Protect Your Home’s Equity

Your greatest investment and largest asset is your home. Why then to millions of home owners fritter away their home’s equity?

Home equity loans are potential financial pitfalls. The foremost danger of these loans to consolidate credit card debt is collateralizing your home. Home ownership can provide security and a stable environment for your family. However, adding unsecured debt to your home jeopardizes its security. Creditors may sue if you fail to repay your credit card debt, but lien holders will take your home if you fail to pay your mortgage.

Dangerous Interest Rates for Home Equity Loans

Teaser interest rates for home equity loans are also extremely dangerous because they dupe home owners into thinking they can afford to refinance their home. When the variable interest rate increases, the home owner is often times already financially stretched and cannot afford the higher monthly payment. If the home owner defaults on their mortgage payments, the lien holders can foreclose on the home. Unfortunately, over 1.2 million homes were foreclosed upon in 2006 and 2007 will most likely top that number.

Home Equity Lines of Credit

Home equity lines of credit (HELOC) are another financial hazard. A home equity line of credit usually works similar to a credit card, only at a lower interest rate. The inherent danger is that ability to fritter away your home’s equity. Even if you pay off your credit cards with the money, you’re only transferring the debt to a longer term debt. The result is you will pay thousands more in interest even with the lower rate because you’re extending the repayment of the debt over 15 to 30 years.

Cash-Out Home Equity Loans

Cash-out home equity loans have become popular in recent years as a quick way for home owners to get cash. A cash-out loan works like this, you owe $100,000 on your current home but you want $15,000 in cash. You can refinance your home for $115,000 and get a check for $15,000. The cash-out loan may offer a lower interest rate but there’s a catch. Typically you pay the bulk of your interest in the beginning of your loan, thus taking another first mortgage on your home means you’ll be paying the initial interest all over again. In the latter years of mortgage payments, the bulk of the payment goes toward the principal and you accumulate more equity in your home. But if you refinance, especially in the latter years of your loan, the majority of your payment will be going toward interest, not equity.

Refinancing your home to alleviate your credit card debt is a poor solution to your problem. Trying to borrow your way out of debt can result in paying thousands of dollars more over a longer period of time. If you struggle with debt and need relief, you need to examine all your options and see which is most beneficial for your situation. Debt settlement may be a viable alternative to home equity loans, debt consolidation. The primary advantage of debt settlement is it can reduce the principal balance of your debt and usually eliminates debt within three years.

Congress Acts Against Credit Card Practices

Congress May Prohibit Unfair Credit Card Practices

Millions of Americans suffer from overwhelming credit card debt and it’s not entirely their fault. Unfair credit card practices have been going unchecked for several years. These practices cost consumers exorbitant amounts of interest, fees, and even interest on fees. However, there is hope that legislation could end the unscrupulous practices of credit card companies.

Senator Carl Levin (D-MI) and Sen. Claire McCaskill (D-MO) introduced the Stop Unfair Practices in Credit Cards Act on May 15, 2007 to counteract the systemic problem of debt in America. The average American credit card holder is estimated to be over $8,500 in debt. This piece of legislation proposes the following 14 actions:

1. No Interest on Debt Paid on Time - Prohibit interest charges on any portion of a credit card debt which the card holder paid on time during a grace period.
2. No Trailing Interest - Prohibit added interest charges on credit card debt which the card holder paid on time and in full.
3. Limits on Penalty Interest - Prohibit interest rate increases on a credit card account unless the card holder agrees to them at the time, and, in any event, limit penalty interest rate hikes to no more than a 7% increase.
4. Apply Interest Rate Increases Only to Future Debt - Require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.
5. No Interest on Fees - Prohibit the charging of interest on credit card transaction fees, such as late fees and over-the-limit fees.
6. Restrictions on Over-Limit Fees - Prohibit charging repeated over-limit fees for a single instance of exceeding a credit card limit, and allow such fees to be charged only when a card holder’s action, rather than a penalty, causes the limit to be exceeded.
7. Fixed Credit Limits - Require card issuers must offer consumers the option of operating under a fixed credit limit that cannot be exceeded.
8. No Pay-to-Pay Fees - Prohibit charging a fee to allow a credit card holder to make a payment on a credit card debt, whether payment is by mail, telephone, electronic transfer, or otherwise.
9. Reasonable Currency Exchange Fees - Require currency exchange fees to reasonably reflect the credit card issuer’s actual costs.
10. Prompt and Fair Crediting of Card Holder Payments - Require payments to be applied first to the credit card balance with the highest rate of interest, and to minimize finance charges. Prohibit late fees if the card issuer’s actions caused the delay in crediting the payments.
11. Prime Rate Reference - Require interest rates linked to a “prime rate” to use the prime rate published by the Federal Reserve Board.
12. Annual Audit - Require the credit card issuer’s primary regulator to perform annual audits to ensure compliance with credit card requirements and prohibitions.
13. Improved Data Collection - Improve existing data collection efforts related to credit card interest rates, fees, and profits.
14. Transition Period - Allow credit card issuers six months to implement the bill’s provisions.

The Stop Unfair Practices in Credit Cards Act is aimed at preventing credit card companies from using abusive practices that keep American consumers in debt. Yet the bill will, ultimately, not alleviate consumers’ current debt. If you need help reducing the principal balance on your credit cards, consider debt-relief options such as debt settlement or debt consolidation.

14 Ways to Save Money Year Round

Your home is your greatest investment and also your largest expense. The average family spends $1,400 a year on energy bills and nearly half that is spent on simply heating and cooling their home. These helpful suggestions can save you money and make those mortgage payments a little more bearable.

During summer months

• Set your thermostat to around 80 degrees and make sure you raise the temperature at least four degrees when you leave for a few hours or more. However, you don’t want to raise the temperature too high because it will cost more to re-cool your home.


• Open your windows and use portable fans to help cool your home.


• Remove lamps, TV’s, and appliances from near your thermostat because they produce heat that will make your air conditioning unit run longer.


• Make sure your attic is well ventilated and isn’t unnecessarily trapping heat.


• Shade your windows with white drapes, curtains, blinds, or install awnings.


• Plant trees and shrubbery around your house since they can greatly reduce the amount of heat your home absorbs.


• Use energy efficient light bulbs such as fluorescent light bulbs
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During winter months

• Make sure there are no cracks around your windows and doors shut snuggly.


• Make sure if you replace old heating equipment you don’t go too big, you’ll end up paying much more in energy costs.


• Check to see if your air ducts have any holes or leaks, especially check the duct leading outside. You also want to make sure no vents are obstructed.


• Check with your local utility provider and see if there are any rebates or specials on heating equipment.


• If your heating unit is more than 10 years old, you may want a professional inspection to see if it needs to be replaced. An individual contractor should be able to give the most unbiased opinion, since they’re not trying to sell something.


• Set your thermostat to a lower setting, 68 is efficient and still comfortable. As in the summer, you’ll want to make sure you lower the temperature when you leave but not drastically.


• Make sure your walls are properly insulated. You can also insulate wall outlets to completely insulate your home from the elements. Try asking a professional at Home Depot or Lowes to see what might work best in your home.

If you are spending more on your biggest expense than necessary, it may be costing you thousands. You can prevent needlessly frittering away your hard earned money by doing just a few simple things around the house. For more money saving tips, click here.