What is home equity loan?

Are you clear of the concept of home equity loan? Not everyone knows what it really is. I am writing this for everyone who doesn’t have a clear understanding about the home equity loan. Here’s a simple and easy to understand explanation.

A home equity loan is a loan that uses the borrower’s equity to secure the loan. People who take home equity loan must know that they have put their home as a security against the loan. This loan can be used for a variety of purposes and the interest is often tax deductible. Typically, a person takes home equity loans to make home improvements or else, it can be used for other variety of options depending upon the individual situation. The loans are granted at either an adjustable rate or a fixed rate. The repayment plan is kept shorter than your first mortgage payment. As per the statistics, a mortgage may typically take thirty years to pay off while a home equity loan can be paid off within fifteen years.

Some people tend to think that this type of loan is an easy way to solve their financial problems, especially if you are in huge debts. Don’t avoid the fact that when you have taken such kind of loan, you have already risked your home the moment you miss one payment. Think two steps ahead, god forbid, if you really lose your home, where will you live and find shelter? Besides, you also need to be very careful of the institution from which you got the home equity loan. There are many scams around and you need to be cautious before putting your home and money. Make sure you have always read the fine print before the loan is yours.

Weigh all the options that are available to you before you sign on that dotted line. You will be making a wise decision if your loan is an adjustable rate mortgage. You will be benefited when the market rate is high and you are paying a lower interest rate. Before taking the loan, clear with your loan company whether there is any pre-payment penalty. Most companies have some penalties if you decide to pay the loan earlier. They average around two to five years. These penalties can be significant and you may end up losing money in the end if the savings is not more than the money you would be shelling out.

Subscribe to this blog's RSS feed

If you are in debts, your top priority in life should be to become debt free as quick as possible. You can be in a lot of emotional imbalance with lots of debts over your head. The problems can become so overwhelming after a certain stage, therefore it becomes important to find some form of debt relief and finding an effective way of managing money. The best way is to learn proper ways of money management skills is to visit a professional counselor. He can teach you from managing household expenses to how to pay off your mortgage without getting deeper into the hole. The professional counselor can help you in getting enrolled in a mortgage program as well as take care of your debts in the most efficient manner.

If you have too much debts, you won’t good job opportunities, sometimes, it can even result in a job loss, a house and can even ruin marriages and families. The stress of going too deep in debts can cause health problems such as high blood pressure and the fear of heart attack or stroke. You don’t need to wait until the situation gets far beyond control. You need to consult a professional counselor and find options to become debt free.

You basically need to formulate a plan. Create a unique debt program for yourself. The crux of the matter is that you should be able to control your debts. Don’t allow debts to control you. In order to do this, you need to devise a budget on which you can live and keep it within your reach. If you think you can do this on your own, you have the perfect control, otherwise you need to speak to a money advisor. It can be anyone who has a better control on money management, someone in your family or a trained expert. Discuss about your situation with family members and friends and get referrals. It’s not good to stay isolated when you are unable to make the right decisions with your finance.

Sit down and carefully review all the options regarding budgeting and then you need to be strict with yourself. Don’t spend money unnecessarily. Draw up a weekly or monthly budget and stick to it religiously.

You should be able to find effective methods of cutting unnecessary expenses in your daily life. With the portion of money that you can save from the total, you can put it towards the bigger debts, such as your mortgage. This rightly put you on the debt free path. Resolve in your own ways not to create new debts while you are walking in the positive direction and improving your present situation. If you want to buy something very necessary like a television or new clothes, set money aside from your daily budget for the purchase instead of being hasty and charging it on your credit card.

Always remember that credit cards are to be paid in full every month. If you leave any outstanding balance, it will add up with financial charges and late fees in the next month. Never charge on your credit card for purchasing something that you know is going to take a long time to pay back. Think about the amount of money you will be wasting just by paying interests and in fees. You must work every day and generate that much income so that you can keep your expenses below it. Work diligently to stay within the budget you have worked out for yourself. You won’t see the progress all of a sudden. It will come in small steps over a long period of time.

Use the internet and search for online tips of saving money and exercise them to your everyday life. There are many ways to cut expenses from your everyday budget. You just have to search for it. All these things will pay off in the end if you have the intense goal to become debt free. While you are working hard to resolve your debt issues, don’t be too hard on yourself. Live an easy life and enjoy it. Be disciplined and make the right monetary decisions. You will have the perfect self control over yourself.

You can have a broad idea about debt by visiting this page:

http://en.wikipedia.org/wiki/Debt

Is there any sharp line that distinguishes people from being frugal and being cheap? Are these the two sides of the same coin? Well, in my opinion, I don’t think they are. I have met people from all grounds and I have seen people who are frugal but not cheap, and on the other side, people who are cheap but not frugal. I met a girl when I was in my law school. She always followed the absolute rule of not going to the ATM. She took out $40 in the beginning of the week and that was the maximum amount that she will spend in the whole week. At first, I used to admire her kind of approach towards sticking to the strict budgeting principles. Later, I came to know the character flaw behind it. When we went out as a group to have pizza, and she was down to her last $2, I was curious to know whether she declined to go further with us. Nope. She went out with us for the outing. When we had our food and the check came, we divided each of our share as $5. This girl offered the $2 only that she had. The rest of us made the difference. Now, my question is was she both frugal and cheap? Or was she just cheap through and through, both with herself and with others?

During those days, I was in touch with another guy who was saving every penny that he had for the studies in the law school, and he rarely bought more than a hot dog at the corner vendor for his lunch. But when he used to go out with the group, he used to pay more than his fair share. He is successful now and doesn’t’ usually eat hot dogs, but he still believes in saving money even today. He will buy a used furnace from a neighbor rather than get a new one, but he will never act as cheap when he is with others. He is one of the nicest guys I had known so far.

I get pissed off with those types of people who are cheap in the name of frugality. A cheap person will ignore the fact that a ten-dollar meal, after tax and tip, is more than the ten-dollar share and his friends had to pay the rest of the balance because of his tight-fisted ness. In the end, this kind of personality flaw is not about the money. It’s a sign of deep lack of character and this has an affect on the overall personality. The most important thing that is really missing is the

I really admire frugal people and I wish that I can be like one of them. They are the ones with all the good tips on travel discounts. These are those kinds of people who are never afraid of buying used things. When I am out with such type of people who show their care towards me, they will never let my wallet go astray because they are watchful of other people’s money as they are of their own. Truly frugal people are really generous. Remember, the other girl who was with me in the law school and I was talking about her above; she is still not well balanced in her life and she has taken wrong decisions with her money. The more important thing is that she really doesn’t have any friends who can trust on her. Life!!

Month after month, we have been spending on our groceries and it can average to around $400-500. This is spent only on food and dining, and not on household items. For our family of three, I know we can spend a lot less than that.

There are free sites that can help you with your grocery shopping and finding good deals. But unfortunately, for us due to our location, those sites do not have any affiliates with our local grocery store. We don’t subscribe to our local newspaper as it’s too expensive. So, to get those flyers, it means a trip to the grocery store and pick the flyer. Then, we have to come back home, review the flyers and creating a grocery list, and go to purchase items. With our schedule and the time when the flyer comes out, the time doesn’t adjust too well for us. So, here’s what we are trying to do.

Once a month, we purchase all the inventory items of our food. I have made a list of all the necessary items that we will need during the month to make meals and I mark those items that have to be fully stocked up. Then we head to Wal-Mart to do shopping. Wal-Mart has some items on sale that our local grocery store will not usually put. Last time, when we came to Wal-Mart, we had a cart full of groceries for $150. I am not sure if we have ever spent that much on one trip before.

Now, we have the normal items that will stay for the whole month. Then it’s the small weekly trip to the grocery store to buy fresh fruit, milk, bread and meat on sale. We don’t buy fresh meat from Wal-Mart anymore because it can get quite expensive for us and our budget is not to exceed $50 each trip during the weekend. So, here’s what we have spent at the end of the month.

$150 + 50 + 50 + 50 = $300/month

So far, it is working awesome. One major problem that we faced was that we were making too many trips to the local grocery store during the week. All those little trips can add up quickly and result in buying items that we really don’t need like frozen pizzas for a quick dinner. This is an unnecessary expense that can fully be avoided. Once we have limited the number of our trips, we are more focused with our purchases and we are getting a little more creative with our meals to use what we have and saving money from our budget.

Limiting our grocery store trips is challenging us and I like it. After some time, I would like to plan our menu also. I used to do that before and this saved a lot of money. But because of my work, I couldn’t devote much time on it. I will have to start doing it again.

The main thing is about saving money. There are many strategies of executing it. You have to spend some time looking at your spending and figuring out the plan that works well for you.