Lines of Credit and Other Types of Borrowing

Lines of Credit and Other Types of Borrowing

As suggested above, there are many similarities between lines of credit and other types of borrowing, but there are also many important differences that borrowers need to understand.

Credit cards

Like credit cards, lines of credit effectively have preset limits – you are approved to borrow a certain amount of money and no more. Also like credit cards, policies for going over that limit vary with the lender, though banks tend to be less willing than credit cards to immediately approve overages (instead they often look to renegotiate the line of credit and increase the borrowing limit). Also like credit cards, the loan is essentially pre-approved and the money can be accessed whenever the borrower wants, for whatever use the borrower intends. Lastly, while credit cards and lines of credit may have annual fees, neither charge interest until/unless there is an outstanding balance.

Unlike credit cards, lines of credit can be secured with real property. Prior to the housing crash, Home Equity Lines of Credit (HELOCs) were very popular with both lending officers and borrowers. While HELOCs are harder to get now, they are still available and tend to carry lower interest rates. Credit cards will always have monthly minimum payments and companies will significantly increase the interest rate if those payments are not met. Lines of credit may, or may not, have similar immediate monthly repayment requirements.

Lines of Credit and Other Types of Borrowing

Loans

Like a traditional loan, a line of credit requires acceptable credit and repayment of the funds, and charges interest on any funds borrowed. Also like a loan, taking out, using, and repaying a line of credit can improve a borrower’s credit score.

Unlike a loan, which generally is for a fixed amount, for a fixed time, with a prearranged repayment schedule, there is much greater flexibility with a line of credit. There are also typically fewer restrictions on the use of funds borrowed under a line of credit – a mortgage must go towards the purchase of the listed property and an auto loan must go towards the specified car, but a line of credit can be used at the discretion of the borrower.

Pawn Loan / Payday Loan

There are some superficial similarities between lines of credit and payday loans, but that is really only due to the fact that many payday loan borrowers are “frequent flyers” that frequently borrow, repay, and/or extend their loans (paying very high fees and interest along the way). Likewise, a pawnshop or payday lender does not care what a borrower uses the funds for, so long as the fees/loans are paid/repaid.

The differences, however, are more considerable. For anyone who can qualify for a line of credit, the cost of funds will be dramatically lower than for a payday/pawn loan. By the same token, the credit evaluation process is much simpler and less demanding for a payday/pawn loan (there may be no credit check at all) and the process is much, much quicker. It is also the case that payday lenders will seldom lend the amounts of money often approved in lines of credit (and banks will seldom bother with lines of credit as small as the average payday or pawn loan).

Top 5 financial decisions you’ll regret forever

Top 5 financial decisions you'll regret forever

Financial regrets. We’ve all had a few. But there’s a big difference between making an impulse purchase that you second-guess the morning after and making a major decision about your money that could haunt you for a lifetime.

We reached out to dozens of financial planners and personal-finance experts for their views on some of the most consequential mistakes people can make with their money. We also offer advice on fixing these mistakes — or avoiding them altogether — so you’re not left ruing the day when you blew your budget, wiped out your savings or otherwise sabotaged your financial future.

1. Borrowing from your 401(k)

Taking a loan from your 401(k) can be tempting. After all, it’s your money. As long as your plan sponsor permits borrowing, you’ll usually have five years to pay it back with interest.

But short of an emergency, tapping your 401(k) is a bad idea for many reasons. According to John Sweeney, executive vice president for retirement and investment strategies at Fidelity Investments, you’re likely to reduce or suspend new contributions during the period you’re repaying the loan. That means you’re short-changing your retirement account for months or even years and sacrificing employer matches. You’re also missing out on the investment growth from the missed contributions and the cash that was borrowed.

Keep in mind, too, that you’ll be paying the interest on that 401(k) loan with after-tax dollars — then paying taxes on those funds again when retirement rolls around. And if you leave your job, the loan usually must be paid back within 60 days. Otherwise, it’s considered a distribution and taxed as income.

Before borrowing from a 401(k), explore other loan options. College tuition, for instance, can be covered with student loans and PLUS loans for parents. Major home repairs can be financed with a home-equity line of credit.

2. Claiming Social Security early

You’re entitled to start taking benefits at 62, but you probably shouldn’t. Most financial planners recommend waiting at least until your full retirement age – currently 66 and gradually rising to 67 for those born after 1959 – before tapping Social Security. Waiting until 70 can be even better.

Let’s say your full retirement age, the point at which you would receive 100% of your benefit amount, is 66. If you claim at 62, your monthly check will be reduced by 25% for the rest of your life. But hold off until age 70 and you’ll get a 32% boost in benefits – 8% a year for four years – thanks to delayed retirement credits. (Claiming strategies can differ for couples, widows and divorced spouses.)

“If you can live off your portfolio for a few years to delay claiming, do so,” says Natalie Colley, a financial analyst at Francis Financial in New York City. “Where else will you get guaranteed returns of 8% from the market?” Alternatively, stay on the job longer, if feasible, or start a side gig to help bridge the financial gap. There are plenty of interesting ways to earn extra cash these days.

3. Paying the minimum on credit cards

Americans’ plastic addiction is taking a toll on their bottom lines. The average household with debt owes $15,762 on credit cards, according to personal finance website NerdWallet.com.

“It can take years and years and years to potentially pay off that credit card debt with the amount of mounting interest costs,” says H. Kent Baker, professor of finance at the Kogod School of Business at American University, “especially if one continues to charge more and more and more.”

Consider this example: You have a $5,000 balance on a card with a fixed rate of 12.5%, typical of what banks are charging these days. If you only make minimum payments, it’ll take nearly 10 years and $1,700 in interest to eliminate that $5,000 debt, a Bankrate calculator shows.

What to do? First, stop making new charges. Second, if possible transfer the balance to a lower-rate card. Third, pay more than the minimum. Even a small boost to your monthly payment can result in significant savings on interest. Above all, advises Baker: Live within your means. (Kiplinger’s Household Budget Worksheet can help you get back on track.)

4. Putting off saving for retirement

Financial professionals have heard the refrain before: “I’ll start saving for retirement when I make more money.” But that fiddling while Rome burns won’t cut it as retirement nears.

“Many people do not start to aggressively save for retirement until they reach their 40 or 50s,’’ says Ajay Kaisth, a certified financial planner with KAI Advisors in Princeton Junction, N.J. “The good news for these investors is that they may still have enough time to change their savings behavior and achieve their goals, but they will need to take action quickly and be extremely disciplined about their savings.”

Morningstar calculated how much you need to sock away monthly to reach the magic number of $1 million saved by age 65. Assuming a 7% annual rate of return, you’d need to save $381 a month if you start at age 25; $820 monthly, starting at 35; $1,920, starting at 45; and $5,778, starting at 55.

Uncle Sam offers incentives to procrastinators. Once you turn 50, you can start making catch-up contributions to your retirement accounts. In 2016, that means older savers can contribute an extra $6,000 to a 401(k) on top of the standard $18,000. The catch-up amount for IRAs is $1,000 on top of the standard $5,500.

5. Passing up professional advice when you need it

We all can use a hand once in a while, especially when it comes to tricky aspects of our financial lives. For example, some of the financial professionals we talked to pointed to the panic brought about by the sharp economic downturn in 2008 and 2009. Many individuals poorly timed when to get out of the stock market and when to get back in.

“Investors who aren’t very experienced tend to buy high and sell low, when you’re supposed to buy low and sell high in the stock market,” says Catherine Shenoy, director of applied portfolio management and senior lecturer at the University of Kansas Business School. “That’s one way a professional financial adviser can help you.”

Advice isn’t limited to investments. The right financial pros can assist with everything from taxes and insurance to retirement savings and estate planning. And good advice can pay off for you and your loved ones. Common but avoidable mistakes such as dying without a valid will or failing to designate the correct beneficiaries for your retirement accounts could leave your heirs in limbo and even see your wealth go to the wrong people.

“Not carefully choosing your financial adviser can be a huge mistake,” says Andy Tilp, an investment adviser representative with Trillium Valley Financial Planning in Sherwood, Ore. “It is very important to have an adviser who is a fiduciary for the clients and is working solely in the client’s best interest. An adviser who sells high-fee, commission-loaded products is helping his own net worth but can be a disaster for the client.” (Learn more about what to ask a financial adviser when hiring one.)

Sorry, your card was declined

Sorry, your card was declined

You never want to hear your waiter say, “Sorry, your card was declined.” For people with bad credit, hard times are inevitable. When they occur, you can dig a deep hole and crawl in, but there are better ways to respond. Here are the most common scenarios involving embarrassing credit and answers most worthy.

1. “I’m sorry sir, but your card was declined.”

When a boy says these terrifying words, you are bound to flush crimson dining companions as speculate on the state of your finances.

Squelch panic, “said John Ulzheimer, president of consumer education. Explain calmly that the tape may have been damaged, and make another card for the purchase. If she was denied because you are maxed out, however, and you have no plastic or other cash, excuse yourself and call the creditor to request an “opt-in for overlimit fees.“” This will allow operations overlimit to fill, “says Ulzheimer. You will be assessed a fee, but your reputation will be saved.

2. “Er, Jane, we need to discuss this issue before you pay.”

It’s awful to be sued for a debt, but it is horrible when your employer receives an order for garnishment of wages, a part of your salary should be given to your creditor.

Do not wait until the sheriff to serve hits the paper, said the trust expert Delores Pressley. Be proactive and request a meeting with your boss, saying: “I am terribly sorry that a personal question has extended to the workplace. I’ll find a solution as quickly as possible. “This straightforward approach may compensate for a negative opinion of your supervisor. Also, you can not be fired for garnishment (unless there was more than one in a period of 12 months), which may inspire some confidence.

3. “Rent to you with your bad credit? Ha!”

Ready to sign a lease? If your credit is terrible, you could be in the same humiliation that Matthew and Fiona Peters, Madison, Wisconsin, experienced. As newlyweds, Peters thought they had found the perfect apartment. Yet in the rental office crowded, the agent announced loudly: “There is no way that we can rent with your credit. It is bad… very bad. “Every parent called and asked for help in vain.” After the second call, we sat there red-faced, wondering what we were supposed to do or say next, “said Matthew Peters.” It was emasculating! ”

Today, Peters offers advice to others in similar situations, “Keep your cool and do not take it personally seen a high level for all residents not only protects the property owner’s investment, but people living there as well.. “Focus on your finer points.” You could say: “My credit is bad, but I’m busy and make it a point to always pay for my first home,” said Peters. You may need to sweeten the deal by offering a co-signer, doubling the deposit or to pay rent in advance.

4. “Great, once we see your credit file, we can complete your job application.”

credit checks pre-employment are the norm today – and you’ll want to hide if yours is full of big balances, late payments and accounts written off.

Sure, you can deny access to your reports, but it could encourage the hiring manager to build your resume. So stand tall and to disclose past problems at the front. Honesty can not increase your chances. And relax on shamefully low credit rating. “The credit bureaus and their professional organization (the consumption data Industry Association) have publicly stated countless times stating that they do not provide credit ratings and audit reports of the working credit” says Ulzheimer.

5. “Darling, I can not wait to start a life with you – buy a house, have children …”

Have terrible credit, but in the beginning of a long term relationship? Assuming it can be scary. Like it or not, you must reveal the horrible truth. Then, commit to open communication and make amends, “said Joe Rubino, author of” Self-esteem book.”

“Contact all debtors, make arrangements to clean the debts, start a savings plan, cut credit cards and take full responsibility for the management of future purchases responsibly.” Strengthen your skills and your faith life partner through financial counseling, therapy or life coaching.

6. “I need to talk with Mary about a bill pending.”

Whether calls or messages collection go to your workplace, roommate or relative, your private situation will become public. First, the end of the phone calls. The Fair Debt Collection Practices Act prohibits collectors third discuss your debt with anyone but you. And while they may contact you at work if you ask them to stop, they should.

Tell them you know the law and that you will file a complaint with the Federal Trade Commission, if they persist. Then, “said Rubino, act with integrity and clean up your mess of money. “This done, he is afraid of anyone except your own. If you feel the need to explain calls to anyone, just say you made financial arrangements to settle debts and the case is supported “.

7. “OK, Phil, go ahead and charge those costs and we will reimburse you.”

A business trip is imminent and you are supposed to book a hotel room, flight or rental car. Uh oh, you have no credit. Do not worry, you’re not the only one not charging fees. About 29 percent of Americans live without credit. Suffice it to say that you only use cash, and ask to be paid with corporate funds or corporate card. Few employers balk at such a reasonable request.

Is it easy to deal with these credit problems mortifying gracefully? Of course not. But keep in mind that even a show of assurance from the air – and feel – better than avoidance.

10 smart ideas for reducing credit card debt

10 smart ideas for reducing credit card debt

A $10 purchase can help you save more than $40 a month — and get you started on paring down what you owe.

If you find yourself falling deeper into credit card trouble, it’s time to take a hard look at what’s coming in, what’s going out and see where you can free up some cash quickly to start hacking away at your debt.

Some trims may seem small, but if you package several of them together, you can soon get started on a respectable payment plan. Here are some ideas for places to turn first.

1. Cell Phones

“For $9.88, you can buy a TracFone (prepaid cell phone) with pretty decent coverage and pay by the minute,” says Mike Sullivan, director of education at Take Charge America in Phoenix. “And if you’re careful, you can end up saving $40 to $50 a month off a typical $80 cell phone bill.” He also recommends canceling your land line unless you have medical issues that may require emergency calls.

2. Cable / Satellite

Most people can save money just by getting rid of the extra pay packages they have — such as premium movie channels and extra services. “If you’re really in trouble, cancel the whole package,” Sullivan says. Check out the library for free movies, DVDs and CDs to bridge the entertainment gap.

3. Homeowners Insurance and Car Insurance

By increasing the deductible of your policy from $500 to $1,000, you can see big decreases on your premium, says Michael Barry, vice president of media relations for Insurance Information Institute in New York. “People pay about $880 a year, so if I can knock $88 off, it’s a start.” Regarding auto insurance, take a look at your collision insurance if you have an older car. If you have even a fender-bender, sometimes the cost to repair the car would be more than it’s worth, so perhaps you could cancel the collision insurance altogether.

First, look up the value of the car at Kelley Blue Book, Edmunds.com or the National Automobile Dealers Association, then check the collision line on your auto insurance bill and see what it’s worth to you to keep that insurance. Also, if you don’t drive that car much, look for a discount. “If you drive from 7,000 to 7,500 miles a year, you can often qualify for low-mileage discounts,” Barry says.
4. Transportation

Americans are increasingly finding alternatives here. In fact, consumers spent 11 percent less last year in this category, according to the Bureau of Labor Statistics’ 2009 Consumer Expenditures Survey released in October. If you have more than one car, this may be the time to look at downsizing to just one car and getting around with better planning, carpooling, bike riding, public transportation or car sharing. Car-sharing companies such as Zipcar operate in a growing number of cities and on many university campuses. You can rent a car by the hour when you have to have one without the expense of insuring and maintaining your own car.

5. Utilities

“People often overlook programmable thermostats,” says Edward Tonini, director of education of Alliance Credit Counseling in Charlotte, N.C. “You can spend $20 to get a programmable thermostat and if you set it right, it can save you $100 over the course of a year easily.”

6. Food

Households spent an average of just more than $300 a month on food eaten at home and about $215 per month on food outside the home in 2009, the BLS survey reported. “Maybe eating out isn’t necessary for you,” Tonini says. “Packing lunches and eating at home will lower your discretionary spending.”

7. Gym Membership

Are you really using it multiple times a week? Divide your monthly dues by the number of times you go in a month and get a realistic picture of what you’re spending on a one-hour workout. Park districts or community centers often have low-cost or free programs. Also check into exercise videos or a piece of home exercise equipment that you would use regularly. If you decide to keep the membership, check to see whether the facility offers discounts for coming at off-peak times.

8. Movies

A family of four can quickly rack up nearly $100 on one movie with popcorn, drinks and maybe even parking fees. “Instead of going to the movies, have a game night at home. It sounds kind of corny, but it will be more meaningful than sitting in the dark when you can’t talk to each other,” says Dave Gilbreath, a regional director with Apprisen Financial Advocates in Yakima, Wash.

9. Tax Relief

Wendy Burkholder, executive director of Consumer Credit Counseling Service of Hawaii in Honolulu, says, “Many of the families we work with are struggling with credit card debt because of loss of income. One of the first things to do is re-evaluate your tax withholding on your paycheck (if your spouse or partner has lost a job). If you don’t make the change, you end up with a whopping refund. You don’t need the money a year from now, you need it now.” If you’re overpaying taxes, you’re also giving the government a free loan and are likely putting off paying for your own bills, which can lead to fees and penalties, she says.

10. Health Insurance for Dependents

“If you’re struggling with loss of income, you may no longer be able to afford $600 being deducted from a paycheck to cover your dependents,” Burkholder says. She suggests checking to see whether you now qualify for a state or federal coverage plan for dependents, such as the Children’s Health Insurance Plan, or coverage by health care providers that may offer reduced prices for basic health care for children.

Deciding what to cut first will be different for every consumer, but whatever the choice, it should be sustainable, rather than a one-time quick fix, Tonini says. Sometimes it’s cutting out the daily $4 coffee, but “they need to figure out what their ‘latte factor’ is.”

Financial fights that can lead to divorce

Financial fights that can lead to divorce

Much has been written about how difficult economic times forced them to postpone couples divorce. They simply can not afford. The legal fees and accounting fees grow as a union is dissolved and a two-earner family life less than a pair of two single-person households.

As the economy improves, we’ll probably see the divorce rate climb. But even if money woes are not separate couples, financial disputes are still the cause of irreconcilable differences. Here are seven common financial issues that may lead to a divorce:

Paycheck Envy

More women enter the marriage with assets of their own and many earn more than their spouses. According to the Bureau of Labor Statistics, one in three women married outside her husband wins. This amount increases by more than half if they earn $ 55,000 or more.

Men may feel threatened by not having their bragging rights as traditional breadwinners. For women, this means they have their own money away from the irresponsible action of a companion. With more play, women can not afford to be accepted to their partner how past generations were.

Debt

Utah State University Professor Jeffrey Dew author of a study often cited, which found that couples argue about finances at least once a week are 30% more likely to divorce than those who do sometimes leads to questions of money. Couples with no assets were 70% more likely to divorce compared to couples with assets of $ 10,000.

Cup in the ability to build the assets is dependent upon long-standing American credit card, but it can be a source of optimism. Who raised a record $ 988 million in revolving debt in 2008, the Americans eroded nearly 90 billion dollars last year there, according to the Federal Reserve. credit cards less debt should result in increased savings, more active and potentially more couples happy.

Bills

As part of an investigation last year, Fidelity Investments has found that less than half of couples make the daily decisions and financial issues such as budgeting and paying bills (45%) .

In many couples, one person is still paying the monthly bills at the beginning while the other could wait until the due date and beyond. checks can be cut even more stressful when one blows unnecessary monthly budget shopping and boyfriends do not take kindly to cable or text message their expensive batteries Better Half in the mixture.

Economy

While half of the relationship may be economical, offering dedicated and committed to building a retirement plan, the other may be more carefree, with a live “today, you can not take it with you “Outlook.

Invest

We can assume that investment decisions are increasingly dividing couples if both partners are financially sophisticated. The risk tolerance may be incompatible with the objectives out-of-synch.

Dump Apple or go long can also be a divisive debate that how often a mother-in-law visit. Overlooking an investment portfolio or 401 (k), one spouse may want to explore emerging markets fund, while the other rejects nothing, but in any national security to the large caps and bonds.

Then about a guy find true happiness with a sort of fundamental analysis of the gal?

Different Expectations

There is no shortage of men and women who value money more than love and companionship. You can be quite content to “live love” and weather financial situation “for better or for worse.” But she may feel entitled to a McMansion in a suburb of Tony and a Mercedes in which to drive your children to private school. Trouble is brewing with his latte grand prize.

Secret Stash

Financial infidelity is a newly coined term that describes situations in which one spouse is hiding cash or credit to his companion.

This may seem like a good idea to have a credit card or bank account secret that you can tap into, but your partner will probably be a big scandal in the underground. Beyond financial dishonesty on the screen, such gains may be a warning sign of even greater transgressions – maintaining a slush fund to pay the tab strip club or support a mistress on the sly.

Debunking the myth of ‘good debt’

Debunking the myth of 'good debt'

Don’t prolong your state of debt by thinking some liabilities are smart to hold.

Think your low-interest mortgage is good debt? Think again. There is some comfort in believing that being in the position of owing money to someone or some company can in some circumstances be “good.” Suze Orman, arguably the world’s most popular personal finance author and guru, explains the supposed difference between “good debt” and “bad debt.” Mortgages and student loans are examples of good debt, while car loans and credit cards are bad. Some debt, like high-interest loans and credit card debt, are certainly worse than others, but rationalizing owing money to others by calling it “good” is a stretch.

When the public is willing to consider any particular type of debt good, the lending industry is the only winner in the long run. For the benefit of our own personal finances, we’ll prosper more by considering all debt bad and striving to eliminate that debt even if we feel it is good.

Don’t fall into the trap of prolonging your state of debt while holding the idea that these forms of owing money are somehow good. Here’s why “good debt” isn’t all that great.

1. Mortgages. A mortgage on a house is a classic example of a type of debt personal finance experts and real estate agents want the world to be at peace with. There is something to be said for mortgages: the reality is that only a small percentage of Americans would be able to afford to purchase a house without access to a loan. The lending industry and the government have historically made it as easy as possible to own a home. We’re not escaping home ownership debt any time soon.

The deeper reality is that the value of real estate increases at or a little higher than the rate of inflation over the long term, but is much more unpredictable over the short term — the length of home ownership most people experience. Some consider mortgages to be good debt because it allows a home owner to be highly leveraged, in a good position for appreciation, but it is risky.

In addition, the tax advantages to paying mortgage interest are frequently overstated. While most taxpayers see an increased refund thanks to the mortgage interest deduction, the benefit can’t compete with not paying interest at all. We’re stuck with mortgages for now, but there’s no solid reason for keeping them around longer than necessary, as one might do with anything called “good.”

2. Student loans. Student loans are an investment in the future; a bachelor’s degree in hand will significantly increase a person’s lifetime income compared with just a high school diploma. Again, the lending industry encourages taking on unnecessary debt, and colleges and universities are complicit.

It is unnecessary to borrow money to finance a college education. In his forthcoming book, Debt Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents, author Zac Bissonnette explains how student loans can be more devastating to an individual’s financial condition than a mortgage. Did you know that bankruptcy can eliminate your credit card debt and your mortgage but your student loan will not be forgiven? Even the government will garnish your social security wages if you default on your student loans.

Bissonnette also shows how there is no good reason to borrow money for an expensive private college or Ivy League university when the quality of education you can receive and your earning potential is matched or bested by an inexpensive, local state college. Reconsider the assumption that you pay a higher price for quality.

3. Start-up costs. Whether starting a business requiring an up-front purchase of inventory or have just graduated college and need to buy appropriate attire for a career, some personal finance experts advise the cash-strapped newbie to anticipate tomorrow’s income and pay for your expenses with a credit card or take out a loan today. This, like borrowing money to invest in something without a guaranteed return, is risky.

While it is often true that success requires taking some risks, consider your options for dealing with the worst-case scenario. Unemployment is still at a high level, and many of last year’s graduates are still out of work with credit card balances increasing. Most new businesses fail.

Even borrowing money to finance assets expected to appreciate like a house, a person’s income potential through education, and a career or business carries risks and in some cases can be fully avoided with smart preparation. You may hear some personal finance experts call these types of debt “good,” but they are far from beneficial. At best, they are like other debt but might help improve your financial condition or quality of life at some point. At worst, however, even this debt can devastate your future if not watched, cared for, and eliminated.

What you should expect from credit report repair company

What you should expect from credit report repair company

When signing up with a credit report repair company, ask the consultant what is included in the service. There are 3 parts to achieving a great credit score:

1.Repair
2.Trade lines
3.Education

A great credit report repair company will not only help with the credit report repair, but also guide you on what type of trade lines to obtain and educate you on how to use and pay those trade lines to maximize your credit score. Education on how to use credit cards for utility purpose only is extremely important!

Discuss your future goals

A great credit report repair company should ask initially what your future goals are. This way you and the credit report repair consultant have an idea of how many points you are away from your goal.

Knowing mortgage and banking guidelines prior to credit report repair

Make sure your credit report repair consultant is familiar with mortgage and banking guidelines. Somebody that is looking to purchase a home in the future, is going to be much different than somebody that is applying for a business loan.

Is your credit report repair company working for you?

Make sure the credit report repair company you are using has your best interest in mind. The reason most people seek a credit report repair company is to obtain a higher credit score in order to save money on interest rates.

Stay away from credit cards with high fees

Do not apply for unsecured credit cards with high fees. A short term fix can create a long term problem. If you are referred to a credit report repair company from a mortgage broker, real estate agent or a builder, ask the credit report repair company if they are going to continue working on your credit after you purchase the home. Your credit score should be the primary focus. You need somebody that is focused on helping you obtain the highest credit score you can achieve.

Does your credit report repair company have an office location?

Ask your credit report repair consultant if you can meet them at their office location. Many credit report repair companies operate out of their home. You want to be able to drop by the office and speak with somebody if you have any questions and concerns. It is important for you to get to know your credit report repair consultant. There is no better way to establish a relationship than a face to face meeting.

Top mistakes to avoid when refinancing

Top mistakes to avoid when refinancing

Low interest rates do not necessarily mean owners will save on their mortgages.

When interest rates are low, leading many owners to refinance before assessing the true consequences of their actions. A mortgage refinancing can benefit some homeowners, especially if they intend to stay in their homes for the long term or whether they can significantly reduce their interest rates. Sometimes, however, a mortgage refinance may be the wrong choice.

“People often make bad decisions because of what I call” the envy of interest rates “around the coffee table,” says AW Pickel III, CEO of Financial LeaderOne in Overland Park, Kansas “They jump to refinance just so they can tell their neighbors they got a lower rate.”

Here are five of the biggest mistakes homeowners make when refinancing.

Not comparing the actual rate

“Borrowers should shop around for a mortgage by comparing the APR (annual rate) of each loan, rather than the interest rate quoted,” said Gregg Busch, vice president of First Savings Mortgage Corp. in McLean, Va. “You must look at the actual cost of the loan and compare it to your current APR to ensure that you will really save a half point or more on the new loan. ”

Busch points out that many owners today are finding that their home is worth less than they assumed when they have an appreciation.

“Fannie Mae and Freddie Mac have added fees on loans with high loan to value, so borrowers need to reassess the rates and fees before they decide to refinance,” said Busch.

Borrowers who have little or no action may be eligible for refinancing under Home by the Government of affordable refinancing program, or harp, available to those with an existing mortgage owner or guaranteed by Fannie Mae or Freddie Mac.

“The beauty of the HARP program is that it does not require an appraisal, so if you think you are underwater on your loan, this could be a good option,” said Busch. “Just make sure to compare rates and fees to see if the new loan is worth the cost.”

Choosing the Wrong Loan

Pickel said the first step when deciding to refinance is to establish a clear objective.

“If you think you can lose your job, but you have a moment, your focus should be to reduce your overall payments regardless of the length of the loan,” says Pickel. “If you want to be debt free by some years, then you need to find a loan that meets that goal.”

Pickel said that sometimes, even with a lower interest rate, you could end up making higher monthly payments due to packing in closing costs has increased the size of your mortgage.

Each borrower must look at the cost of refinancing and the financial benefits before choosing a loan, said Busch. Forget that some borrowers to refinance into another 30-year mortgage can add years of payments, especially if they have paid on the loan during a long time.

“A ARM 10 / 1 (variable-rate mortgage) or a 10-year fixed rate loan can sometimes be a better choice depending on the individual circumstances of the borrower,” said Busch.

Not Shopping Around

While many borrowers to compare loan offers from more than one lender, they can also shop for title services and save hundreds or sometimes thousands of dollars on their loan.

“Check at least three lenders and at least three companies before choosing a title,” said Busch. “It can be an advantage to go to the Management Authority that manages your loan the same now, because they may require less documentation, but I recommend also searched at least one other direct lender to compare rates and expense. ”

Ask the company as a reissue rate on title insurance own your vehicle – Busch believes that this can save up to 35 percent on premiums.

When refinancing you should not

Charles A. Myers, president and CEO of Home Loan in Jackson, Mississippi, said refinancing can be a mistake if you do not plan to stay in your home for many years.

“One client wanted to refinance to improve his property and rent it, but it would have ended up with a larger mortgage and then need a different loan because the property is no longer the principal residence,” says Myers. “The key is to ensure that the refinancing has a net tangible benefit to the owner.”

Borrowers must decide how long they intend to stay in the property and determine the break-even as economies outweigh the costs before deciding to refinance, said Myers.

Does not follow the Borrower responsibilities

Owners should rely on a lender to refinance, but they have obligations of their own that they are not met, could derail the mortgage refinancing. Borrowers must have good credit to refinance with most lenders require a credit score of 640 and above even for a loan insured by the Federal Housing Administration, said Myers.

Lenders can check credit borrowers again just before closing, if you need to maintain good credit and avoid a new debt, even after the refi was approved.

“Check the lock-in date to the interest rate on your new loan to make sure you can close before the rate expires,” said Busch. “Be sure to turn in all your documents as soon as it is required, because a delay could mean that your date should be postponed.”

Tax deductions with the biggest payouts

Tax deductions with the biggest payouts

$6,000 for setting up an IRA is paltry compared with the $37,000 for another transaction.

A $5,000 or $6,000 deduction for IRA contributions, a $4,000 deduction for college tuition and fees, a $1,000 child tax credit — these are hefty tax breaks for which a taxpayer may understandably yearn. But they’re small beans when compared with the tens of thousands of dollars in savings some reap through deductions and credits.

How about taking a $50,000 deduction for state and local taxes paid, a $37,000 deduction for medical expenses, a $28,000 deduction for mortgage interest, or a $21,000 deduction for charitable contributions?

Those are the average amounts claimed for each of those deductions in 2008 by taxpayers with adjusted gross income higher than $250,000, the group with the highest average claim for each of those deductions that year, said Mark Luscombe, principal tax analyst with CCH Inc., a Riverwoods, Ill.-based tax publisher and unit of Wolters Kluwer. (The average dollar amounts are rounded, and count only those taxpayers who claimed that particular deduction.)

Some tax breaks “basically don’t have any limit,” Luscombe said. For example, to take the medical-expense deduction your expenses must exceed 7.5% of your adjusted gross income.

“That puts a floor on it, but as far as a top number, the more medical expenses you have, the higher the deduction,” Luscombe said. (Some deductions discussed here are restricted or disallowed under the alternative minimum tax.)

For taxpayers with adjusted gross income of $30,000 to $50,000 in 2008, the average deduction for state and local taxes was about $3,800; for medical expenses, $6,000; mortgage interest, $9,000; charitable contributions, $2,200, according to CCH.

For taxpayers with AGI of $50,000 to $100,000, the average deduction for state and local taxes was about $6,000; medical expenses, $7,000; mortgage interest, $10,600; charitable contributions, $2,700.

The mortgage-interest deduction is limited by the value of your home — generally speaking, you can claim it for interest paid on mortgage indebtedness up to $1 million, plus another $100,000 of home-equity debt. See this IRS page for more on the mortgage-interest deduction.

Meanwhile, some credits don’t have an upper limit, Luscombe said. The residential energy-efficient property credit for installing solar, wind or geothermal systems is worth 30% of the amount spent — whatever that amount is.

But don’t confuse that credit with the one for home energy-efficient upgrades, such as new windows and doors. That credit was worth up to $1,500 in 2010 but lawmakers reduced it for 2011, in the Tax Relief Act passed in December.