply do not.

There are many loan packages available for people with no money to put down on the home or for closing costs. The home loan industry has undergone revolutionary changes over the last ten to twenty years. No longer is it true that you need to put down 10% and have enough money for closing costs in order to buy a home. The simple fact of the matter is that there are home loan packages that can get you in a home with no money down, or very little.

Let us first examine the down payment. A down payment is the amount of money towards the purchase price that you pay out of your own pocket. Typically people put between 5% and 10% down on a home when they sign a contract. This is not a legal requirement, but rather an established tradition. If you find a buyer who does not require a down payment on contract and you are approved for a loan with 100% financing, then you need not pay anything out of pocket.

But, just how do you do this? The first thing you need to do is meet with a mortgage professional and get that aspect of the process completed. You will want to have a pre-approval or even a mortgage commitment with contingencies based on home value and selling price. Armed with this, you will be in a better negotiating position to get a seller to agree to sell their home with no money down. Your lender also may be able to refer you to real estate agents that can help you find a home that you can purchase with no money down. Again, there are no legal obligations to put money down, it is rather just custom and tradition. With the right mortgage lender and real estate agent you will be able to purchase a home without any money out of pocket.

Aside from the down payment you have likely been told that you will not be able to purchase a home without money for closing costs. Closing costs can be anywhere from a couple of thousand dollars to tens of thousands of dollars depending on the value of the home, the size of the mortgage and other variables. You do not necessarily have to pay closing costs out of your pocket.

There are loan packages available for people that are not able to pay closing costs out of their own pocket. What these packages basically do is inflate the purchase price of the house by the amount of the closing costs and then have the seller pay the closing costs for the buyer with those extra funds. So, for example, if the purchase price of the house is $100,000 and closing costs were calculated to be $4,500 the contract would read that the sale price is $104,500 and would include language that the seller is to pay $4,500 worth of closing costs for the buyer. The seller still gets the $100,000 for the home and the additional amount that was financed goes towards the purchasers closing costs.

Different states have different rules on how the language must read and what closing costs can and cannot be paid by the seller. You will want to make sure you have a full understanding of this process and how this will work under you specific circumstances.

Believe it or not, there are loan packages available that combine both of these examples - no money down and no money for closing costs. The property will need to appraise at a specified amount in order to qualify but the key is understanding that this very much can be done. It can turn a renter into a homeowner with nothing out of pocket and perhaps even a reduced monthly payment. Mortgage payments can be at or below rent payments depending on the home you pick.

Today's home loan industry is competitive. There are packages available for most people no matter what credit history they have or what funds they have available for the down payment and/or closing costs. Rather than deny your own mortgage application, speak to a mortgage professional to determine if you can begin realizing your dream of homeownership and a brighter financial future.

by: Max Hunter

About The Author

Max Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any type of credit issue please visit us at http://www.homeloanave.com.

Direct Loans 101

2005-09-24T09:24:00.000-07:00

Direct loans are convenient, flexible and simple. A Direct loan is a loan by a lender to a customer without the use of a third party. This type of loan enables the lender to have greater discretion in the distribution of loans. Typically the lender is the U.S. Department of Education rather than a bank or financial institution. The federal government provides four types of direct loan financing.

These direct loans vary in criteria and repayment schedules:

• The Federal Direct Subsidized Stafford/Ford Loan is a direct loan, which means you do not pay the interest on the loan while you are school at least part-time. This particular type of Direct loan is based on the student financial need in accord with federal regulations.

• The Federal Direct Unsubsidized Stafford/Ford Loan is a direct loan the government charges you interest while you are in school. The student does not need to be in extreme financial need to receive this type of loan.

• The Federal Direct PLUS loan is a direct loan designed for parents without an adverse financial history who wish to borrow money for their dependent student. In order for a student to be dependent he or she may not be 24 years or older, a graduate or professional student, someone with legal dependents, an orphan or a ward of the court. Parents of independent students are not eligible to apply for this type of loan.

• The Federal Direct Consolidation loan is a consolidation of one or more federal loans combined into a direct loan. A single monthly payment is made to the U.S. Department of Education. It is to the student’s advantage to consolidate, due to lower interest rates.

Direct loans give you the simplicity of having one contact for concerns with your financial assistance. You are able to have access to your Direct loan information on-line 24 hours a day, 7 days a week. You are given the flexibility to choose your repayment options and are able to change your schedule as your needs change.

by: John Williams

Tips for Finding Low Interest Loans

2005-09-23T07:27:00.000-07:00

When seeking low interest loans, it can sometimes prove challenging to find exactly what you're looking for. A variety of factors influence the amount of interest that you pay, and some of these factors have taken years to develop so that you cannot change them when you most need to.

Don't be under the impression that low interest loans are out of your reach, however… the more you know about the factors that effect your interest rate, the more you can do to be ready for them when you apply for the loan. There may not be much that you can do to change each factor for the better at a moment's notice, but there are ways that you can work to minimize the damage that each does.

Hopefully, the suggestions below will help you to get the most out of your loan application and find the low interest loans that you're looking for.

Secured vs. Unsecured Loans

One of the first things that you might encounter when looking for low interest loans is the option of having either a secured or an unsecured loan.

You might not qualify for this choice if you've had credit problems in the past… the terms “secured” and “unsecured” refer to whether collateral is used to guarantee repayment of the loan, and if you've had credit problems then collateral will likely be required.

If you are given the option of an unsecured loan, you should consider it carefully; unsecured loans almost always have higher interest rates than secured loans, so if interest is a consideration you'd be better off going with a secured loan.

Collateral

As mentioned above, collateral is the personal property that is used to guarantee repayment of low interest loans. Most types of property can be used as collateral, but there are some forms that are more readily accepted than others.

High value items such as real estate and vehicles are often used as collateral, because they have an easy market to find and as such can save the lender both time and money should you fail to repay the loan.

Other common forms of collateral include home equity, precious metals, and antiques or collectables.

Alternative Lenders

If you're still not finding the low interest loans that you want, you might want to consider an alternative lender as opposed to a traditional bank.

Alternative lenders can include finance and lending companies, which focus only in loans, or online lenders that can offer lower interest rates to coincide with the lower costs of operating a business online.

Taking the time to consider a variety of loan options can reap several benefits, the least of which are saving you money in interest as well as lessening the time it takes to repay the loan considerably.

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by: John Mussi

Student Loan 101: Get Money and Get a Degree

2005-09-22T16:18:00.000-07:00

If you are like every other college student out there, you need to pay for college somehow. Many students look into getting government grants or taking out loans from friends and family. These can be extremely effective means of financing an education and these options should be looked at. However, a student loan may be the answer if you don't have the savings or the means to get the money.

College can be expensive. Most parents at least try to help their children financially through at least some part of their university experience. However, getting a degree at one of the prestigious universities can run you more than $30,000 in tuition alone at the top schools. You might be one of the myriad students who attend our large state schools and therefore go to school at a substantial discount. However, most people don't have an extra $100,000 saved up and therefore seriously need to consider taking out student loans and applying for scholarships if they can.

A student loan can help you pay for tuition, books, and general living expenses. Student loans are handy when you don't have a job and have an immediate bill that is coming due. Finding a grant or student loan shouldn't be as difficult as your classes are, so here are 3 valuable tips to consider when putting together your financial plan for your next year at college.

1)Find a student loan provider who is established. You don't want a fly by night organization that is merely interested in taking you for a ride and not providing the money you need to complete your education. Getting your student loan can be a long drawn out process where the lender delays and delays and you end up waiting and waiting with more debt piling up. I have friends that have had their student loans delayed until the end of the semester due to paper work errors! Wow! A $5000 tuition bill doesn't look pretty when it's sitting on your credit card statement.

2)When you receive your student loan, look to pay off high interest debt first. Guess what? Your money will do a lot more for you when it's only accruing debt at 5% per year than at over 20% on your Visa bill! Credit card companies can be very aggressive marketers and you might end up paying for that tuition bill many times over if you let it sit on your credit card. Always look to lower your highest monthly expenses if possible and this definitely includes credit card debt.

3)Shop around. I'd be willing to bet that some banks will give you a better deal on a student loan than you think they would. Find out who's got the best rate to get the best deal on your loan. Student loan payments can last a lifetime and that extra 1% can add up to literally thousands of dollars over the years. I have friends that are in their 50s and still paying off their student loans. It'll pay off in the long run to make sure you find the best deal possible.

Student loans are popular as today as ever: find one and use it to your advantage.
by: Richard Martin

A Guide to Finding Home Owner Loans

2005-09-18T18:52:00.000-07:00

If you're in the process of trying to find home owner loans with a good interest rate and acceptable terms, you'll likely find that there are a variety of options available to you. As long as you have sufficient equity in your home to secure the home owner loans that you apply for, you're likely to be able to find a loan to meet your needs regardless of your credit rating.

The real key to finding good home owner loans is to take your time to research the various loan options available to you and to pick the loan that offers you both the best interest rate and the most agreeable loan terms for your money.

Below you'll find details on the best way to compare various home owner loans so as to find a better deal.

Comparing interest rates

The first thing that you'll need to do in order to compare home owner loans is get several different quotes for potential loans. You should check with a variety of lenders, including traditional banks, finance companies, and online lenders.

Once you've received a wide range of quotes, begin looking at the interest rates on each home owner loans offer. You may find that the traditional banks offer low rates in comparison to finance companies, or that online lenders offer slightly lower interest rates than some of their competition… differences like these are the reason that it's a good idea to get several quotes before you start.

Narrow the total number of loan offers down to the top 3 or 4 loan quotes; it's from these potential home owner loans that you'll be deciding on the loan offer that you finally accept.

Comparing loan terms

After you've created your short list of potential home owner loans, it's time to decide on the best loan from the list.

Begin looking at the loan terms of each one in earnest… factors such as the total monthly payment, the number of months that repayment is expected to last, and any options that are available for early repayment should be some of your top concerns.

Other factors that should influence your decision are whether or not the different loans have a fixed interest rate or whether the interest rate can fluctuate… you should also make sure to note whether fixed-rate loans retain the same rate for the entire loan term, or whether the loan rate is only introductory and reverts to a higher rate after a certain period of time has passed.

Using criteria like this, you should be able to decide which of your loan offers will serve you best in the long run… saving you time and money while making the loan process as simple as possible.

Once you've found your loan, go ahead and complete the application process so that you can move past your financial worries and fulfill your dreams.

by: John Mussi

A Guide to Low Cost Secured Loans

2005-09-16T12:08:00.000-07:00

The idea of low cost secured loans might sometimes seem like nothing more than a fantasy… it doesn't have to be, however. Low cost secured loans can be found, even for individuals with less-than-perfect credit; it's all a matter of knowing where to look and knowing what you're looking for.

Below you'll find basic information on various lenders from which you might get low cost secured loans, as well as the process of actually looking for and finding the loan that you seek.

Lender options

The first thing that you need to do when trying to find low cost secured loans is examine the various lender options that you have available.

Perhaps the most obvious lender for low cost secured loans is your own local bank… after all, you've already got a history with them that they can consult and since you're a returning customer there's a good chance that you'll qualify for lower rates. Check with your usual bank, as well as several other banks in the area… request loan quotes from each so that you can compare them later.

Unfortunately, not all banks are willing to offer low cost secured loans to individuals who have poor credit… if this is the case with you, then you might want to consider other alternatives to the traditional bank.

One place that you might go to get quotes other than from a traditional bank is a lending company. These businesses specialize in loans, and are often willing to offer loans to individuals of most credit levels with sufficient collateral for the loan. In some cases, though, lending companies will offer interest rates higher than those of traditional banks.

Since this isn't what you're looking for, you might want to also look into online lending companies. These companies offer loans based on collateral (such as home equity), and because of the lower costs of running an online business can often offer lower interest rates than both traditional banks and lending companies.

Getting the best loan

Since you're looking for low cost secured loans, getting the best loan that you can is very important. In order to do this, you should get several loan quotes from a variety of lenders (including banks, lending companies, and online lenders) and compare them to find the best interest rates and loan terms.

You should make sure that you use high-value collateral (such as a real estate property deed, automobile title, or home equity), ask for the lowest amount that you can definitely get by with, and make the largest monthly payments that you can afford.

This will not only help you to find low cost secured loans, but will also assist you in repaying the loan quickly… which will save you even more money once the entire loan has been repaid which along with the low interest rate of the loan itself will likely mean that you would have paid hundreds if not thousands more if you hadn't taken the time to research your loan options.

by: John Mussi

How to Secure a Low Cost Online Loan

2005-09-15T06:58:00.000-07:00

If you're in the market for a loan and haven't thought about online options, you might want to consider looking into getting a low cost online loan.

Unlike a traditional loan from a bank or finance company, a low cost online loan doesn't require you to drive around from lender to lender, looking for the lowest interest rate… instead, you can simply compare interest rates from different online lenders from the privacy and security of your own home. What's more, a low cost online loan can actually end up offering a lower interest rate than some banks and finance companies… even if you don't have great credit.

Of course, the first step in getting a low cost online loan is finding the right online lender; the best way to do this is to consult your favorite search engine and see where it takes you.

Searching for Loans

When using a search engine to find a low cost online loan, you should be pleasantly surprised to find that the first several results that are displayed from your search are likely going to be the best lending resources that you'll find.

Search engines rank their search results based upon the relevance to your search terms, the trust that the search engine has in that site, and the amount of traffic that the site has received recently in conjunction to those search terms.

The sites that are displayed at the top of the listing are most likely to be reputable sites, and are therefore much more likely to be able to deliver the low cost online loan that you're looking for.

Collateral

In order to keep the interest rates down for a low cost online loan, you're going to need some form of collateral. The collateral that you need might differ slightly from loan to loan and lender to lender, but chances are it will be some form of high-value personal property.

Some loans, such as online mortgages and automobile financing, use the purchased item as collateral, whereas other loans such as debt consolidation loans require some additional form of collateral to serve as a guarantee that the loan will be repaid.

One common form of collateral for online lenders is the equity that the borrower has in their home or other real estate… the individual needs of specific lenders may vary slightly, however.

Online Security

A major concern when dealing with online lenders is the safety and security of the borrower's personal identifying information. Individuals who are applying for a low cost online loan usually have nothing to worry about, since online lenders do their best to protect the personal and financial information about their clients.

Internet security has come a long way since the early days of online communication, and lenders who do business over the internet make sure that their security is top notch to keep their customers coming back for years to come.

by: John Mussi

Home Equity Loans - Are They Right For You?

2005-09-14T19:10:00.000-07:00

The bills are out of control and you need a new car. “Maybe we can get a new carpet and paint the house”, you say to yourself. These are just a few reasons why home equity loans can seem like the solution to all your problems and are so popular.

Home equity loans can be a fantastic way to start your own business or to take advantage of an investment opportunity. They can also make your situation worse than it was before you got the home equity loan.

The reason’s for taking advantage of home equity loans are the most important part of the process. Take the time to sit down and ask yourself, “Do I really need a home equity loan? Do I want to go on a spending spree or am I really trying to improve my life?”

A home equity loan is like having a second mortgage on your home. Suppose your home is worth $200,000 and you have a mortgage against it at $150,000, you will have $50,000 of equity available. Home equity loans allow you to borrow up to 80%, and sometimes more in certain situations, of your home value. In this situation you could borrow $80,000 as a home equity loan and still have only borrowed 80%.

This is why it is so important to take a good look at your situation before making a decision. You can see how easy it could be to get carried away with home equity loans.

Let’s say you only need $20,000 for that new car and some home improvements. You decide to borrow another $15,000 of equity for that vacation to Hawaii you have been dreaming about. First of all, a vacation to Hawaii would not cost $15,000 unless you went on a first class, spare no expense vacation.

Using a home equity loan to buy a car may not be a great idea with today’s 0% interest rates and no money down loans. There is no sense in risking losing your home to buy a new car with these type of loan programs that are available in todays market.

On the other hand, a home equity loan for home improvements may be a great idea. This will add value to your home as long as you can afford the higher loan payments.

A business that’s doing great that you want to expand may be another good use of a home equity loan. As long as the business is already in profit and is not losing money.

Some solid investments can be a good idea if you have done your research before hand. The latest IPO may or may not be a great idea.

Consolidating high interest credit cards may be a great idea as long as you close the accounts and don’t run them back up. You really only need one or two credit cards in case of an emergency.

Educational expenses may be a good reason to take a home equity loan to get your children started in the right direction. Someday this type of an investment can pay off.

These are just a few things you can do with home equity loans. It’s very easy to borrow too much, only to find yourself having a tough time making the new payments.

The important thing to remember with home equity loans is to be logical and don’t let your emotions get the best of you. Again, take the time to sit down and research all your options. This way you can rest well at night and not have to be concerned about losing your home. You can enjoy the things you do with your home equity loan knowing you’ve made a wise decision.

Copyright 2005 Dean Shainin

by: Dean Shainin

No-Cost Student Loan Consolidation

2005-08-11T21:53:00.000-07:00

A no-cost student loan consolidation – doesn’t that just sound too good to be true? Think about it. You have just accrued thousands of dollars in debt through student loans after 4 years of college, or possibly even more. Then, a company offers to take all of your loans off of your hands, put them into one central loan, and do it all for free! Well, while it might not be too good to be true, it all depends around your particular situation, which could make this a “free” process, or could still work out to the benefit of the consolidation company that you are working with throughout the process.

How A Student Loan Consolidation Works

Here is how the student loan consolidation works. You have used up thousands of dollars in student loans to pay your way through college, obtain housing throughout college, and pay for other odds-and-ends while attending college. A student loan consolidation then takes all these different loans, pays for each of them, at which time you then pay the student loan consolidation company for the total amount of loans taken out during college.

Example of Student Loan Consolidation

If you were to have outstanding loans of $5000 to one company, $6000 to another, and $9000 to a third, the student loan consolidation allows you to owe $20000 to one company, rather than to three. This can save you money in the long run, as these companies also may be able to offer you a competitive interest rate, which means you will be paying less overall for your student loans in a shorter amount of time and to only one company.

Potential Student Loan Consolidation Problems

Problems can occur with student loan consolidations if you catch a deal that does not work out favorably to your situation. For instance, if you choose a no-cost student loan consolidation that does not offer you a low interest rate, you could actually end up paying them more than you originally would have! It is important that you choose a company not for their “no-cost” approach, but for their willingness to get your student loans paid off with a consolidation that promotes a quick pay-off with minimal interest rates.

by: Vanessa McHooley

Do You Need a Home Equity Loan or Line of Credit?

2005-08-06T08:48:00.000-07:00

A home equity line of credit is very closely related to a home equity loan but the subtle differences can mean a lot. Determining which option is the best for you relies upon you knowing your current situation and having a clear plan for what you wish to accomplish with the money.

A home equity loan is a lot like a mortgage. With a home equity loan you are able to borrow the amount of your homes value that you have already paid off. The benefits of this type of loan is that it is almost always guaranteed since it is based upon the amount of your home that you already own, the terms are almost identical to a mortgage and you receive the entire amount of the loan up front after closing.

While a home equity loan is also based upon the amount of your home that you currently own, the terms of the loan are very different. A home equity loan is basically a credit card where the limit is the amount of equity that you have in our home. Instead of receiving one large lump sum of cash, you will receive an overdraft type of service on your account that will allow you to withdraw as much or as little of the equity that you wish to use.

Which choice is better for you? The answer depends upon what you need the money for. With a home equity loan the monthly repayment schedule is known and the interest on your loan will be lower than most other types of loans. However, with a home equity line of credit, you have instant access to cash and the payments will vary depending but the interest will vary. With this in mind the question really becomes do you need access to a varying amount of money or one known lump sum of cash?

A lump sum of cash with a set repayment schedule is great for specific things such as debt consolidation or the funding of specific projects with a predetermined cost. If you are considering debt consolidation for credit cards or any other high interest loans a home equity loan is most likely a very good idea. You will be able to repay all of your debt and will only have to make one monthly payment at a lower rate of interest that you are currently paying on your cards and other unsecured loans.

Home equity loans also make perfect sense if you know the exact amount that you need to borrow. While it is always nice to have cash on hand it is often better to have more credit available to you. The more of your credit limit that you use up the higher the interest rates will be for you and the tougher it will be to borrow more money in the event of an emergency. It is definitely to your advantage to only be in debt for a specific amount to complete one project.

A line of credit option may be better depending upon what you wish to do with your money. While you will still use up a portion of your credit limit, the payments and impacts on your available credit may be lower. With a line of credit you always have the same amount of money available to you. As you pay off the amount of credit used, you can reuse that portion if needed without having to apply for another loan. Also your payments may be considerably lower since you are only paying on the amount of money that you have actually used, not the total amount borrowed.

As you can see there are some big differences between a home equity loan and line of credit. If you are looking at a single project, such as a new car or adding a pool to your home, a home equity loan is the better choice for you. However, if you are looking at starting up a new business, wish to travel or can not settle on predetermined amount money, then a line of credit is the better option for you. With a line of credit you can use as much of your credit as you wish whenever you wish and, much like a credit card, you can reuse the amount of the line of credit that you have repaid with out having to re-apply for a loan.

by: Jakob Jelling

Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.

Top 10 Things to Consider on Home Loans

2005-08-05T12:55:00.000-07:00

Here are our Top 10 most important things to consider when shopping for a Home Loan, Equity Line of Credit, or Refinance, courtesy of LoanResources.Net:

Down-Payment
Fixed Versus Adjustable Rate
APR
Loan Types
Loan Amount Qualification, Income
Loan Amount Qualification, Expenses
Employment and Credit History
Points
Sub-Prime Loans
Short-Forms
1. Down-Payment - As a general rule of thumb, lenders will be seeking contribution from you of around 3% to 6% of the total loan value. This can be negotiable, and there are many loan packages available.

2. Fixed versus Adjustable – The two most common loan products available for home mortgages are fixed rate versus adjustable rate.

Fixed rate means that you agree on an APR (annual percentage rate) that does not change through the life of the loan, whereas, an Adjustable Rate Mortgage, better known as an ARM, means that rates and monthly payments can change, often tied to the U.S. Government Treasury Bills or some other form of “index”, with the frequency of change dependent upon the terms of the loan.

Deciding on which way to go involves many variables. We suggest that you start by examining the fixed rate products available on the market. They are by far the most popular, and arguably with the least amount of risk. After evaluating several preliminary loan offers (quotes) for fixed rate mortgages, you can then venture into the world of ARM’s to see if one of these products may be right for you. But, proceed with caution, and understand all the risks, alongside any potential benefits.

3. APR – APR, better known as the annual percentage rate, aka: “rate”, is arguably the most important consideration you must examine when looking for a loan. The APR includes principle, interest, “points”, fees, PMI (Mortgage insurance), and other costs associated with the loan. While all costs and terms are significant and affect the bottom line, we suggest that shopping rate is a very good starting point.

4. Loan Types: There are several standard loan products to look for, including 30 year fixed, 15 year fixed, bi-weekly mortgages, 1 month ARM’s, 5 year fixed ARM’s, 2nd Fixed, ARM’s with a provision to convert after 5 years, lender buydowns, and discounted mortgages.

We think the best place to start, is to obtain quotes for a 30 year fixed rate loan, and then go from there. 30 year fixed rate loans generally produce the lowest monthly payments for fixed rate products, and they are relatively safe. Once you know where you stand with a 30 year fixed, after obtaining quotes from several lending institutions, then you can consider the possibility of exploring more exotic loan products. At this juncture, you will want to consult with those you trust, for good, solid advice and feedback on risk versus reward.

5. Loan Amount Qualification, Income: This can vary widely depending on you, your lender, and many other variables. However, as a rule of thumb, look at 2 to 2 ½ times your current household income, as a baseline to determine how much you can afford to borrow.

6. Loan Amount Qualification, Expenses: This is another broad category that varies from one lending institution to the next. However, there are two general factors to look at, and they are Housing Expenses (such as mortgage, property taxes, and insurance), and long-term debt (which can include credit cards, auto loans, etc.).

First, add all your expenses together. As a rule of thumb, you will want your expenses to not exceed 33% to 36% of your gross household income.

Second, examine your housing expenses only. As a rule of thumb, you’ll want these expenses to not exceed 25% to 28% of your gross household income. 7. Employment and Credit History: Lenders generally want to take a look at your employment history so that they can see a pattern of stability and income. Lenders generally also want to take a look at your credit history, so that they can see a pattern of borrowing and repayment in your past. Lenders cannot discriminate and must use this information solely for the purpose of considering your ability to repay a loan. Also, many loan products are available for all kinds of customers, with varied financial backgrounds and histories.

8. Points: Points are one of the primary fees charged on the loan, and they represent the profit earned by the lending institution. One point represents one percent of the total loan amount, and points are usually tax-deductible (along with the interest paid on the loan). They are broken down into two basic types:

Origination Points – Origination Points are the fees charged by the lender, and represents their gross profit.

Discount Points – Discount Points are most often charged in association with a lowered interest rate. In other words, the Discount Points represents a dollar amount, as a fee for giving the borrower a lowered APR (lower than what the lender might otherwise charge).

9. Sub-Prime Loans: Sub-Prime Loans consist of loan products designed for customers with challenging credit and financial backgrounds, or, customers that are looking to re-establish credit. They can be significantly higher then the prime lending rate, with less favorable terms (Often times, the loans are for the short-term, such as 2 to 3 years). However, they do offer a venue for certain individuals, and they can allow customers to re-establish credit, or buy new homes prior to cleaning up a credit history, etc.

For some of you, this avenue may offer exactly what you’re looking for. It’s important to know that lenders who specialize in sub-prime loans are out there and want to earn your business. However, we advise that you proceed with caution. Be sure to gather sound advice from trusted friends and professionals, and understand all the risks versus rewards, prior to signing on the dotted line.

10. Short-Forms: The most important thing you can do as a consumer of loan products is to shop around and get several preliminary loan quotes for your consideration.

These are no risk, no obligation, preliminary loan offers. They take 30 seconds to 2 minutes to complete, they require no personal or confidential disclosure on your part, and they require no commitment from you.

We suggest that you obtain 3 or 4 offers. You can then examine and compare the terms, rate, fees, and all other pertinent information about the loan product, and the lender, at your leisure and in the comfort of your own home.

LoanResources.Net has categorized hundreds of online services that you can explore. You can also go to any search engine and find them from there. Look for a “privacy policy” on their website, as well as short, simple application forms that make sense and are relatively easy and quick for you to complete.

Also, take a quick look at the current interest rate for 30 year fixed loans, as well as the 6 month trend graph. We have set up a free webpage with this information, or you can find many graphs and charts via your favorite search engine.

We’ve enjoyed providing this information to you, and we wish you the best of luck in your pursuits. Remember to always seek out good advice from those you trust, but never turn your back on your own common sense.

Sincerely, Webmaster Tom Levine
info@loanresources.net
http://loanresources.net

Copyright 2004, by LoanResources.Net

This article may be freely distributed so long as the copyright, author’s information and an active link (where possible) are included. For more information about mortgages, debt consolidation, credit repair, and all other forms of consumer loan, credit, and debt products, please visit our website at http://loanresources.net .

Tom Levine is the webmaster of http://loanresources.net , and he can be reached at info@loanresources.net

Disclaimer: Statements and opinions expressed in the articles, reviews and other materials herein are those of the authors. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. The author will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

By Tom Levine

About The Author

Webmaster Tom Levine has been involved in insurance and finance for over 14 years, and provides a solid, common sense approach to solving problems and answering questions relating to consumer loan products. His website seeks to provide free online resources for the consumer, including rate-watch, tips and articles, financial communication, and links to products and services. You can check out Tom's website here: http://loanresources.net

What Students and Parents must Know about Student Loans

2005-08-04T21:57:00.000-07:00

A student loan helps you get through college. Then you come out into a high-paying career. It's a great investment in your (or your sons/daughters) future.

Student loans generally give you a good deal. You get below-market interest rates, and you get a $2500 federal tax credit on interest paid over any period of time (previously first 60 months only)

It doesn't matter if the student, or parent takes out the loan; tax deduction remains the same.

* Did you know the federal government has a $50 billion student loan program ?

Not surprisingly, the federal government provides the largest percentage of student loans. Other student loans may come direct from colleges, private lenders or state governments.

One of the key advantages to a federal guaranteed loan is exactly that - it's guaranteed. That means you don't need collateral. It also means the terms are kinder than a typical lender might offer. Of course, your educational program has to be approved by the government.

Types of student loans

* Federal Stafford Loan - for undergraduate or graduate students

A popular and cost-effective source of a student loan. Stafford loans provide low-interest, government guaranteed funds.

Stafford Loans come in two types, subsidized or unsubsidized. Whether or not you're eligible for subsidized depends on household income. The school ought to advise on this.

For subsidized, the government covers the interest right up to start of repayment i.e. they pay interest incurred during the course, in deferment and during the grace period before repayment begins. If you qualify for subsidized, it's a great deal

For unsubsidized, the student must pay all interest incurred at all times, though they don't start repaying until after grace period.

* Federal PLUS Loan - for parents of undergraduates

Parent Loan for Undergraduate Students (PLUS) allows parents to take a loan on their Childs behalf. They can contribute to their Childs future, and get a great low- interest loan with continuing future tax relief.

PLUS actually allows parents to borrow the total cost of their child's education, minus any grants or other financial aid awarded. All tuition fees, meals, books, transport etc. can be included in the loan.

This really is a great deal, and has no income or asset requirements. Even poor credit history may be overcome. Repayment is flexible, and can include zero payments for up to 4 years.

Only one drawback to the Federal Stafford and Federal Plus loan - your school must be approved to participate in these programs. If your school isn't approved, then you've got some other options...

* Banks

Many banks offer unsubsidized Stafford loans. You still get the money, which you must have to attend college, but repayment options are more limited. Some deals offer you an interest rate reduction if you make payments on time.

* State Loans

Most states offer guaranteed student loans. Apply direct to Banks, who'll administer the State program. It's usually a more expensive way to borrow than Stafford.

* College Board Extra Credit Loan

Administered by your college. Can be expensive, and best used only in an emergency e.g. your aid is withdrawn.

* Other Loan Sources

A number of other sources may be worth trying if you get a problem with your first choice lenders. Academic Management Services affiliates with approx. 2000 schools. AMS pay your tuition fees if you repay them in less than a year. College Resource Center also has loans available.

If your parent served in the military, then a military loan should be investigated.

College can be the experience of a lifetime. A child starts college as a high school kid, and emerges a full grown adult with high-earning potential…

But he or she needs money to survive and thrive in college. This article looked at the main sources of student loan funding, and those sources should be ideal for most students and their parents.

by: John Williams

What on earth are Home Equity Loans?

2005-08-04T12:51:00.000-07:00

Home equity loans are one of the most common types of financing for doing improvements on your house. These loans are not necessary used for home improvements but can also be used to simply obtain extra cash. It is essentially a standard loan, based on the equity you have in your house. This is as opposed to mortgage loans which are the loans used to purchase a home. Equity is the value that you have paid on your mortgage loan.

If you are planning on building a house, it may be advisable to obtain a construction loan. These loans are available at most banks or lenders online. Home loans in general are available online. If you are looking for more information on loans that are available, try checking online.

By doing a simple search using any search engine, like Yahoo or Google, you will undoubtedly receive hundreds of pages of websites that offer information or loans themselves. These companies, while there are many, may not all offer the same things. On value in doing this type of research is the ability to compare and contrast the different types of loans and different lenders available. You can save a lot of money by doing some basic research. Countrywide Home Loans, is one such lender that uses the Internet as a tool in providing potential customers with updated information.

Things to consider when looking at different loans include interest rates and terms of the loans. The interest rate, while dependent on the rate on the current market, may differ between lenders. Terms and conditions can be dependent on length of loan, flexibility of interest rate and credit standing. You may be able to find online lenders that will pre-approve you online within minutes of sending them your information.

All in all, there are many different financing options depending on if you are buying, building, or in need of extra cash. Home equity loans and home mortgage loans can be found through lenders at your local bank or online. Doing the proper amount of research will afford you the best deal out there.

By Mike Yeager
Mike Yeager
Publisher
http://www.a1-loans-4u.com/