credit

Meet Jane.

Jane is a thirty-something homeowner with two young kids. She walks into her local bank one day to talk to someone about taking out a loan to replace her outdated furnace. She wanted to put it on her credit card, but she got herself into trouble with credit cards when she was younger, so she wants to look at other options. After talking with her a while, her personal banker, Joe, suggests a home equity line of credit, to which Jane replies, "A what?"

I met many customers like Jane during my time as a personal banker. Many people simply don't know what or how home equity lines of credit work.

A HELOC (home equity line of credit) isn't for everyone, but it often can be the perfect solution for many. First off, you have to be a homeowner and have equity in your home.

What is home equity?

The equity in your home is what you truly own, debt-free. Let's say Jane's house is valued at 200k and she has a mortgage balance of 60k. This would mean that Jane's home equity value is 140k. Over time, the more you pay off any lines against your house (mortgages), the higher your equity value goes. Home improvements that increase the value of your home also raise equity.

A home equity line of credit works much differently than a mortgage or home equity loan. I find it best to view it as working similarly to a credit card. You may draw funds out of the line of credit only as needed. Therefore, technically you can take out a HELOC without ever actually touching the money and having to pay it back.

How much do I qualify for?

Typically, most banks will let you borrow anywhere from 75% to 90% of the equity in your home. To figure this out yourself, take the value of your home, subtract any loans against your home, and multiply that number by the percent the bank will let you borrow. Jane's banker tells her she is able to borrow up to 80% of the equity in her home. You would multiply 140k by .80, coming to a figure of 112k being the maximum amount Jane can borrow. It's important to note that you do not need to borrow the max available. Keep in mind that your debt to income ratio and credit score can also affect how much you qualify for.

How much should I take out a line of credit for?

This is the number one question that was asked to me by customers looking to take out a line of credit. And really, there is no right or wrong answer. You can always take the max available, but you don't have to. There are things you need to consider when deciding how much to borrow. If you are a person who is easily tempted to use that money, even when it's not needed, it probably isn't best to request the max amount unless you know that you will be able to afford the monthly payments.

On the other hand, I also tell people it can be a good idea to take more than you need right now, so you have it as a "cushion." One of my customers came to me to request a HELOC to update her kitchen. Although she qualified for a much higher line, she insisted on only taking what she needed at that time. Not even a year later she came back to me. She had used up the entire amount available on the line of credit and now needed more to fix her roof. She had to go through the entire application process again to do a HELOC increase, and she wasn't happy that it wasn't as simple as saying "I need more money" and having the money readily available. This is the reason I tell people to have a cushion. That cushion can be a lifesaver in emergencies.

What can I use my HELOC to pay?

Most people assume HELOCs can only be used for home renovations, but, in reality, you can use the money for anything. A HELOC can be a great tool to consolidate credit card debt. According to the federal reserve, the average credit card rate was around 15% in 2019, and that rate is often higher for people without excellent credit standings. In contrast, the average HELOC interest rate, according to Bankrate, is around 6%.

What's the application and fee process?

Before heading to the bank, make sure you have the following documents:

  • W2s / 1099 forms
  • Last 2 years federal tax returns
  • Recent pay stubs
  • Proof of any other income

The application process usually takes anywhere from a few days to sometimes weeks, depending on how much information the underwriters may need. The bank typically does an appraisal of the house. In some instances, they may need access to the inside for appraisal, although this is typically not necessary.

After the HELOC is approved, the bank will schedule a closing date and time for you to come in and sign the mountain of paperwork. It can seem like a lot, but you will receive copies of everything, and you have three business days to look it over and cancel if you want.

Common fees associated with HELOCs are lender fees, annual fees, and cancelation fees. Do yourself a favor and research lender options before applying, as there are plenty of banks that do not charge most of these fees. When I worked at M&T Bank, the only fee applicable to a HELOC was a cancelation fee, and that only applied if the line was closed entirely within the first three months.

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Congratulations! You've Ubered and Grubhubbed and online-shopped your way into credit card debt. Now you're an adult who's incurred enough debt to make a credit card company very frustrated with you. Welcome to the maxed out club!

The first time you realize that you've maxed out a credit card, you may panic, but there are many recourses you can take that aren't openly advertised by credit card companies. Some will impact your credit score more than others, but if you've come this far, you've probably realized that a credit score is just life's homework, and there's always a way to half-ass the assignment during homeroom.

Debt Forgiveness

NationalDebtRelief.com

Listen: Credit card companies are like distant relatives from whom you've been forced to borrow money. You are fully expected to pay it back; but sometimes they just give up on you. If you've been missing multiple payments and are clearly falling behind what you could ever feasibly repay, you can call your creditor to negotiate a way to settle your debt. You reach an agreement to pay a lower amount than what you owe, and they agree to forgive the difference.

It's not a perfect plan, however; a note is added to your credit report that you've settled a debt you couldn't pay. Your credit score could take a hit, plus any forgiven balance over $600 is counted as "taxable income" by the IRS, meaning you could end up owing taxes on it.

My life has changed a lot over the last 18 months. I got married, bought a home, and now my wife and I are expecting our first baby. With all of the joy has come a lot more responsibility, and while all of the changes are exciting, we're always looking for ways to be better about saving money for our future. I've always been a good saver and had a decent credit score, but I never realized that I could be pocketing big savings on my car payments until a coworker told me about RateGenius. RateGenius is a service that negotiates with lenders to secure you lower monthly payments on your car loan.

They transferred my loan to a new lender, leading to lower monthly payments.

I went online and saw that RateGenius works by transferring ownership of your car payment from one creditor to another. The old loan gets paid off and is replaced with a new one that has monthly payments that are more affordable. In addition to having lower interest rates, they can shorten the life of their clients' loans by a lot! Their experts work with over 150 lenders nationwide to find a fit that works best for your financial situation. Sounded like a simple and effective way to put a little more money in the bank for my growing family.

Their pre-qualifying application was quick and had no impact on my credit score.

My credit score has been something I've taken seriously since I got my first credit card at 19, so I've always been wary of any application that requires a credit check, because I heard it can lower your score. So I really liked that RateGenius' initial application didn't require a credit check. The only information they needed was my name, date of birth, address, yearly income, and vehicle type. Once I was done, they showed me a rate table that outlined various options and estimates on how much I would be saving depending on which plan I picked. Seeing the rate table was helpful because it gave me a better idea of how much I could be saving, before going through the full application process.

The full application process only took minutes.

After I decided that refinancing my car loan was a good fit for me, I was immediately impressed with how simple the full application process was from start to finish. I deal with numbers and computers all day long at work, so the fact that it didn't cause me a headache was a real plus. Everything was done online and only took me a couple of minutes. I was able to shop around for the best rates, and their online calculator gave a good estimation of what my new monthly payments would look like.

They don't get paid unless they save me money

After I went through the whole process and was matched with a new creditor, I was pleasantly surprised to learn that RateGenius doesn't charge a fee unless they successfully secure you lower monthly payments. I loved this risk free payment structure, and that I wouldn't have to pay a cent unless they found me a great deal. They ended up matching me with a creditor that is saving me a huge chunk of change every month, and the one time fee was nothing in comparison to what I'm pocketing.

I'm on track to save almost $1,000 this year.

RateGenius was able to secure me a new repayment plan that saved me $78 a month. Now I'm only paying 2% interest -- that's a huge improvement from my old loan. That means I'm pocketing almost $1,000 in savings a year. That's some serious cash for a first time dad with a new mortgage!

I'm so glad I discovered RateGenius -- it's a relatively quick and worthwhile way to refinance your car loans and reduce your interest rates. Their experts did all of the hard work for me, and now my payments are much more manageable for my family. I'm putting all of the money RateGenius has saved me straight into a college fund for my son. We haven't even met him yet, but it feels good to be getting a head start on his future.

Prequalify for auto refinance with no impact on your credit score today!


My life has changed a lot over the last 18 months. I got married, bought a home, and now my wife and I are expecting our first baby. With all of the joy has come a lot more responsibility, and while all of the changes are exciting, we're always looking for ways to be better about saving money for our future. I've always been a good saver and had a decent credit score, but I never realized that I could be pocketing big savings on my car payments until a coworker told me about RateGenius. RateGenius is a service that negotiates with lenders to secure you lower monthly payments on your car loan.

They transferred my loan to a new lender, leading to lower monthly payments.

I went online and saw that RateGenius works by transferring ownership of your car payment from one creditor to another. The old loan gets paid off and is replaced with a new one that has monthly payments that are more affordable. In addition to having lower interest rates, they can shorten the life of their clients' loans by a lot! Their experts work with over 150 lenders nationwide to find a fit that works best for your financial situation. Sounded like a simple and effective way to put a little more money in the bank for my growing family.

Their pre-qualifying application was quick and had no impact on my credit score.

My credit score has been something I've taken seriously since I got my first credit card at 19, so I've always been wary of any application that requires a credit check, because I heard it can lower your score. So I really liked that RateGenius' initial application didn't require a credit check. The only information they needed was my name, date of birth, address, yearly income, and vehicle type. Once I was done, they showed me a rate table that outlined various options and estimates on how much I would be saving depending on which plan I picked. Seeing the rate table was helpful because it gave me a better idea of how much I could be saving, before going through the full application process.

The full application process only took minutes.

After I decided that refinancing my car loan was a good fit for me, I was immediately impressed with how simple the full application process was from start to finish. I deal with numbers and computers all day long at work, so the fact that it didn't cause me a headache was a real plus. Everything was done online and only took me a couple of minutes. I was able to shop around for the best rates, and their online calculator gave a good estimation of what my new monthly payments would look like.

They don't get paid unless they save me money

After I went through the whole process and was matched with a new creditor, I was pleasantly surprised to learn that RateGenius doesn't charge a fee unless they successfully secure you lower monthly payments. I loved this risk free payment structure, and that I wouldn't have to pay a cent unless they found me a great deal. They ended up matching me with a creditor that is saving me a huge chunk of change every month, and the one time fee was nothing in comparison to what I'm pocketing.

I'm on track to save almost $1,000 this year.

RateGenius was able to secure me a new repayment plan that saved me $78 a month. Now I'm only paying 2% interest -- that's a huge improvement from my old loan. That means I'm pocketing almost $1,000 in savings a year. That's some serious cash for a first time dad with a new mortgage!

I'm so glad I discovered RateGenius -- it's a relatively quick and worthwhile way to refinance your car loans and reduce your interest rates. Their experts did all of the hard work for me, and now my payments are much more manageable for my family. I'm putting all of the money RateGenius has saved me straight into a college fund for my son. We haven't even met him yet, but it feels good to be getting a head start on his future.

Prequalify for auto refinance with no impact on your credit score today!