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Pros & Cons: Reverse Mortgage Line of Credit vs. Home Equity Line of Credit

Pros & Cons: Reverse Mortgage Line of Credit vs. Home Equity Line of Credit

Equity in your home is always a positive, but many homeowners aren’t sure how they best take advantage of the equity they live with. Do they take out a reverse mortgage or a home equity line of credit? What are the rules for each, and do they even qualify? These are a few of the most important questions people ask when it comes to how they can get what they want out of their home, but there are more than a few considerations that should be taken into account long before a decision is made. Reverse mortgages and lines of credit are vastly different, and many homeowners are unaware of how they can affect the person who is living in the home.

Home Equity Loans

The good news about a home equity line of credit is that it’s available if there is equity in your home. You can borrow this money to make changes to the home, improve it, add onto it, and do whatever you want with it. It’s your money to use as you please and see fit. The other positive regarding a home equity line of credit is the loan type is available to anyone who owns a home in which they have some equity. There are no age limits associated with this type of loan. The positive attributes of a home equity line of credit are numerous, but there are cons associated with this type of credit.

Homeowners must have good enough credit to qualify for this type of loan. Without a good credit score, it’s impossible to get a good rate or even approval for the loan. If the rate is high, you might not be able to afford the payments on the loan. If your credit is very poor, you might not even find approval on your loan. It’s a scary concept, and it’s one that many people can’t face. Additionally, this loan must be paid back over time, which can become quite expensive as you continue to borrow more and more money for it.

Reverse Mortgages

People love these, and they’re a lot more affordable for seniors. They are only available to seniors, however. You must be of a certain age. This works by allowing seniors to take out the equity in their home without making monthly payments. The amount they can borrow each month also changes with the economy and other factors, allowing borrowers to take more each month. This money is money they’ll never pay back. It’s also guaranteed. You can borrow the amount of money your house is worth no matter your income or credit.

The house loan is paid for when the home is sold. The person who takes out the loan will leave the home to the bank or to their family when they pass on, and the house must be paid off or listed for sale immediately to satisfy the terms of this type of mortgage. The downfall to this is you have no home to leave your kids if they cannot afford to pay off the loan or buy the house on their own. This has the potential to become a devastating position for family if you are worried about how they will survive once you are no longer with them.

There are many pros and cons associated with both types of loans, but you are going to choose the best for your personal financial situation. Financial experts argue your job is not to leave your kids with anything but to live your best life financially. Take that into consideration when it’s time for you to make the important decisions regarding your bank account and finances.

Look into the options of both loans and figure out which one works best for your income and situation. If you can afford to make payments each month on a line of credit, this is probably the best solution. If not, you can do what works for you and take advantage of the offers that are available for seniors on a fixed income without much chance of seeing funds in another manner that’s more traditional.

Business Credit Could Very Well Enhance A Company’s Valuation

Business Credit Could Very Well Enhance A Company’s Valuation

Small business owners start out with a limited amount of knowledge about their endeavors. A lot of things an entrepreneur learns is based on experience. Until a someone has actually sat in the all-important desk of a small business owner, a lot of little things end up being ignored or left unknown. One such thing is credit. More specifically, newbie small business owners may be totally unaware of how credit impacts the value of a business.

Valuation is Valuable

Valuation is definitely important. The value of a business defines how much the business can be sold for. A common exit strategy for any business — small or large — is to sell the enterprise at a profit. Sometimes, sadly, a business has to be sold because the company is underperforming. Regardless of the reason for selling, bumping up the value of a business is vitally important. Building up credit helps with such a goal. As such, improving the credit standing of a business should come a priority for all entrepreneurs.

Business Credit Examined

Business credit refers to credit taken out in the name of a business and not an individual. Individuals acquire personal credit and must maintain a good personal credit score. The range of a personal credit score runs up to 850. A business credit score follows a simpler scale: 0 – 100.

Credit taken out in a business’ name has to be treated with the same level of seriousness as personal credit. Maintaining the highest possible business credit score is critical for boosting a company’s value in the market.

The Transfer of Worthiness

Although the human who runs the business applies for credit, the business holds the credit. When the business is sold, the business retains its outstanding credit score. Anyone interested in purchasing the business also procures the existing credit score. Consider this an asset to the business, an asset that drives up the value of the business at least in part.

Removing Impediments to Business Operations

Business credit does something very important long before any decisions are made to sell a company. The credit allows the business to procure the things needed to actually run things. Cash flow might not be consistent at all times. A lack of cash can be tempered by access to credit. A business would not need to run at “half mast” due to the inability to pay for necessary items. Of course, the debt does have to be paid back. As long as the interest rates on the business credit account are fair, repayment should not be too difficult.

Since the business is running at a proper operational level, it won’t be losing customers unnecessarily. This alone should assist with building up the value of a business.

Caring for the Business Credit Line

As would be the case with a personal line of credit, a business credit line does need to be used correctly. Being loaded with debt is not exactly going to be helpful for a business. Proper management of a business credit line makes running the business easier, avoids costly mistakes, and ensures the value of the business is not needlessly undermined.

Business credit should not be a confusing topic. Understanding a few simple points definitely aids in managing business credit wisely. The end result of this may be a business with a much higher valuation.

5 Expert Tips for Consolidating Credit Card Debt

5 Expert Tips for Consolidating Credit Card Debt

Debt is all-consuming, and many families live with it. Credit card debt, student loan debt, car notes, and home loans are all debt. While a mortgage might not seem like bad debt to you, your credit card debt is certainly bad debt. You’re paying interest, tying up your available funds, and you’re ruining your credit score with debt. The best thing you can do for yourself and for your finances is get your debt paid off in full. Experts offer their advice on consolidating debt and how it works for consumers. If you’re not sure whether it’s right for you, this information can help you make an informed decision.

Check Your Credit

The most important thing to do is check your credit. Credit card debt consolidation companies help find funding to help consolidate your debts, and that’s not easy to do when your credit report is incorrect. You’re going to need to get your credit report to check for inaccuracies and misinformation so you can apply for consolidation credit as quickly as possible.

Consider Credit Card Consolidation

One of the best ways to consolidate your credit card debt is with a 0% APR credit card. These offers are always available, and they’re free. You can transfer credit card balances to the new card, and you’ll end up with a set amount of time in which you can repay the debt without paying interest.

Get A Personal Loan

Personal loans are another option for anyone who has debt to pay. You can pay off your credit card debt by consolidating it all into a personal loan. You’ll eliminate numerous high interest rates for a lower rate on one payment. It allows you to pay off your debts faster and for far less. It’s a great option for those who have the credit and the ability to apply for a personal loan.

Don’t Cancel Old Accounts

Once your accounts are consolidated, many consumers begin cancelling their credit cards. You don’t want to run up your debt again, so this makes sense. However, you don’t want to cancel your oldest cards. Your credit score is dependent on the length of your credit history. If you have old accounts you want to cancel, you can shorten your credit history and negatively affect your credit score. It’s not safe to do this, but it’s a good idea to cancel any newer cards you have. Be careful how many you cancel, though. The available credit you have makes your credit utilization ratio look better when you’re not using as much of it. What does this mean?

Credit reporting bureaus calculate your credit score using a complicated array of methods. One method is your credit utilization. Your total amount of available credit is determined, and then it’s determined how much of it you’re using. Let’s say you have $20,000 in credit card debt and you just paid it off by consolidating it into a home equity line of credit worth $35,000. You’re only using the $20,000 and the other $15,000 is unused.

With your credit card accounts still open, your total available credit is $55,000 of which you are using $20,000. That’s just above 36% of your available credit, which is your credit utilization. If you cancel those credit card accounts and decrease your available credit to $35,000 and still have $20,000 of that utilized, your utilization increases to just under 60%, which is unfavorable and will affect your score.

Make Repayment a Priority

Simply because your debts are now consolidated doesn’t mean you can stop paying as much on the loan. You’ll want to apply all funds you were currently applying to your debts to help pay it off faster and more efficiently. Don’t stop paying those debts just because they’re not as costly. If you were paying $1,500 per month in minimum payments to your 7 credit card companies before consolidation, continue paying that much.

Financial experts want to see Americans debt-free, and that’s why they take the time to offer advice regarding debt consolidation. It’s not easy to live with debt, and these options can make it simpler for you to avoid debt and continue to live a life of financial freedom.

Credit Card Help: 10 Ways Students Can Build Good Credit

Credit Card Help: 10 Ways Students Can Build Good Credit

When you are still a student, the thought of building good credit might seem like a faraway goal. However, the sooner you can start, the more time you have to establish a credit history and to learn how to use credit cards responsibly. Building good credit can help you to qualify for certain future goals, such as a new house or car.

1. Choose a credit card for students.

One way to get started is to select a credit card for students. These cards may have low limits on them to help keep you on financial track. Also, if you apply to many cards in a short period of time, you may hurt your credit score. Selecting one tailored for students helps to increase your chances that you are approved.

2. Start now.

While you do not want to pile up insurmountable levels of debt before you even have a full-time job, your credit history matters. Your history is one of the factors calculated into your credit score. For example, even after 10 years of having a credit card, you may still not have a perfect grade in that column, so the sooner you start, the better.

3. Select low limits.

Even if you do not apply for a credit card made for students, you should choose one that has a low limit on it. When you get your first credit card, you might feel tempted to spend right away, but doing so can leave you with tremendous amounts of debt in the future. Select a card that forces you to stay within a certain range of debt.

4. Pick store cards.

Store cards can be a place to start because you may find that they are easier to qualify for than other cards. Also, you can also start to earn rewards with some of these cards, allowing you to save more money than if you shopped at the store without the card.

5. Research rewards.

Credit cards with rewards, even if they are not for a particular store, are useful. For example, some credit cards might give you money back for all of your purchases, so you can use that money to pay off some of the debt or to put into your savings account.

6. Obtain a student loan.

In the event that you need to take out loans for college, see if you can do so in your name. You may find that it is difficult or impossible to qualify if you have no credit history, however. In the event that you do qualify, you may find that paying back this loan can raise your credit score. Keep in mind that you generally do not start to pay back loans until after college; you may have the opportunity to do so, but some lenders penalize for early payments.

7. Procure other loans.

Taking out an excessive amount of loans is a poor choice, especially when you are still on your way to obtaining a full-time job. However, you may obtain a small loan to pursue a business venture, or you might have a loan on your car. When you are making payments, you are working to increase your credit score.

8. Pay your bills each month.

You might feel tempted to make one large purchase and then to pay it off over the course of the next year or so. Keep in mind, however, that you are not just paying for the sum of the purchase; you are also paying for the interest rates.

9. Research interest rates.

Many people find themselves in major problems with credit cards not so much because of what they spend but because of the interest rates on those purchases. Looking for interest rates that are as low as possible can help you to keep your credit under control.

10. Set a budget.

Creating a budget for your spending habits on your new credit card is important. Each month, make sure you are aware of exactly how much you can put on the card before you start to open the door to problems with debt.

These habits can help you to build a good credit score, and they can also assist you in creating a savvy financial future.

5 Things to Know Before You Buy: A Pet Insurance Review

5 Things to Know Before You Buy: A Pet Insurance Review

Pet insurance isn’t new, but it’s a new concept to many. It’s been around for years, but it’s only recently people with animals of their own began to look at a policy for their pets seriously. The insurance industry is massive, and it only makes sense it would enter the world of pets. With so many animals being sent to the vet regularly to undergo expensive and often unaffordable procedures, it’s helpful for pet owners to have a way to make their pet’s healthcare more affordable. If you’re not sure how much pet insurance might benefit your family, you should consider these five important factors.

Prices

No one but you can determine what’s affordable in terms of pet insurance. Someone who has a sick dog with a disease might not find anything too expensive in comparison to what they’re paying at the vet for medication and treatment each year. Someone who has a healthy dog who goes to the vet each year for his annual exam might feel a policy that costs several hundred dollars per year a bit expensive.

The point is pet insurance is a gamble. You either need it or you don’t. If you don’t have it and you need it, you’ll end up paying thousands of dollars in veterinary bills. If you do have it and never use it, you’ve spent money you wouldn’t otherwise spend. You still have financial peace of mind knowing anything could happen to your pet at any time, and you won’t be left making the decision to seek veterinary care for your animal that might cost too much or forgoing that care because of the cost.

The Age of Your Pet

The age of your pet might make a difference when it comes to pet insurance. An older pet who is on his or her way out might not need insurance. There’s little that can be done to make a dog or cat more comfortable if it’s very sick or just old. Younger pets have years to go, and you might see the benefit of paying for insurance in this case.

How Much You Spend

If you have a pet that doesn’t cost you anything at the vet, you might not want pet insurance because it doesn’t seem worthwhile. However, you should take into consideration the cost of one veterinary service you weren’t expecting to the cost of a pet health insurance policy. A policy might cost a few hundred dollars per year, but what happens if your dog runs out into traffic and is hit by a car? Those vet bills can become expensive before the day is over. You might feel the need to pay for this insurance simply because it’s a safer bet.

Your Pet

It should be common sense, but some people wonder if they need pet insurance for all pets. Cats, dogs, horses, and other large animals that live a long time are good candidates for this insurance. If you’re looking to keep your goldfish alive, however, you don’t want pet insurance. Your iguana might be very important to you, but these aren’t animals that necessarily benefit from pet insurance the way other animals benefit from it.

Providers

Before you check out any pet insurance review be sure you’re aware of the providers they work with. If your trusted vet of decades isn’t on the list, do you really want to go with that company? If the provider is of little interest to you, this might not be the most important consideration. You do want to ensure there is a provider on your list of acceptable vets close to home, and one who has a great reputation for working with their patients and clients well.

Pet insurance isn’t for everyone, but it’s for many people. Many believe their pet is a part of their family, and the idea of insuring the pet the same way they’d insure their kids is without a doubt important. For others, the idea of paying for something like this for an animal is a little questionable, which is why getting to know what pet policies offer and how they benefit families is imperative.

Student Loans for College

Student Loans for College

Student loans are an option for anyone with good enough credit or a co-signer to attend college without worrying about how to pay for expensive classes. The premise of college is to provide students with the chance to improve their future. With an education, there are often more job opportunities for students. With an education, most people are paid more. With an education, you open your job prospects to positions only degree-carrying graduates can apply for. It’s meant to make the future brighter for most, but it’s often too expensive. When it’s time to go to school, you might want to learn about student loans and how to use them correctly.

Find Free Money First

Student loans are so easy to obtain, so many students look to them before anything else. After all, it’s easier to apply for a loan in a matter of minutes than it is to work part-time or full-time while attending school. It’s also easier than looking for scholarships and sending in documents, essays, and more. Out of laziness or a lack of time, many students stick to loans and forgo free money.

Grants and scholarships are available, and they’re not nearly as difficult to obtain as so many students believe. It does take a bit more time, and it’s not guaranteed the way a loan is. However, there are grants and scholarships everywhere. It’s money you get to use for your education and never pay back. This is a smart money move, and it makes the amount you need for loans smaller.

Borrow Only What You Need

Student loans are as much or as little as you’d like. The rule of thumb here is to apply only for what you need. There is no need to take out loans for more than the amount of your tuition. In fact, it’s a good idea to see if you can get four years of your education paid for in one loan. This means you’re going to stick to your budget, get through school, and you’ll never worry about not having the money to pay for college when it’s time. This is one way to ensure your tuition is paid, but that you don’t acquire too much debt in the process.

Choose Federal Loans

Federal loans offer better rates and repayment terms than private loans, and they make better debt. You’ll be required to pay it back, but there are perks. If you graduate and cannot find a job, federal loans allow you to defer your loans longer than you originally deferred them. These loans are also within the realm of specialized repayment terms. If you’re looking for a way to repay loans you can’t afford, you’ll find federal lenders are more likely to work with you on income-based repayment programs. This helps you find relief if you need it. The post-graduate job market isn’t always what grads expect, so this feature helps.

Know If Your Degree is Worth It

Loans to go to medical school are almost always worth it. Doctors earn a substantial income and are able to repay their loans. If you’re taking out tens of thousands of dollars to become a teacher only earning $35,000 but in debt for twice that, it’s not a great idea. Does your degree guarantee you will have a good income and the ability to get a job and repay your loans? An expensive degree in a market that doesn’t pay well or hire often might be too risky.

Student loans are never a great idea, but they’re always an option. It’s always better to work your way through college or seek scholarships or grant money before you turn to the help of student loans. Also if you’ve found yourself in serious debt after college then you probably should consolidate your private of federal student loans fast. Whether you go federal or private, your job is to repay those loans. When they amount to more than you can afford to repay, it becomes difficult to repay the amounts you owe. It’s up to you to find a way to make your money work for you, which is often looking for alternatives to student loans and their expensive and lengthy repayment options.

The Dangers of Consolidating Credit Card Debt

The Dangers of Consolidating Credit Card Debt

Credit card debt is known to cause an enormous amount of havoc in a person’s life. Once several credit cards are maxed out, paying down the debt becomes difficult even when the interest rate is reasonable. Several cards with high interest rates are doubly difficult to pay down. Each and every month, money ends up going to pay interest. The principle amount ends up being barely touched.

At some point, steps do need to be taken to eliminate the debt. Consolidating credit card debt is probably the most common approach most take. Is credit card consolidation the best plan of action to follow? Honestly, there may be a better way. Some financial gurus even suggest not consolidating credit cards. Many, however, have done so to great success.

Generally speaking, consolidating credit cards is an available option but the process comes with caveats.

Consolidating Credit Card Debt: The Basics

The process of consolidating credit card debt means the balances of several different accounts are paid off by a single loan. Now, only that one debt has to be paid off. This does make things simpler and easier to budget. There are a few ways in which this can be done.

The Balance Transfer

Credit card companies like to take business away from each other. One method to luring clients away entails offering low-interest or no-interest credit card transfers. Depending upon the limit awarded with the new card, two or more credit cards may be consolidated with the new one. As long as the new debt is paid off quickly, interest won’t even be factored into the obligation.

A Debt Consolidation Loan

A line of credit or personal loan could be used for debt consolidation. A higher credit limit may be possible with either of these two lending options. A balance transfer credit card might be limited in terms of the available credit. For those with more debt than can fit on a single credit card, going with this particular loan makes more sense. There is going to be interest required on the loan, but the interest probably will be much lower than what is found on a credit card. Also, the interest won’t fluctuate as is the case with credit cards known for low introductory offers.

Secured Consolidation Loans

Secured consolidations loans are those loans backed by collateral. When the amount to be consolidated is significant, then collateral may be required for a lender to approve a particular loan. Home equity loans, however, are often chosen because the interest rates are very low. Secured loans may be easier to procure since the loan is being backed by assets in case of a default.

The Trouble with Debt Consolidation Loans

Based on the simple process of consolidating a loan, it would seem there is very little wrong with putting a tremendous amount of debt into one account. A host of problems can and do arise when playing the debt consolidation game.

The biggest problem with consolidating debt is the risk of running up even more debt. Once the balances on those credit cards have dropped to zero, the account holder has free reign to start charging on them again. $30,000 in credit card debt moved to a $30,000 home equity loan could turn into $60,000 in debt if the cards are maxed out again. The extreme danger here is no other options may be available to pay off the new — more massive — debt.

The problem with not being able to pay secured debt means the collateral can be seized. With a home equity loan, a lien could be issued and the property lost. Yes, the most important asset associated with net worth — a home — could be lost due to a return to improper spending habits.

Going the Route of Debt Management

Before accepting any offers for debt consolidation, it may be wise to seek out a reliable debt management plan. Debt management helps with setting a new budget and coming up with a strategy to reduce all current debt. Discipline is most definitely required with this strategy. The risks are limited. In time, with the right plan, being debt free may very well result.

Buying A Home? Tips on Doing it Right

Buying A Home? Tips on Doing it Right

Buying a home is one of the most exciting and most stressful situations you’ll experience, but it’s worth every moment. If you’re buying a home for the first time or even if you’ve purchased a home in the past, you should know there’s a right way to make a home purchase. There are numerous alternative ways to buy a home, but doing it right involves knowing how to get the best mortgage, how to afford a home, and how to make sure the process is as seamless as possible. These tips can help you do just that.

Compare Mortgage Rates

Buying a home is expensive, which is why it’s best to compare rates. Even if you’ve been banking with the same bank your entire adult life, you can search for better rates. Your bank might have the best rates, and it might not. The point is that you can’t get the best rate if you don’t do a comparison and find out which bank is offering you the lowest interest so you can minimize your mortgage payment and afford more house.

Check Your Credit Report

You might know you’ve never made a late payment or have debt, but you don’t know what’s on your credit report. Mistakes are made all the time, and your report might be the subject of a serious mistake. Someone else’s information might mistakenly be on your report. There could be information that’s old that never fell off, or information that’s not accurate. Your job is to find the mistakes and have them fixed before you apply for a mortgage. They can affect your rates, your approval, and the buying process.

Save for A Down Payment

There are numerous financial assistance programs that allows buyers with a low down payment or no down payment to secure a mortgage. These mortgages require buyers to pay Private Mortgage Insurance until the loan is less than 80% of the value of their home. It’s expensive, and it’s not always worth it for buyers.

Buying a home is done well when you are able to make a down payment. The traditional amount is 20% of the total value of the home. You should never finance more than 80% of the home’s value, because banks won’t allow you to finance that much without assistance. When you make a down payment, you go into your mortgage with instant equity in your home.

Know What You Can Afford

You can do the math, but you might not do it correctly. There’s more expense to buying a home than just paying a mortgage. Did you include taxes and insurance? You’ll also consider any fees for a homeowner’s association, lawn maintenance, utilities, water, cable, and any other expenses you might incur as a homeowner. It’s easy to forget you’re buying a home that requires electricity if you’ve never bought a home before, and sometimes these features take up a bit of your budget. Perhaps you can afford to spend $2,500 per month on a house, but that must include all the other expenses that go along with homeownership.

Get Pre-Approved

One of the most important things buyers do when searching for a home is getting pre-approved for a mortgage. This is not a mortgage, but it’s going to make the entire buying process simpler. Many sellers refuse to work with buyers if they haven’t a pre-approval. Many agents won’t show specific homes to buyers without a pre-approval. There are numerous reasons you need a pre-approval, and one of the most important is knowing what you can afford.

Many buyers assume they can afford so much home, but they can’t actually afford that in terms of a mortgage if their credit isn’t perfect or their income high enough. It’s far easier to seek pre-approval and know what you’re working with in terms of a mortgage than assume.

Buying a home is a delicate process, and these tips make it simpler. Each one is designed to allow buyers the chance to buy the best home for the best rates, and to make the best financial decisions. Don’t let the process be a difficult one to face. Follow these tips and enjoy the process of buying a home.

Refinance Mortgage – When to Refinance Your Mortgage

Refinance Mortgage – When to Refinance Your Mortgage

Mortgage refinance involves paying off your existing loan with a new one. Many reasons to refinance involve the reduction of mortgage costs and fees, which is why it is often beneficial to the average debt-laden homeowner. With foreclosure reaching an all-time high and one million people entering into foreclosure every year, refinance is an option that prevents financial problems, debt and the loss of your home. Refinancing is similar to taking out a new mortgage, as you will go through the same application process. Your credit score, financial standing and debts will be considered before refinance can be done. Here are just some of the reasons behind wanting to refinance your mortgage. All of these implications justify refinancing with a qualified mortgage broker.

When You Need a Lower Interest Rate

If you entered into a mortgage agreement with a high interest rate, refinancing can substantially lower this fee. Homeowners with bad credit who have raised their score numbers over the past several years will find that refinancing allows them to get a better interest rate. A bad rate on a home that is often given to those with poor credit scores is 5.481 percent. An excellent rate, and one you should strive to obtain, is 4.025 percent. Lowering the interest rate is the most common reason to refinance for American homeowners.

When You Need to Lengthen the Term

For homeowners who took out their loans under a 15-year payoff agreement, it can be difficult or even impossible for them to make those expensive monthly payments. Refinancing allows you to turn a 15-year mortgage into a 30-year one, lowering your payments tremendously to make them more affordable.

When You Want to Transition From Adjustable-Rate to Fixed-Rate

ARMSs seem tempting at first because they offer lower rates to consumers. However, periodic adjustments made to these rates result in an increase in mortgage repayment. You might have taken out your current mortgage at a very low rate, only to find that the interest is killing your finances now that it’s gone up. Converting to a fixed-rate mortgage provides the stability that you need for the decades it’ll take to pay off the loan. It prevents hikes from becoming a concern, eliminates problems with mortgage repayment and eradicates the uncertainty of an ever-changing rate.

Alternatively, you may be looking to switch from a fixed-rate mortgage to an adjustable one due to the competitive rates. Fixed-rate mortgages are great when you want to get locked into an affordable rate and plan on staying in your home for as long as you can, but they can be damaging when you could potentially get a lower interest rate by refinancing to an ARM. Adjustable-rate mortgages are particularly advantageous to homeowners who don’t plan on living in their homes for very long.

When You Need to Consolidate Debt and Manage Finances

Mortgages that total more than 20 percent of your total income need to be refinanced. Debt problems often surface because of a larger-than-life mortgage payment each month. After all, if it comes down to paying your cable bill or paying your mortgage, you’re obviously going to pay to live in your home to avoid foreclosure. Unfortunately, those unpaid bills go into collections, further lowering your credit score and causing a quick-sand effect on your financial well-being. Debt consolidators will often recommend mortgage refinance to families struggling to pay their bills. You can do this by going with an extended term and lower interest rate, if possible.

When You Want to Cash-Out Home Equity

It’s rather tempting to refinance your mortgage for the sole purpose of cashing out some of your home equity. This helps other investments you’re planning to make, such as purchasing a second property or starting your own business. Cashing out on home equity should be done by individuals responsible with managing their money as it puts your security at risk if done for frivolous reasons such as buying a luxury car, purchasing a boat or paying for an all-inclusive vacation package.

Home refinance should always be done by a trusted financial institution that specializes in mortgages. You should have a clear understanding of the reasoning behind your refinance and what you expect to get out of the process.

How do I Budget for the Unexpected?

How do I Budget for the Unexpected?

Budgets help many families stay out of financial trouble, and they’re useful tools for everyone regardless of their income or bank account balance. Budgeting allows consumers to see where they stand financially. Everyone should know what they make, what they owe each month, and how much they spend on specific expenses and simple pleasures each week and month. It’s a good way to stay on track, to avoid debt, and to avoid unexpected expenses. You may end up needing debt consolidation company just to get things more under control.

Unexpected expenses occur all the time. It’s a leaking roof, a deductible to pay after a car accident, or a large co-pay when someone visits the emergency room. It’s a flat tire, or the need for a car repair you didn’t see coming. An unexpected expense might be a flight home to visit sick or ailing family member. Unexpected expenses crop up all the time, and many families are only one unexpected expense away from financial ruin. Don’t let this happen to you. It’s time to learn how to budget for life’s unexpected expenses.

What’s an Emergency Fund?

An emergency fund is the best way to cover unexpected expenses. It’s nothing more complicated than a bank account with funds in it designated only for the expenses you’re not expecting. It’s a bank account that has money in it for flat tires, car repairs, bigger-than-usual phone bills, or anything else you don’t see coming when it happens. This account, according to financial experts, should have at least $1,000 in it. This is a good start, and putting more into the account is a great way to really feel comfortable when the unexpected occurs.

The best way to handle your emergency fund is to place 3 to 6 months of living expenses in the fund in case of an unexpected job loss. A year worth of expenses is even better. Of course, not all families have the ability to put that kind of money into an account and leave it sitting there. That leaves you wondering how you can save this kind of money.

Saving For an Emergency

Those who are one unexpected financial emergency away from financial ruin know they need an emergency fund, but you ask how you’re supposed to save for one when you live paycheck-to-paycheck. It’s not always easy, but there are ways you can set aside funds in this account if you’re on top of your financial habits. Start by creating a budget, and then try using the following methods.

– Save your savings. Use coupons at the grocery store and put away whatever money you saved on that trip into your savings account. If you saved $11 with coupons, put that $11 worth of savings into your emergency fund.

– Place unexpected funds in your emergency fund. If you are given a bonus at work, use it to start your emergency fund. If you receive an income tax refund, use it for savings.

– Change your tax rate at work. If you receive an income tax refund each year, you’re paying too much in withholding taxes. Ask HR to change the information on your W4 to take out less withholding and increase your paycheck. Use the addition to your paycheck each pay period to fund your emergency account.

– Sell what you no longer use, want, or need for cash to fund your emergency cash with.

There are endless creative ways you can start an emergency fund to protect yourself from unexpected expenses. You can take on a second job for a month to raise the money, or you can do odd jobs around the neighborhood such as mowing lawns or babysitting. You should do whatever it takes to fund this account, and keep adding to it when you can to help the amount grow. If you can only afford to put $25 per week into the account, that’s more than $1,000 per year you can add to your account.

Unexpected expenses can cause financial ruin for many families, but you don’t have to live with that fear. An emergency fund isn’t as difficult to fund as many believe, and it’s time for you to learn how to save money and your financial future by creating one of your own.

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