What to Know About Refinancing Your Home

Refinancing a home is a significant financial decision that can offer various benefits, from lowering monthly mortgage payments to accessing home equity. 

This guide provides an in-depth look at the refinancing process, its advantages, potential drawbacks, and essential considerations.

Understanding Home Refinancing

RefinancingRefinancing involves taking out a new mortgage to replace an existing one. Homeowners often refinance their loans to secure better terms, such as a lower interest rate or a shorter loan term. 

By refinancing, you can reduce monthly payments, save on interest over the life of the loan, or even cash out a portion of your home equity.

Benefits of Refinancing

Lower Interest Rates

One of the primary reasons homeowners refinance is to obtain a lower interest rate. Lower rates can significantly reduce monthly payments and overall interest paid, making the mortgage more affordable.

Shorten Loan Term

Refinancing to a shorter loan term can help pay off the mortgage faster. While this may increase monthly payments, it can save a considerable amount in interest over time and help achieve debt-free homeownership sooner.

Access Home Equity

Cash-out refinancing allows homeowners to borrow against their home equity. This option provides access to funds for home improvements, debt consolidation, or other significant expenses.

Switch Loan Types

Refinancing also offers the opportunity to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. Fixed-rate mortgages provide stability with consistent monthly payments, while ARMs can lead to fluctuating payments over time.

Potential Drawbacks

Closing Costs

Refinancing comes with closing costs similar to the original mortgage. These costs can include appraisal fees, origination fees, and title insurance. It's essential to calculate whether the long-term savings outweigh these initial expenses.

Longer Break-Even Period

Refinancing to a lower interest rate might require extending the loan term. This could result in a longer break-even period, where the savings from lower payments equal the costs of refinancing.

Impact on Credit Score

Applying for a new mortgage involves a credit check, which can temporarily lower the credit score. Multiple credit inquiries within a short period can have a more significant impact.

Key Considerations

Current Interest Rates

Before deciding to refinance, it's crucial to research current interest rates. Monitoring the market helps determine the best time to lock in a favorable rate.

Home Equity

Lenders typically require a minimum amount of equity to qualify for refinancing. It's important to assess the home's current value and any outstanding mortgage balance.

Financial Goals

Clearly defining financial goals aids in choosing the right refinancing option. Whether aiming to lower monthly payments, pay off the mortgage quicker, or access cash, aligning the refinancing strategy with personal objectives is essential.

Loan Terms

Understanding the new loan terms is vital for making an informed decision. Comparing offers from multiple lenders ensures the most favorable terms and conditions.

Working with a Professional

Choosing to refinance your home can be a complex decision, and working with a professional can provide valuable guidance and insights. 

A mortgage broker or financial advisor like Lund Mortgage Team can help you navigate the options available, ensuring you make the best choice for your financial situation. They have access to a wide range of lenders and can compare different offers to find the most favorable terms. 

Additionally, they can assist in understanding the fine print, such as fees and potential penalties, so there are no surprises down the road. 

By leveraging their expertise, you can confidently move forward with your refinancing decision, knowing that you have considered all the relevant factors and opportunities.

Steps to Refinance

Evaluate Financial Situation

Start by evaluating the current financial situation, including credit score, income, and debt-to-income ratio. This assessment helps determine eligibility for refinancing.

Research Lenders

Research and compare multiple lenders to find the best refinancing options. Consider factors such as interest rates, fees, and customer reviews.

Apply for Refinancing

Submit an application with the chosen lender. This process involves a credit check and providing documentation such as income verification, tax returns, and bank statements.

Get an Appraisal

The lender will require a home appraisal to determine its current value. This step ensures that the home meets the lender's loan-to-value ratio requirements.

Review and Close

Review the loan estimate and compare it to the original mortgage. Once satisfied with the terms, proceed to close the loan, paying any necessary closing costs.

Final Thoughts

Refinancing a home can be a strategic move to improve financial stability and achieve long-term goals. By understanding the process, benefits, and potential drawbacks, homeowners can make informed decisions that align with their financial objectives. 

For personalized advice and assistance, consider consulting with a financial advisor or mortgage professional.

Teach Your Kids Early | Advice on Navigating Various Loan Types

As a parent, it's important to teach your children about financial literacy from a young age. One aspect of this education is understanding different loan types and how they work. 

By starting this conversation early, you can help your teenagers and kids make informed decisions about their finances in the future. 

In this post, we will discuss the importance of teaching teenagers and kids about loan types and provide tips on how to do so effectively.

Start With the Basics

When teaching teenagers and kids about loans, be sure to start with the basics. Explain to them what a loan is and how it works. Make sure they understand that a loan is money borrowed from a lender that needs to be paid back with interest. Use simple examples and analogies to help them grasp the concept.

It's never too early to start educating your kids about finance and loans. As soon as they are old enough to understand basic concepts, it's a good idea to introduce them to the concept of money management. 

This can involve teaching them about saving and budgeting and even introducing them to different types of loans. By starting at an early age, you can set a solid foundation for their financial education and help them make smart decisions about money in the future.

Discuss the Different Types of Loans

There are various types of loans available, each with its own terms and conditions. Some common types of loans include personal loans, student loans, auto loans, and mortgages. 

Explain to your children the differences between these types of loans and when they might be useful. For example, a student loan can help pay for education expenses, while an auto loan can be used to purchase a car.

To further familiarize your children with the world of finance, you can take them to visit an Installment loan business or a bank and open a savings account in their name. 

This will give them hands-on experience with managing their own money and understanding how banks work. You can also involve them in your own financial decisions, such as budgeting for household expenses or applying for a loan. 

By involving them in these processes, they will gain a better understanding of how finances and loans play a role in everyday life.

Teach Them About Interest Rates

Interest rates play a crucial role in loans, as they determine how much additional money you will have to pay back. Help your children understand how interest rates work and how they can affect the total amount owed on a loan. 

Show them how to calculate interest using simple formulas so they can see the impact of different rates on loan payments.

Be sure to teach your kids how to spot good and bad interest rates when considering a loan. Help them understand that lower interest rates are generally better, but they should also look at the overall terms and conditions of the loan before making a decision. 

Show them how to compare interest rates between different lenders and explain the concept of adjustable versus fixed interest rates. By teaching them how to spot good interest rates, you can help them make more informed decisions when it comes to borrowing money.

Discuss the Importance of Budgeting

Understanding loans is not just about borrowing money, but also about managing finances wisely. Teach your children about the importance of budgeting and planning for loan repayments. 

Show them how to create a budget that includes loan payments, so they can see how borrowing money will impact their overall financial situation.

One of the best ways to teach your children about loans is to lead by example. If you are responsible with your own finances and make wise decisions when it comes to borrowing money, your children will likely follow suit. 

Show them how you budget for loan repayments and make timely payments to lenders. This will not only set a good example for them, but also instill a sense of responsibility and discipline when it comes to managing money. 

Remember, children often learn by observing their parents' behavior, so make sure you are setting a positive example for them to follow.

Encourage Responsible Borrowing

Finally, be sure to teach teenagers and kids about responsible borrowing. Help them understand the risks and consequences of taking on too much debt. 

Teach them to only borrow what they can afford to repay and to always read and understand the terms and conditions of a loan before signing any agreements. Encourage them to ask questions and seek advice from trusted adults if they are unsure about a loan.

Be sure to educate your children about responsible borrowing and the potential consequences if they need to be more careful with their finances. Explain to them that failing to make loan payments on time can lead to late fees, damage their credit score, and make it difficult for them to secure loans in the future. 

It's also a good idea to discuss how taking on too much debt can limit their financial freedom and impact their overall financial stability. By teaching them about responsible borrowing, you can help set them up for a successful and financially stable future.

Teaching teenagers and kids about loan types is an important step in preparing them for financial independence. By starting with the basics, discussing different types of loans, explaining interest rates, emphasizing budgeting, and encouraging responsible borrowing, parents can help their children make informed decisions about borrowing money. 

Empowering young people with financial knowledge can set them on the path to a successful and secure future.

Recommendations on When You Should Refinance

Refinancing basically means replacing an existing loan with a new one that has better terms and conditions. In some cases, refinancing can help you save a lot of money in monthly payments or on total interest over the life of your loan. 

However, refinancing isn’t always the right choice because it comes with costs and fees. 

To help you decide if refinancing is the best move for you, we’ve compiled some recommendations to guide you in making the right decision.

When Interest Rates Drop

One of the most common reasons people refinance their existing loans is when interest rates drop. By refinancing your loan, you might be able to get a lower interest rate and, in turn, a lower monthly payment. 

For example, if you have a mortgage with a 6% interest rate and the current rate drops to 4%, refinancing can save you thousands of dollars over the life of your loan. 

However, you need to carefully consider the costs of refinancing, such as closing costs and application fees, to ensure that the savings outweigh the fees.

When You Want to Shorten the Loan Term

Refinancing your loan term might be the solution you need. Shortening the term from 30 years to 15 years, while the monthly payments might be higher, you would be saving more money in total interest over the life of your loan. 

It's important to take advantage of low-interest rates, and if higher monthly payments are doable, you will be making sound financial progress in the long run. This is a great strategy to consider when you want to have a shorter-term loan.

When You Want to Switch the Type of Loan

When it comes to managing your finances, making sure you have the right type of loan can be a big decision. Sometimes, circumstances change, and you may find yourself wanting to switch to a different type of loan. 

Refinancing is a great way to make this switch possible. For instance, if you have an adjustable-rate mortgage and you want to avoid the risk of fluctuating interest rates, refinancing to a fixed-rate mortgage could be the perfect solution. 

Additionally, if you're looking to change your home equity loan into a home equity line of credit, refinancing can help make that possible too. 

So, whether you're trying to secure a more stable financial future or achieve new financial goals, refinancing may be the answer you're looking for.

When You Want to Consolidate Debt

If you're struggling with high-interest debt, it may be worth considering consolidating it into your mortgage to simplify your finances and lower your monthly payments. 

Although this can be a helpful strategy, it's important to carefully evaluate the costs of refinancing and consider the amount of interest you may pay over the life of your new mortgage. 

By doing your research and seeking out advice from a financial expert, you can make an educated decision and take the necessary steps towards financial freedom.

When Your Credit Score Improves

Improving your credit score can have a positive impact on many areas of your life, including your finances. If you obtained a loan when your credit score was lower, you might now be eligible for better interest rates. 

That means you could refinance your initial loan to take advantage of the lower rate and save yourself some money over the long term. With the potential for significant monthly savings and total interest savings, it's something to consider.

When You’re Switching Financial Institutions

Refinancing can be a smart financial move under the right circumstances, but when should you consider it? If you're thinking about switching to a new financial institution, such as switching to the Credit Union of Denver, refinancing could make sense. 

Perhaps you're looking for better interest rates or more flexible payment options. Whatever your reason, don't rush into refinancing without doing your research. Take the time to compare rates and terms, and make sure the new financial institution is a good fit for your needs. 

With careful planning and consideration, refinancing could help improve your financial situation and put you on the path to success.

Final Thoughts

Refinancing can be a smart strategy to reduce your monthly payments, shorten your loan term, switch loan types, consolidate debt, or take advantage of a better credit score. 

However, you need to weigh both the benefits and the costs to make a well-informed decision. Your unique financial situation, goals, and timeline should guide whether or not refinancing is the best option for you. 

Be sure to shop around for the best rates, terms, and fees from various lenders and consult with a financial advisor to help you make the right decision.

How a Home Loan is Your Best Option When Buying a House

Buying a house is an exciting milestone in your life, but it can also be a little daunting. When figuring out how to pay for your new home, completely out of pocket is often unrealistic or downright impossible. 

Instead, there are different financing options out there to help you buy a home, and one of those is obtaining a home loan from the bank.

Affordable Interest Rates

One of the most attractive aspects of home loans is their competitive interest rates. Home loan interest rates are typically lower than other types of loans, making them more affordable and accessible. 

This makes them ideal for buyers with limited funds or those who need established credit. 

A lower interest rate means you'll pay less overall on a loan, so you can enjoy more financial freedom while owning your new home.

The Right Loan Amount

When buying a house, you need to ensure that the amount you borrow will cover all costs associated with the purchase, including closing costs, down payment, legal fees, and more. 

With a home loan, you can rest assured knowing that you're borrowing just enough money to cover all necessary expenses without overextending yourself financially. 

This also gives you peace of mind knowing that you won't have any surprises down the road regarding additional costs or fees associated with your purchase.

Tax Benefits

Another advantage of taking out a home loan is its potential tax benefits. Depending on where you live and the size of your loan, you may be eligible for certain tax deductions that help offset some of the costs associated with homeownership. 

Additionally, some lenders offer special deals and discounts if certain criteria are met, such as signing up for automatic payments, which could result in even greater savings over time.

Overall, taking out a home loan when buying a house is one of the best ways to finance this major expense in life. 

Not only do they offer competitive interest rates and tax benefits but they also provide peace of mind knowing that there is enough money available to cover all associated costs without overextending yourself financially. 

If you're considering purchasing a new house soon, make sure to look into what types of home loans are available to see if it's right for your situation!

What Is a Loan Modification and How Can It Benefit You?

Are you feeling overwhelmed by your current mortgage payments? Do you need to make changes to your loan but don’t know where to start or if it’s even an option for you?

A loan modification could be the perfect solution for you. Let’s break down what a loan modification is, how it works, and how it can benefit you.

What Is a Loan Modification?

A loan modification is a way to change the terms of your existing mortgage agreement. This includes things like interest rates, monthly payments, length of term, and more. 

A loan modification can provide relief when life throws unexpected curves that make it hard for you to keep up with your original agreement. 

It is important to note that not all lenders are willing to modify loans so this should be an option discussed with your lender as soon as possible.

How Does a Loan Modification Work?

Suppose you decide that modifying your existing loan is necessary for you to remain in good standing with your lender. In that case, the process begins with an application and supporting documents from you. 

This will require proof of income and other financial documents. Once the application has been submitted, the lender will review it and determine if they can offer a modified loan agreement on their end. 

If they are able to accommodate such a request, then they will send out a new agreement outlining the changes made to the original loan which must be signed by both parties before any changes take effect.

Benefits of Loan Modifications

The biggest benefit of modifying your loan is obviously being able to stay up-to-date on payments while also having more manageable monthly payments that fit within your budget. 

Another great benefit of a modified loan is that it can help build or rebuild credit scores since there will be no late payments included in the new agreement! 

Finally, having peace of mind knowing that everything has been worked out between yourself and your lender will go far in terms of stress relief as well.

In conclusion, considering all aspects mentioned above—from what a loan modification is and how it works to its many benefits—it becomes clear why this might be worth exploring for those having difficulty keeping up with their current mortgage payment schedule. 

Even though applying for one could seem overwhelming at first glance, it doesn’t have to be – just do some research ahead of time so that you can understand what kind of decisions need to be made during the process and get ready for whatever comes next!

Credit Unions vs. Banks and Which Is Best for Getting The Most Out Of Your Money

In years past when you wanted to open a checking or savings account, obtain financing for a car or other big purchase, or were interested in making your money work for you as much as possible, you likely did like many other people and relied on a bank.

While there's nothing wrong with this, many people are now taking a closer look at credit unions as an alternative. Are there major differences between the two? If you're wondering which will help you get the most out of your money, here's what you need to know.

Interest Rates

If you do business with a credit union, chances are it will offer you lower interest rates on all types of loans, and will also provide you with higher interest rates on savings and checking accounts. 

In many cases, the average difference in interest rates between the two can be as much as two percentage points, meaning you could save thousands of dollars in interest costs on a loan.

Services and Conveniences

If you want your financial transactions to be extremely convenient and have access to a wide array of services, banks tend to get the nod in these areas over most credit unions. 

As banking has moved online, even the smallest banks tend to offer their customers mobile apps that allow most transactions to be done through a smartphone.

Insurance Protection

Just as banks are insured by the FDIC, credit unions such as the Credit Union of Denver also protect the money of their customers by having insurance protection from the National Credit Union Administration. 

Like the FDIC, the NCUA insures deposits up to $250,000, meaning you can have peace of mind no matter where you are keeping your money.

Educational Resources

When you visit a bank, you probably are not going to find many resources available to you regarding how to learn more about making your money grow. However, credit unions do this and much more. 

In fact, most credit unions are well-known for offering workshops and seminars on investing, how to manage credit cards, how to stay protected from identity theft, and other important topics. 

Also, most credit union customers tend to feel that credit unions offer more of a personal touch than traditional banks.

Since credit unions and banks offer various advantages in certain areas, the choice of which one to use comes down to personal preference. 

However, if you like better interest rates, a personal touch when doing business, and being educated about your finances, a credit union may be worth exploring.

4 Benefits of Refinancing Your Home Mortgage

You've probably heard of the word "mortgage," and you know what it means: a financial instrument that lenders, like banks and credit unions, use to make home loans. 

But did you know that your mortgage can benefit you in ways other than making debt payments? Below are the benefits of refinancing your home mortgage.

Convenience and Increase Home Equity

Many lenders offer refinancing home mortgage options. It's really up to you, but once you have decided on a lender, getting prequalified before visiting the lender is the easiest way to ensure that you are getting what you want. 

Many banks have pre-qualification tools on their websites. Just enter your information, and you get an idea about what you can borrow. 

Other terms of the refinance may include an increase in the value of your home, so you can borrow against this equity to take care of other debts. This is known as a cash-out refinance, and you can use it to pay off consumer debt or even finance home improvements.

Lower Interest Rates

The first thing that homeowners consider when refinancing or selling their homes is how much they can save in interest payments. For example, if you pay 5 percent interest on your current loan, you can refinance a new loan with a lower rate. 

Even if the new rate is higher, the savings will be greater. Moreover, the lower payments will leave you with more to save for retirement or other expenses.

Turn Investment Property Into Owner-Occupied Property

If you own an investment property that you want to turn into an owner-occupied property, refinancing a home mortgage may allow you to switch from an investment mortgage to a conventional mortgage. 

This will allow you to sell the investment property and make a profit. If the new mortgage is an FHA loan, you can still keep your investment property and rent it out.

Lower Your Mortgage Payment

You probably pay more than the amount on your mortgage each month. You might also regularly make extra payments on interest or principal, such as when you first move into the home or take out a 30-year mortgage. 

If you decide to refinance, your new lender may agree to lower principal payments to pay off any outstanding balance. This is known as a principal-reduction refinance.

Refinancing your mortgage is a good way to save money on interest, get a lower payment, or even sell your home with little to no down payment. 

It's also a good option if you need money to pay off debts or make home improvements. You can use the money from a cash-out refinance to make some of these improvements.

Factors that Impact your Mortgage Rates

Since every lender has the inside knowledge of how a mortgage interest rate is determined, it is only fair that you, as a customer, have the same understanding. So, how is your individual interest rate determined? 

There are several factors that go into the decision, and knowing what they are can help you learn what to expect going forward so you can better negotiate your loan.

Here are just six of the basic components that are considered:

Term

The duration of your loan, which is referred to as a “term,” is how long you have to pay it back. Those that are shorter term may have higher payments due each month, but they tend to have lower costs overall, including lower interest rates.

Down Payment Amount

If you put down a larger down payment, you will most likely receive a lower interest rate. This is because you will increase your stake of ownership in the property, therefore you appear to be a much lower-risk recipient for a home loan.

Type of Interest Rate

There are two different types of interest rates, which are “adjustable” and “fixed.” As the names imply, adjustable rates change after a time, and fixed rates are locked in. An adjustable rate fluctuates depending on the market.

Size of the Loan

If your loan is especially large or small, you may end up paying higher-than-average interest rates. Remember, your loan amount will depend on not just the price of the home, but also includes closing costs. And, you should also subtract your down payment amount.

Type of Loan

There is a plethora of loans out there, including VA, USDA, FHA, and conventional types. Rates tend to change in accordance with the type of loan that you acquire.

Credit Score

Your credit score can certainly affect your interest rate, because it acts as a predictor of how likely you are to pay back your loan. That is because credit scores reflect your payment history on your bills, including credit cards, utilities, and other loans.

Just keep in mind that it isn’t any one of these factors that determines your interest. It is the combination of all of them that culminates in your particular rate. 

Taking the time to understand each of these reasons will help you to find the best mortgage for your personal situation. And, understanding these factors is one way to take control of your future when it comes to determining your interest rate.

How Loans Can Keep You From Falling Behind Financially

Many people are currently out of work but still need to pay their bills. This causes people to drastically fall behind financially. Even if you have money saved for a rainy day, an unexpected financial crisis can put you in debt.

Back in the day, you could borrow money from your loved ones to get by and they could live comfortably until you paid them back. However, it's likely that even their finances have become tighter, so they may not be as open to loaning large amounts of money.

Some people may feel skeptical about getting a loan depending on how much research they have done. However, taking out a loan from reputable businesses can be the best financial decision you can make. Here are a few ways loans can improve your financial standing.

Avoid High-Interest Rates.

When it comes to lending options, getting a personal loan is one of the most flexible options available to you. Some companies give you between six months to ten years to repay the loan back depending on their policies. 

When you commit to a long-term payment plan, you also have a fixed interest rate, which is less than having to pay multiple bills at once.

Once you’re in decent financial standing, you can even get in good standing by paying a bit more than your minimum monthly balance. As long as your lender doesn’t require a prepayment fee, you can get ahead while saving hundreds or even thousands in interest.

Consolidate Major Credit Card Debt.

Credit cards are a great thing when you can make the payments on time. Unfortunately, falling behind on bills typically means you’re unable to pay your credit card bills every month. On top of late fees, credit cards notoriously have high-interest rates.

Taking out a personal loan allows you to combine your credit card debts and pay them off in a shorter time period. Even if you still have a remaining balance, you’ll ultimately pay less money than if you don’t consolidate your credit card bills and utilize a loan to pay them off. Best of all, you can raise your credit score, which creates a large number of financial opportunities for you.

Like any lending option, personal loans can have ups and downs. However, they are a great way to help yourself when you're in a financial bind. 

Be sure to do plenty of research so that you can find a reputable personal loan company like Right Trac Financial. By taking the time to identify your options, you will be able to find a variety of different loans that can help you maintain financial stability.

Considering Refinancing? Here’s How to Know When You Should

Good financial management means more than just watching every penny. It also means taking an occasional step back and looking at the big picture in the context of the world around you. An area where many people find a way to save money is by refinancing their homes. 

Here are four ways to know that it’s time to look into refinancing.

Market Rates are Better

Interest rates are almost always in motion, headed either up or down most of the time. At the time of your last refinance or the initial purchase, you may have taken a rate that was pretty solid. Since then, though, rates may have dropped, and a refinance could save you thousands of dollars in interest.

Your Credit Has Improved

One of the most important factors in the interest rate you get is your credit score. Over time, you should be able to see that figure gets better and better. Once you’ve reached a significantly better credit score, you will probably qualify for a better rate, making it worth your while to refinance. 



A home buying loan service can review your situation and see if there may be options for you.

Your Situation Has Changed

Since you took out your current mortgage, you may have encountered many changes. You could have had a job change that resulted in a lower salary, making your mortgage a bit of a strain. You may have experienced marriage, divorce, or the arrival of children. Each of these events can change your financial needs and make it beneficial to investigate refinancing.

You Need Cash Out

Your home is not just your residence. It’s also an investment. The dollars you put into it can someday come out if needed, even if it’s for upgrading the house itself. During a refinance, you can cash out some of your equity to take care of other expenses, such as tuition for the kids, debt consolidation, or even just a great family vacation. Instead of racking up student loans or credit card debt, look into a refinance that will cover the expenses.

When you think about it, very few mortgages should ever go the full term without being refinanced at least once. Changing interest rates and personal needs are a given when you’re considering a time horizon of up to 30 years. Check your situation periodically and be prepared to refinance when the right circumstances develop. You could easily save yourself thousands of dollars in interest.

Understanding How to Use Collateral for a Secured Loan

It is important to be able to have access to loans when you need them. Sometimes you will need to provide a lender with collateral in order to receive the favorable loan terms that you are looking for – this is typical of secured loans. 

If you have yet to secure a loan with collateral, then you may not understand how the process works. There are specific things that will be accepted as collateral, and knowing what they are as well as the benefits are important.

Why is Collateral Necessary?

Collateral is necessary for loans when the lenders need assurances. Sometimes people with less than stellar credit will need access to loans. If the lender deems the loan to be risky, then having collateral in case something goes awry will limit their risks. 

This makes it easier for them to justify giving you the loan, and it can wind up giving you more favorable terms.

What Are the Benefits of Using Collateral for a Loan?

There are various benefits to using collateral to get a secured loan. The most apparent benefit is that it allows people with less than perfect credit to get the loans that they need. 

This can lower the interest rates of the loan and will also make the approval process go smoother. If you want to get a loan, and your credit score is less than 700, then it might be in your best interests to use collateral to make things as manageable as possible.

What Are the Negatives of Using Collateral for a Loan?

The negatives of using collateral for a secured loan are pretty easy to understand. You are using your assets to secure the loan, so if something goes wrong, you could potentially lose those assets. 



If your vehicle is being used as collateral to secure the loan, and you don't pay it back, then your car could get repossessed. Also, sometimes these loans are long-term, and you can get stuck paying interest for a long period of time if you don't plan ahead.

What is Accepted as Collateral?

The type of collateral that is accepted for a loan will depend on the type of loan that you are applying for. Generally speaking, there are three types of loans that you will be able to seek out – personal loans, business loans or commercial finance, and auto loans. Each of these three types has differences with the types of collateral that you can use to secure a loan.

Personal loans allow you to use real estate, home equity, vehicles, and even your paychecks as collateral for a loan. There are also cases where savings accounts, investment accounts, and valuables are accepted as collateral. The most common collateral that is used for these purposes is definitely real estate, vehicles, and home equity.

Business loans allow people to use similar things as collateral but will also add in a few options. You can use business assets such as inventory, machinery, or a blanket lien as collateral. Auto loans will allow you to use the car that you are purchasing as collateral, or other vehicles that you already own. No matter what type of loan you are applying for, the value of your assets will need to be determined before moving forward.

Choosing Between Simple Interest and Compound Interest

Interest Rates (Photo credit: 401(K) 2013)

As with everything, there are perks and consequences for every choice we make. Choosing between simple interest and compound interest has certain advantages over each other depending on your needs.

Compound interest is when an interest paid on your investment is added to your total sum and the interest is calculated onto the full amount. The interest will be added to the complete total allowing the sum to increase each time. Your returns are quickly obvious with compound interest instead of simple interest. Simple interest is where the same amount of interest will be paid on the total at the same time each year.

The best way to explain the differences between the two is to create a simple scenario.

Two people are each given $10,000 by a close friend. Person A decides that putting his money in an investment would earn him the most at a 5% rate. Person B decides that he wants a faster return but less profit. So he draws on the interest as it is paid. Person B is under the illusion that he's doing well because he has managed to pocket 5.5% on his investment. This means he's making $550 every year.

Because Person A has decided that they don't want to use the return he gets on his funds from his investment, he's experiencing what most would call compound interest. Persona A is receiving his income from his investment and experiencing simple interest.

After ten years of watching his investment grow, Person A returns. The $10,000 he initially invested has quickly expanded to a whopping $16,289. Person B was only able to receive $5,500 in interest, which was spent. He's now back to his original $10,000 investment.

Person B was able to use his money whenever he wanted throughout the years but its highly unlikely that he used the money he earned for anything useful. Person A was careful to manage his money and as a result, he earned more than Person B.
Compound interest may seem like the way to go, but you should be aware that the bank or credit card company you choose to associate with will also earn a large sum of money too. It generates more profit for your bank and you also end up paying more than you normally would on your debts.

When simple interest and compound interest are compared side by side, it's obvious that compound interest is the best of the two. However, compound interest may not be for everyone. Compound interest usually works out better for people who don't have a problem with not being able to touch their hard earned money for large periods of time. For some, this may not work out. Simple interest may be better and easier on the sort of people who like to spend their money as soon as they get it. Sites such as www.myloanadvisor.com have tools that can help you make these decisions.

Finding the Best Mortgage Rates

Finding the perfect house may be difficult, but choosing the right mortgage loan can prove to be even more challenging, especially for first-time borrowers  While the mortgage process may seem daunting, finding a knowledgeable broker can conveniently simplify and expedite the process. A mortgage broker will help you navigate the mortgage system and will match your financial needs with a suitable mortgage from a selection of lenders. The key is choosing the right broker. Similarly, choosing the right mortgage lender can be an overwhelming and frustrating process. By understanding some simple mortgage terms, knowing the right questions to ask, and comparing mortgage quotes from multiple companies can better enable you to find the best mortgage loan possible for your particular financial situation. 

To narrow down your search for the best mortgage rates, brokers, and lenders, this article will highlight three tools that will help simplify your search for the best mortgage loan available. 

Brokers vs Lenders 

To start, it is important to identify the difference between a mortgage broker and a mortgage lender. Many people do not understand and often confuse the difference between the two parties. Essentially, a mortgage broker is a loan provider who serves as a liaison between you and mortgage lenders. A mortgage broker offers the loan product of various lenders, while a mortgage lender provides the actual loan money. Many lenders, though not all, are associated with banks. As a loan seeker, you can either apply for a mortgage at the bank you use for your checking and savings accounts, or you can shop around to see which lenders offer the best interest rates and terms. 

Mortgage brokers do not loan money, instead, they work with you to help you find appropriately-matched mortgage loans. Typically, a mortgage broker will learn about your particular financial situation and then shop around for the best loans from lenders offering the particular type of loan you need. Brokers usually work with numerous lenders, attempting to match the right lender with your profile. Since they have so many lenders from which to choose, brokers are more likely to find loans for borrowers with special needs, such as bad credit, than individual lenders. It is beneficial to explore all your options and to meet with multiple mortgage brokers and lenders so you can determine where you would be best served. 

How to Find the Best Brokers 

To find the best broker it is important to get specific. Anyone seeking a loan has a different loan purpose, be it commercial or residential. This key information can be a factor in deciding which broker to work with. Similarly, when seeking help from a broker you should research each type of mortgage to see which is right for you. Each one has its own set of pros and cons, and choosing one that first your financial situation can help create better plans for the future. Check out the tool below to help you search for the right mortgage broker:

Mortgage Brokers

How to Find the Best Lenders 

To find the best lender it is important to assess loan type, mortgage loan programs, closing costs, and company reputation. Researching the necessary loan type is important for both brokers and lenders as explained above. There are several types of loans to choose from such as adjustable rate, fixed rate, home equity loans, and hybrids. Mortgage loan programs are typically overlooked, but they can offer you special deals or lower rates. Closing costs and reputation should be factors in your decision as working with a company that has excellent personnel and has been in business for years could seek to benefit you. You must also ensure that you will be paying reasonable closing costs, which are various fees charged by those involved with home sale. Check out the tool below to help you search for the right mortgage lender:
 

Mortgage Lenders

How to Save on Your Mortgage Payments 

For most homeowners, a mortgage payment accounts for about 30 percent of their monthly income. If you’re determined to stick with your budget, take time to trim some of those housing expenses. You can free up some extra cash each month by reducing your monthly mortgage payment and then reconfiguring your budget to better manage your household’s monthly expenses. It may be helpful to make a large lump sum payment to pay down your mortgage, shop around for better rates, extend the life of the loan, or ask your lender about the Home Affordable Modification Program (HAMP). These steps and these tools will help you narrow down the search for the best rates, brokers, and lenders when seeking a mortgage loan.