When it comes to understanding finance, some people are embarrassed to admit that financial issues can be confusing. While the complex world of economic trends and their affect on financial markets is a baffling topic, some everyday financial topics, such as credit, mortgages and equity are relatively straightforward. Whether you are currently buying a house or plan to buy in the future, you should familiarize yourself with all financial aspects associated with the process.
If you already own and don't plan on moving, understand the basics of credit, loans and interest rates can save you headaches down the road. In fact, many people get into financial trouble because they don't understand how this aspect of the financial world works. Don't let yourself be caught up in the common myths. Learn the facts about credit, mortgages, buying a home, home equity and payday loans.
Even if you find yourself already in serious financial trouble, our tips can help you get back on your feet. Learn new ways to manage debt. For example, set up a schedule for paying off your open lines of credit by paying off the ones with the highest interest rates first. In the long run, you will save hundreds of dollars in interest as soon as you close that line of credit.
Credit Information
Dealing with credit reports is perhaps one of the most serious and confusing aspects about credit. Credit reports document your credit history. Because they are key to securing any type of loan, you should take time to familiarize yourself with how they work and how to improve your credit score.
In fact, experts recommend that you check your credit report twice a year to make sure that it's accurate and that you haven't fallen prey to identity theft. You can request a copy of your credit report from Equifax, Experian or TransUnion. Because different creditors don't necessarily report to each agency, request a copy of your report from each agency.
Information on Mortgages
When it comes to buying a house, a homebuyer can choose from a variety of mortgage programs. The type of mortgage program you choose will depend on your needs, your budget and your personal situation. For instance, did you know that first-time homebuyers and veterans can get special mortgage loans to buy homes? Similarly, low-income families can get HUD mortgages to help them buy a home.
Another issues key to choosing the right mortgage package is the length of time you plan to stay in the house. If you don't plan on keeping the house for a long period of time, you will likely want to opt for an adjustable rate mortgage (ARM). However, those planning on staying in their new homes for years to come may not welcome fluctuating mortgage payments. Therefore, a fixed-rate mortgage would be a better choice.
Understanding the Home Buying Process
Whether you are a first-time buyer or have purchased a home in the past, you'll likely want to familiarize (or re-familiarize) yourself with the steps involved in buying a home. From choosing the right neighborhood to the closing process, buying a home is a complicated process. However, understanding each stage can help reduce your anxiety and get you into your dream home without added fuss.
Briefly, the home buying process includes finding the right neighborhood, negotiating an offer, getting a home loan and the closing process. Because this process comes with its own set of legalities and time frames, you may consider getting your own real estate agent to help you along the way.
Home Equity
When it comes to getting a loan, understanding the value of home equity is essential. If you already own a home and have been diligently making your mortgage payments, then a home equity loan may be an option for you. Generally, people only take out home equity loans when they are strapped for cash, such as when they are out of work or have to pay a large bill immediately.
When considering a home equity loan, keep in mind that the collateral for these loans is your home itself. If you default on payments, you could lose your home. While this sounds scary, proper budgeting and planning can make a home equity loan an ideal option for those who need a large lump sum of cash.
Understanding How to Manage Debt
Keeping debt in check is a problem that crosses all socio-economic sectors of society. People who have high paying careers can just as easily find themselves in huge debt as those who live below the poverty line. The key to avoiding financial crisis is to monitor what you spend versus what you make.
While this may sound like an easy approach, the surge in credit card use over that past few decades has been heavily responsible for plunging people into debt. Often, when people use credit cards, they forget that they will have to pay for everything the buy PLUS interest. As a result, if you only make the minimum payments on your card every month, you are just prolonging the time in which you are in debt.
Information on Payday Loans
Sometimes people need a chunk of cash between paydays. If you get in a car accident or find yourself facing a medical emergency (and don't have a savings account), you may need some money between paydays. One option is taking out a payday loan. With a payday loan, you can go to an agency write them a post-dated check for the amount you need plus whatever fees they charge and then get the money you need without any credit checks.
While this seems fairly easy, payday loans can plummet you into serious debt if you take out more than you can afford to pay back with your next paycheck. As a result, only take out a payday loan for an amount to can quickly repay, as the associated interest rates are astronomical.
