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5 Things about Home Equity Loans You Must Know

5 Things about Home Equity Loans You Must Know

Home equity loans are unique in the sense that they can help you get excess cash against the value of your home without actually giving your home to anyone else. This option is particularly good for people with bad credit history, low-income level, or if they are of higher age.

Home equity loans have both their positive and negative aspects, but despite this, a lot of people exercise this option. If you want to avail home equity loan in the future or just curious to know more, here are some really great information bits for you:

1. They are good for tax purposes

Home Equity Loans exploded in popularity during the 1990s when there were certain deductions on consumer purchases.

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Interest paid on the home equity loans are tax deductible, therefore, many tax savvy individuals tend to take the second mortgage to save tax on the interest paid on such loans.

2. Interest rate is lower than charge by credit cards

The normal interest rate charged on home equity loans is higher than your first mortgage but it is a lot lower than what you may be paying on a credit card.

You can easily calculate how much it would cost you by using online calculators for home equity loans. Using online calculators can help to do comparison shopping before deciding on which home equity loan provider to choose.

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There are also reviews available online that can help you to make an informed decision on whether to go for a home equity loan or not.

3. They can be great for bad days

It is a fact that we all face financial troubles. Periods of financial insecurity often happen due to bad economic situations, job loss, or other events in our lives.

In bad days, normally people sell out their homes if they fail to pay their mortgage payments. You can easily find local, as well as national buyers of property on cash, who will be ready to buy them at a fair price. For many, it could be a good option to sell the property outright if they have alternative plans, but for many selling their home under difficult conditions may not be the option.

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Home equity loans are best for such people who are in distress and do not want to sell their properties to pay for their genuine needs. Instead of selling a home, it is always a preferred choice to take a second mortgage loan on the same property by leveraging the increase in the value of your home.

4. Home equity loans are good funding sources to pay off legal liabilities

Accidents happen every day, and so do medical emergencies. Instead of engaging a lawyer to fight long cases, you can easily use the proceeds obtained from home equity loans to pay off your lawyers’ fees, and any other legal liability arising due to undesirable events.

Since home equity loans are mostly obtained by people at the later stage of their lives, and it is normally paid off when the borrower dies, therefore, most of the times such loans are used to pay for medical and other emergency expenses.

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In the UK, there was also a trend where parents took home equity loans to help their kids to pay for down payment on their own first home.

5. Fixed vs Line

Home equity loans can be availed either as the fixed loans or as credit lines. Fixed loans are paid in each amount in one go and you cannot redraw it. However, in the case of a credit line, you get a sort of overdraft limit where you can draw and redraw the amounts when you desire.

Credit lines are especially good if you are willing to use home equity loans for paying the college expenses of your children, or even for your recurring medical expenses.

Featured photo credit: Guarantee Bank via gbankmo.com

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Adnan Manzoor

Data Analyst & Life Coach

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Published on November 20, 2018

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The truth is, there are many “money saving guides” online, but most don’t cover the root issue for not saving.

Once I’d discovered a few key factors that allowed me to save 10k in one year, I realized why most articles couldn’t help me. The problem is that even with the right strategies you can still fail to save money. You need to have the right systems in place and the right mindset.

In this guide, I’ll cover the best ways to save money — practical yet powerful steps you can take to start saving more. It won’t be easy but with hard work, I’m confident you’ll be able to save more money–even if you’re an impulsive spender.

Why Your Past Prevents You from Saving Money

Are you constantly thinking about your financial mistakes?

If so, these thoughts are holding you back from saving.

I get it, you wish you could go back in time to avoid your financial downfalls. But dwelling over your past will only rob you from your future. Instead, reflect on your mistakes and ask yourself what lessons you can learn from them.

It wasn’t easy for me to accept that I had accumulated thousands of dollars in credit card debt. Once I did, I started heading in the right direction. Embrace your past failures and use them as an opportunity to set new financial goals.

For example, after accepting that you’re thousands of dollars in debt create a plan to be debt free in a year or two. This way when you’ll be at peace even when you get negative thoughts about your finances. Now you can focus more time on saving and less on your past financial mistakes.

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How to Effortlessly Track Your Spending

Stop manually tracking your spending.

Leverage powerful analytic tools such as Personal Capital and these money management apps to do the work for you. This tool has worked for me and has kept me motivated to why I’m saving in the first place. Once you login to your Personal Capital dashboard, you’re able to view your net worth.

When I’d first signed up with Personal Capital, I had a negative net worth, but this motivated me to save more. With this tool, you can also view your spending patterns, expenses, and how much money you’re saving.

Use your net worth as your north star to saving more. Whenever you experience financial setbacks, view how far you’ve come along. Saving money is only half the battle, being consistent is the other half.

The Truth on Why You Keep Failing

Saving money isn’t sexy. If it was, wouldn’t everyone be doing it?

Some people are natural savers, but most are impulsive spenders. Instead of denying that you’re an impulsive spender, embrace it.

Don’t try to save 60 to 70% of your income if this means you’ll live a miserable life. Saving money isn’t a race but a marathon. You’re saving for retirement and for large purchases.

If you’re currently having a hard time saving, start spending more money on nice things. This may sound counterintuitive but hear me out. Wouldn’t it be better to save $200 each month for 12 months instead of $500 for 3 months?

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Most people run into trouble because they create budgets that set them up for failure. This system won’t work for those who are frugal, but chances are they don’t need help saving. This system is for those who can’t save money and need to be rewarded for their hard work.

Only because you’re buying nice things doesn’t mean that you’ll save less. Here are some rules you should have in place:

  1. Save more than 50% of your available money (after expenses)
  2. Only buy nice things after saving
  3. Automate your savings with automatic bank transfers

These are the same rules that helped me save thousands each year while buying the latest iPhone. Focus only on items that are important to you. Remember, you can afford anything but not everything.

How to Foolproof Yourself out of Debt

Personal finance is a game. On one end, you’re earning money; and on the to other, you’re saving. But what ends up counting in the end isn’t how much you earn but how much you save. Research shows that about 60% of Americans spend more than they save.[1]

So how can you separate yourself from the 60%?

By not accumulating more debt. This way you’ll have more money to save and avoid having more financial obligations. A great way to stop accumulating debt is using cash to pay for all your transactions.

This will be challenging, depending on how reliant you are with your credit card, but it’s worth the effort. Not only will you stop accruing debt, but you’ll also be more conscious with what you buy.

For example, you’ll think twice about purchasing a new $200 headphone despite having the cash to buy them. According to a poll conducted by The CreditCards.com, 5 out of 6 Americans are impulsive spenders.[2]

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Telling yourself that you’ll have the discipline to not buy things won’t cut it. This is equal to having junk food in your fridge while trying to eat healthy–it’s only a matter of time before you slip. By using cash to make your purchases, you’ll spend less and save more.

A Proven Formula to Skyrocket Your Savings

Having proven systems in place to help you save more is important, but they’re not the best way to save money.

You can search for dozens of ways to save money, but there’ll always be a limit. Instead of spending the majority of your effort saving, look for ways to increase your income. The truth is that once you have the right systems in place, saving is easy.

What’s challenging is earning more money. There are many routes you can take to achieve this. For example, you can work long and hard at your current job to earn a raise. But there’s one problem–you’re depending on someone else to give you a raise.

Your company will have to have the budget, and you’ll have to know how to toot your own horn to get this raise. This isn’t to say that earning a raise is impossible, but things are better when you’re in control right? That’s why building a side-hustle is the best way to increase your income.

Think of your side-hustle as a part-time job doing something you enjoy. You can sell items on eBay for a profit, or design websites for small businesses. Building a side-hustle will be on the hardest things you’ll do, be too stubborn to quit.

During the early stages, you won’t be making money and that’s okay. Since you already have a source of income, you won’t be dependent on your side-hustle to pay for your expenses. Depending on how much time you invest in your side-hustle, it can one day replace your current income.

Whatever route you take, focus more on earning and save as much as possible. You have more control than you give yourself credit for.

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Transform Yourself into a Saving Money Machine

Saving money isn’t complicated but it’s one of the hardest things you’ll do.

By learning from your mistakes and rewarding yourself after saving you’ll save more. What would you do with an extra $200 or $500 each month? To some, this is life-changing money that can improve the quality of their lives.

The truth is saving money is an art. Save too much and you’ll quit, but save too little and you’ll pay for the consequences in the future. Saving money takes effort and having the right systems in place.

Imagine if you’d started saving an extra $100 this next month? Or, saved $20K in one year? Although it’s hard to imagine, this can be your reality if you follow the principles covered in this guide.

Take a moment to brainstorm which goals you’d be able to reach if you had extra money each month. Use these goals as motivation to help you stay on track on your journey to saving more. If I was able to save thousands of dollars with little guidance, imagine what you’ll be able to do.

What are you waiting for? Go and start saving money, the sky is your limit.

Featured photo credit: rawpixel via unsplash.com

Reference

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