Home Equity Loans – Pros and Cons Obtaining a home equity loan is a common method of refinancing debt and it has several advantages. But there are a few potential 'gotchas' that are worth considering before taking the plunge. First, what is a 'home equity loan'? The basic idea is simple: obtain a line of credit, secured by the equity in your home.That is, if you have a certain amount of ownership in your house - say, as a result of having made a down payment or payments over a long time (as many homeowners do) - borrow against that equity. But, like any loan, it's important to remember that a home equity loan is just that - a loan, or debt.

If one of your major problems is the inability to exert the will to refrain from spending beyond your means, you have just found another supplier to feed your addiction. As a result, a home equity loan may actually make your more fundamental problem worse, rather than better. But, if you have made a commitment to control your debt, and are seeking ways to reduce your overall expenses, a home equity loan can be a sensible method to employ. One essential exercise is to actually calculate how much money you would be spending per month - and over the life of the debt - in one scenario versus the other. There are debt calculators readily available online to help you do just that. Sometimes you will have to weigh whether you prefer to spend more money over the life of the debt as opposed to having a smaller monthly payment, but higher total amount of interest. The better calculators will help you run through both scenarios, changing amounts to help you weigh the pros and cons. Debt Handling - Secured vs Unsecured Loans Both lender and borrower are faced at the outset with a basic decision - to obtain a loan that is either secured or unsecured. But, what does that mean, and what are the pros and cons of each for either party?

A secured loan is one in which the money borrowed is guaranteed to be repaid or some asset will be forfeited. The most common example is a home loan. The borrower agrees to repay on the terms of the contract, and if he or she defaults, the lender can legally claim the home as compensation. In theory, that means that if you miss a payment on the home loan, the lender has the legal right to foreclose and sell the property.

it's wise to realize that the lender has this right. How important or not that right is can be judged by recognizing that even with an unsecured loan, creditors have the legal right to seize assets like salary, stocks and property. This requires only undertaking a relatively simple and inexpensive legal procedure to declare the borrower in default. But, legal procedures are only RELATIVELY simple and inexpensive - and lenders will almost always try to work out a repayment option before taking that step. There are other differences between secured and unsecured loans that borrowers should be aware of. Since the money in an unsecured loan is not, in theory, backed by the right to seize the asset in case of default, the interest rates on them are usually higher. The lender in that case is taking a larger risk, and they are compensated by charging higher interest. That covers losses from defaults (which are higher on unsecured loans) and is one way to change borrowers incentives. Most people will try much harder to meet a debt that is tied to their home than for an unsecured loan. So, there are pros and cons for both borrower and lender to obtaining one type of loan versus the other. As a borrower, you may find it necessary to incur a higher rate of interest if you don't have a home, bonds or other assets to offer as collateral. Or, you may simply want not to put those at risk. Only you can decide in your particular circumstances whether the advantages outweigh the risks and costs.

Car Loans - Do Your Homework

If you're considering buying a car, or even just refinancing your current car loan, you'll benefit from some simple research before making a final decision.

Know your credit report items. The overall number assigned to measure your credit worthiness doesn't tell the whole story about you or your ability and willingness to repay a loan. But it's used by every lender you approach and will have a strong influence on whether the loan is approved and what rate you might receive.

You can check your current credit report with two major companies below

Equifax: www.equifax.com

Experian: www.experian.com

Next, consider carefully whether any 0% loan offered by a dealer is the best deal for you. That number certainly looks attractive, compared to the 4% or higher that is often the next best thing. But you might actually be better off taking the immediate cash rebate instead.

For example, at 4% with a £2,000 rebate on a 36-month loan, your monthly payment will be £30 lower and you'll save over £1,100 on the total cost over a 0% loan. You can run various scenarios yourself by using one of the readily available online loan calculators.

Always be sure to pre-arrange financing before you go car shopping. That has a number of benefits. You'll find out in advance how much the loan can cost you and what you can afford, both in terms of monthly payment and total cost.

You'll also have a bargaining advantage negotiating with the dealer, since part of the purchase price they offer is always dependent on whether they will make the loan. Dealers will often accept a lower purchase price if you take their financing offer. Run various scenarios in advance to determine where your trade-off amount starts.

It may well be worth accepting their financing offer if the purchase price is low enough. You can refinance the day after, after all. That too has costs, though, so be sure to include that in your calculations.

Another advantage of having pre-arranged financing is the confidence you get from being able to walk away from any unattractive deal. New cars especially are virtually identical from one dealership to the next. If you get a better deal elsewhere, it may be worth it to go on to the next. Before you do, though, consider not just the immediate or lowest price but also what service you'll get after purchase.

Last, be sure to calculate the pros and cons of leasing versus a car loan versus another form of financing. Getting a home equity loan, for example, can give you ready cash with tax deductible interest and most contracts don't require you to spend the money on the house.

Being creative when considering financing options can save you money.