For the Week of June 28

What About Your Credit Card

Consumers with no credit or those whose credit has been pummeled over the past few years know that it is virtually impossible for them to land a new credit card. With credit being the tightest anyone has seen in years, your chances of securing new credit has been greatly reduced unless you agree to unfavorable financing terms including a high interest rate and annual fee.

What You Should Do

PREPAID CREDIT IS ONE SOLUTION -- the convenience of having a credit card means not having to carry cash around. Prepaid VISA and MasterCard are universally accepted, with millions of merchants around the world accepting them.

Get More Information:

• how pre-paid cards can work for you
• view BLOG article

Becoming Your Own Banker

Have you ever thought of yourself as being a banker? No, I don’t mean that you work for a bank, but your financial savvy puts you up there with the best money managers around. Wouldn’t it be nice to have a stash of cash you could tap to finance various projects you have planned? Well, you already do if you are a homeowner who has built up equity in your home. Let’s take a look at a novel way you can pay for important projects through your home equity line of credit account.

Instead of using your checking account to receive and pay out funds, you can use your home equity line of credit account for all income deposits and expense pay outs.

Your Home Value Means You Have Home Equity

Once you have established an equity line of credit account through your bank, credit union, or other financial institution you can take the following three steps:

Step One: Pay off consumer debt using your banker home equity line of credit account. Credit card debt, auto loans, and other consumer debt can be wiped away thanks to your home value equity.

Step Two: Next, deposit all of your income into your banker home equity line of credit account. You will take all of your income sources and deposit them into your equity line account instead of your checking account. These deposits include: all salary income, capital gains, personal savings, and spare change.

Step Three: Finally, use your banker home equity account to pay expenses including everyday budgeted and planned expenses such as: your monthly bills, food and clothing, mortgage payment, budgeted card charges, and other living expenses.

Please view our demonstration for more information.

Pay Off Your Debts Faster With Your Discretionary Income

Your discretionary income – income minus expense – stays in the banker equity line credit account to reduce the balance of your debt. By using this method of tackling debt, you can pay off what you owe twice as fast or use the funds to finance additional expenses including home improvement, your daughter’s wedding, college costs, and more.

One final point: In most cases a home equity line of credit is tax deductible, just like a mortgage loan. Therefore, additional savings can be realized when you take your government approved tax deduction. Consult with a financial advisor to learn how an home equity line of credit account can work for you.

Are you your own banker?

Please check out our 10 Step Plan For Success to manage money the smart way.

Resources

• check our Home Equity center for more information

Tapping Your Home Equity to Manage Debt

Your personal debt level can be having an adverse impact on the way that you live. Credit cards, student loans, auto loans and department store debt can quickly add up -- factor in interest rates of 10, 12, even 20 percent or more and the burden on consumers can be tremendous. If you are a homeowner, a readily available way to handle your debt load can ease the burden for you. Yes, tapping the equity in your home is one way for you to consolidate debt.

Residential Debt Consolidation

The longer you live in your residence, the more likely you have built up a decent amount of equity in your home. As you pay down your mortgage and enjoy the rising value of your home, the difference between your mortgage's pay off amount and its current value is what lenders consider to be the equity in your home.

Let me give to you an example: You bought your home just over four years ago for $185,000, taking out a mortgage loan for $165,000. At that point your equity (or piece of the pie) is $20,000. Between making fifty payments to the mortgage company and kicking in an additional $50 whenever you had it, your outstanding balance has been reduced to $152,000. What's more, your home's value has increased nicely, thanks to a robust housing market.

An appraisal of your house reveals that it is now worth $219,000. The difference between $219,000 and the $152,000 outstanding balance on the mortgage loan is now $67,000. That latter amount represents your, a portion of the amount you can use for debt consolidation.

Home Equity Lending

Lenders will look at your home's value ($219,000) and allow you to borrow as much as 80% of that amount ($175,200) minus the amount you owe on your mortgage ($152,000). Therefore, you could borrow as much as $23,200 ($175,000 - $152,000) to cover debt, living expenses, and even take a vacation. Of course if your debt level is much smaller than that, you may simply want to borrow enough money to pay off your debt and then allow 5-10 years to pay off your low, fixed-rate home equity loan.

Home Equity Loans -- Tax Advantages

Most homeowners are able to take advantage of tax deductions for their home mortgage. However, those deductions do not extend to cover most personal debt. On the other hand, a home equity loan is usually tax deductible even if the monies were used to pay off personal debt. In other words, you can let the government reward you for paying off high interest rate credit cards and other loans by giving you an extra deduction come tax time.

Worth Your Consideration

Of course, whether it is personal debt or a home equity loan, you will have to pay off what you owe. A financial calculator can help you compare your outstanding debt with a home equity loan to help you develop a plan that is affordable, tax deductible, and much lest burdensome then the high interest rate personal debt you are presently battling.

Resources

• check our Home Equity center for more information