Personal loan Archives

December 23, 2020May 20, 2022

5 Smart Ways to Consolidate Growing Debt

Debt can wreak havoc on your ability to achieve your financial goals. That’s why it’s critical to pay off debt quickly so you can get your finances—and life—back on track. While it may feel impossible to get out of debt, consolidation can help you chip away at the burden. Here are five ways to do it.

1. Tap Into Your Largest Asset

As a homeowner, you can access your equity through a HELOC, home equity loan, cash-out refinance, or home equity investment and pay off your debts in full. A home equity investment, like Hometap provides, allows you to get cash to pay for what’s most important to you without the hassle of monthly payments or interest.

The option that will make the most sense for you depends on your debt and financial goals. Compare your options using our guide to find the best one for you.

Take our 5-minute fit quiz to get started.

2. Use a Balance Transfer Credit Card

Depending on the amount of debt you have, you may be able to transfer it all to one credit card. If you transfer it to a credit card with a 0% interest promotional period, you can avoid paying interest. You’d then have only one monthly payment while eliminating the high interest your other cards carried.

However, you’ll still need to qualify for these cards, which may require a good credit score. Plus, if you can’t pay off the debt by the end of the promotional period, you may end up paying more through higher interest. You’ll need to stick to a disciplined payment schedule if you want to avoid additional debt.

3. Take Out a Personal Loan

If you can secure a personal loan with a lower interest rate than the rate on your current debts, it may make sense to take out a loan.

Personal loans don’t require collateral. That means they don’t require you to back the loan with assets like your house or car in case of nonpayment. You’ll still need a good credit score, however, especially if you’re hoping for a low-interest rate.

4. Consider Debt Settlement

Debt settlement isn’t so much debt consolidation as it is payment consolidation. With debt settlement, a firm negotiates with your creditor(s) to lower the total amount of debt you owe. You then make one monthly payment to a settlement firm.

While that may sound ideal, you’ll want to look into the details. The process can take months, you’ll be racking up interest, in the meantime, and the firm will charge a fee. You may even have to pay taxes on the forgiven debt, and your credit score can be affected for seven years.

5. Borrow From Retirement

Consider this option with caution: If you have a retirement plan you may be able to take out a 401(k) loan. You’ll need to determine if your specific plan allows this and its terms. If you pay the loan back on time (usually five years), the cost to you is relatively low. The interest you pay on the loan actually goes back into your own account. You can also repay the loan without prepayment penalties and many plans may allow you to take payments out of your paycheck.

Over 50 and have $0 for retirement? Here’s your roadmap to get on track >>

But if you don’t pay your loan back on time, you’ll likely have some serious setbacks. At this point, it’s considered an early withdrawal, which means you’ll face a penalty and income tax. You’ll also want to consider your job status. If you leave your job, you’ll have to pay the loan back within 60 days.

Take our 5-minute quiz to see if a home equity investment is a good fit for your debt consolidation goals.

DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

April 30, 2019June 22, 2022

Aging in Place: A Choice or a Lock-In Sentence?

Aging in place, otherwise known as staying in your home as you get older, is becoming the norm, especially among baby boomers. According to a recent study from Chase and Pulsenomics, more than half of boomers plan to age in place. However, 88% say their homes need renovations with increasing bathroom safety at the top of the remodel list.

Many homeowners looking to age in place are tapping into their home equity to get the cash they need to make necessary home improvements or supplement their retirement savings.

But for some homeowners, aging in place isn’t a choice, can be dangerous, and may feel more like a lifetime prison sentence. How can you ensure you have a choice—and can make the right one for you?

Beware: The Rate Lock-In Effect

The so-called “lock-in effect” occurs when homeowners don’t want to give up their mortgages because they have favorable interest rates. When it comes to the housing market, older homeowners are feeling the greatest impact from the rate lock-in effect.

As HousingWire explains, there’s no incentive for homeowners to sell when borrowing the same amount of money at today’s mortgage rates will lead to higher monthly payments.

That’s what happened to Waltham, Massachusetts residents Joe and Suzanne. The couple purchased their two-family home in the 1960s for $19,000. While the couple, who both just turned 90, are in relatively good health, the home has caused some trouble.

Most homes don’t come equipped with features that go hand in hand with aging, such as ramps, wheelchair-accessible bathrooms, and safe showers. For Joe and Suzanne, the steep steps to their second-floor home are a challenge, and Joe even had a fall earlier this year carrying up a bag of groceries. “I’m just too old to risk getting up and down those stairs alone in the winter,” explains Joe. “So, I end up staying here with nothing to do.”

Higher Home Values, Higher Taxes

Plans to age in place can also fall apart when residents are forced out of the homes and communities they love due to factors like increased property taxes and expensive renovations.

Skyrocketing home values aren’t helping either. Property owners in Mecklenburg County, North Carolina received revaluation notices at the start of 2019. Many residents, including those who have paid off their homes, are concerned about the increase in property taxes. While some people may be willing to move to certain neighborhoods despite the costs, folks that have been living in a neighborhood for decades feel the impact more sharply.

The Good News: You Have More Equity

The plus side to increasing home values is having more equity in your home. For many homeowners, tapping into their home’s equity to supplement income is a smart way to continue to age in place.

Rising interest rates means moving to a more senior-friendly home is out of the question for Joe and Suzanne. The couple, who have significant equity in their home, have instead chosen to rely on home equity lines of credit (HELOCs) to help supplement rising taxes and home maintenance fees.

Choose your method for tapping into your home equity wisely. Many equity loans come with monthly payments and interest rates—which are not ideal for homeowners trying to limit their monthly debts or living from Social Security paycheck to Social Security paycheck.

Reverse Mortgages in Retirement: When to Sign On and When to Steer Clear

Equity sharing programs, like Hometap, are another option. Hometap was created to provide homeowners access to some of tomorrow’s home value to cover today’s needs—without interest or monthly payments. Unlike a reverse mortgage, you know exactly what Hometap’s share will be at the time you sell or buy out the investment.

Whether retirement is several years down the line or you’re already planning on aging in place, start planning for what’s next. By being aware of potential pitfalls and opportunities now, you can better position yourself for a thriving future.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

LEGAL DISCLAIMER

The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, consult with a licensed advisor.

March 30, 2019June 17, 2022

5 Ways to Build Your Cash Flow for a Home Renovation

Imagine your new kitchen. Or second bathroom. Or outdoor patio. Dreaming is the easy (and fun) part. But for many homeowners, figuring out how to fund that project can delay the start date.

Home renovations are on the rise across the U.S.—as is spending. More than 20 percent of homeowners said in a recent Hometap survey that renovating is among their goals for the coming year.

While the home renovation of your dreams may take a significant chunk of change, you can turn it into reality by following these five creative ways to build your cash flow.

See where renovations fit in among other financial goals for homeowners in 2022 in our free Homeowner Report.

1. Dedicate Savings to a Separate Account

A penny saved is a penny toward your basement makeover. Open a savings account and build toward your budget by setting a monthly goal.

Sources of savings are often in plain sight.

Allocate some of your paycheck across several weeks or months.
Cut back on the extras in your cable package or remove a streaming subscription.
Forgo your gym membership for outdoor or at-home exercises.
Slash spending on dining out by making your cup of coffee and lunch at home.

2. Add a Short-Term Income Stream

Make the most of the gig economy’s flexibility to increase your income and, therefore, ability to save. Fast and easy side hustles are a great way to accelerate savings, according to Zillow. Gigs like dog walking, housesitting, and selling homemade crafts or baked goods are always in demand.

No time? Use your assets instead. Rent a room in your home or lease an extra parking space.

3. Secure a Home Improvement Loan

If you don’t have enough home equity to take out a home equity loan, a personal loan may prove a fruitful alternative.

Depending on your circumstances, there are upsides and downsides to a personal loan. According to The Simple Dollar, these loans work well for homeowners with a small project that they’d like to pay off at a fixed rate over a set time period.

The simplicity of these loans is appealing. But be forewarned that you may pay more interest compared to a home equity loan, and many personal loans cap the amount you can borrow.

4. Opt to Relocate Over Renovating

Weigh the risks and rewards of your renovation. Sometimes renovating costs more than relocating to a home better suited to your short- and long-term needs.

Take the time to carefully price out a renovation while measuring your home’s current value. You may discover selling your home is more profitable (and affordable).

Relocating to another home may also lower your housing costs, taxes, and even your commute to work. With money in the bank from your sale, you could find yourself in a more comfortable place, physically and financially.

Read Should You Renovate or Relocate?

5. Tap Into Your Home’s Equity

If you’ve built up sizable equity in your home, borrowing on it or sharing it may prove great options for fast cash. A home equity line of credit (HELOC) or home equity loan are two ways to borrow cash against your home as collateral.

Know the details before you apply. Good credit will help you avoid a higher interest rate. Ensure you can make the monthly payments so you don’t fall into a mound of debt while financing your renovation.

If your credit is less than stellar or you’re not prepared for monthly payments, equity sharing products like Hometap are worth exploring. Equity sharing is akin to having an additional investor in your home’s future value. Instead of taking out a loan, you get paid upfront for the equity you’ve accrued in your home.

Don’t let sticker shock defer your dream of a home renovation. With smart planning and budgeting, you can beautifully and affordably redo your house—on your terms. Fund your next home renovation project without monthly payments or interest.

Take our 5-minute quiz to see if a home equity investment is a good fit for you.

YOU SHOULD KNOW…

We do our best to make sure that the information in this post is as accurate as possible as of the date it is published, but things change quickly sometimes. Hometap does not endorse or monitor any linked websites. Individual situations differ, so consult your own finance, tax or legal professional to determine what makes sense for you.