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What is a HELOC and How Does it Work?

This post is sponsored by Best Financial Credit Union 

There are many reasons to borrow money, from renovating your home to paying for college or paying for your daughter's wedding. While credit cards carry higher interest rates and may work for smaller, more immediate purchases, there are other methods of borrowing money that go beyond credit cards and personal loans, such as a Home Equity Line of Credit (HELOC). 

Applying for a HELOC is similar to applying for a mortgage, but there are some vast differences in both structure and repayment. Both a home equity loan and a HELOC use your home as collateral against the borrowed money. 

Unlike a standard loan, however, a HELOC provides a level of flexibility in borrowing and spending that is comparable to a credit card. While the amount you can borrow is dependent on your home equity, your credit score, and other aspects of your personal financial situation, how you spend the borrowed money is entirely up to you. 

Banks and other lenders, such as credit unions, can offer HELOCs that are up to 80 percent of the equity of your home. The flexibility of a line of credit is exhibited in how the borrower uses the money. If you receive a line of credit for up to $100,000, you can choose, for example, to only use $30,000 of that amount. In turn, you will only have to pay back the principal and interest on the amount used, not on the entire borrowing limit. 

On the other hand, home equity loans are borrowed and dispersed in one lump sum. These loans are often for large renovation projects and have set repayment terms and interest rates. Once borrowed, you begin repayment immediately. 

The HELOC is also unique in that it enters a draw period — sometimes up to 10 years — in which you can draw on the line of credit in amounts as small or as large as you need. Most lenders even offer checks or account cards so using your line of credit is convenient and easy. During the draw period, you make payments on the interest of the amount borrowed. 

Where loans often have set interest rates, the HELOC often has a flexible rate and will adjust according to certain indicators and indexes used by the lender. The variable rate may seem risky, but on average it remains much lower than a fixed rate.

When dealing with large sums of money, a few percent savings in interest payments can go a long way. After the draw period ends, the HELOC enters a repayment period that can be a few years to a few decades in length.

The HELOC provides an advantage to other loan types and home equity loans. It offers flexibility and convenience that other loans don't provide, making it possible for you to fund your home renovations while also paying off your high-interest credit card or that unexpected medical expense. 

As with any type of borrowing or credit, comparing rates and lenders is the first step to determining which lender and which loan type are right for you. Many home equity lines of credit come with fees for opening, closing, or drawing funds from the account. Be sure to ask lenders what all of the applicable fees will be, what interest rates are available within your financial situation, and how the HELOC can most benefit you.

About Best Financial Credit Union

Unlike being just another bank customer, at Best Financial Credit Union, you're a member. We offer competitively low rates for a home purchase or refinance on primary residences, second homes, vacation homes, and investment properties. We have a wide range of financing options available, budget-friendly and accommodating repayment terms, and a team of helpful loan advisors with working knowledge of the local real estate market in West Michigan.


6 Things to Look for When Choosing the Right Mortgage Lender

Congratulations! You’re ready to start shopping for homes. You have been hard at work saving for a down payment, and you are finally ready to buy that perfect family home, townhouse, vacation home, or investment property. However, before you start searching for that special place in your favorite neighborhood, it’s important to find the right mortgage lender for you and your family.

How do you find the right mortgage lender?

Every lender provides different advantages, from interest rates to qualification requirements. While some factors of a home loan will be dependent on you, your credit score, your down payment, and income, there are also several other things to consider when shopping for the right loan.

Here are six of the top things to look for when choosing a mortgage lender.

1. Pre-approval. Many real estate agents expect home buyers to be pre-approved for a loan before they start showing houses. This ensures the agent is using their time wisely and that you — the home buyer — understand your housing budget. Getting pre-approved is only part of the loan process, however, which is why it is important to understand different lenders and what they can offer you. 

2. Low or competitive interest rates. This is where shopping around for loans comes in handy. Compare interest rates with other lenders in the area, making sure you get the lowest rate possible for your situation. While interest rates are impacted by things like loan amount, loan term (how long it will take to repay the loan), and credit score, not every lender is equally flexible when it comes to rates. 

  • It also helps to consider different lending institutions that can offer more competitive rates than most banks, such as a local credit union like Best Financial Credit Union

3. Flexible repayment terms. An important part of choosing a mortgage lender is understanding and feeling comfortable with the terms of repayment. Does it fit your budget? Does it stretch your wallet a bit too thin? Feeling confident that you can repay the mortgage is as important as qualifying for the loan. Ask potential lenders about their repayment options to see if they will accommodate your budget and financial goals. 

4. Closing costs. One area of home buying that is easy to overlook is the closing costs. When looking for mortgage lenders, ask about those pesky costs and how the lender can help lower or alleviate that aspect of home buying. 

5. Financing options. While shopping for that perfect mortgage, ask about the various financing options available to you. Mortgages aren’t one-size-fits-all. Every home buyer is facing different needs and circumstances. Your lender should seek to help you find the financing that fits your unique situation.

6. Local support and knowledge. There is incredible value in finding a lender who offers expertise as well as community-based financing and support. A local lender who understands you, the community, and the local housing market can offer greater flexibility and personalized help in qualifying for and understanding your mortgage loan.

Shopping for a mortgage doesn’t have to be difficult or intimidating. Understanding what to consider when choosing a lender will help you make the most informed — and best — decision for your life circumstances and financial situation.

Ultimately, finding the right lender comes down to comfort, trust, and confidence. Approach each lender with questions about the above categories, and you are one step closer to finding the perfect mortgage loan for your first, or next, home purchase. 

About Best Financial Credit Union

Unlike being just another bank customer, at Best Financial Credit Union, you're a member. We offer competitively low rates for home purchase or refinance on primary residences, second homes, vacation homes, and investment properties. We have a wide range of financing options available, budget-friendly and accommodating repayment terms, and a team of helpful loan advisors with working knowledge of the local real estate market in West Michigan. Find out if Best Financial Credit Union is the right mortgage lender for you and visit our website.


Credit Unions vs. Banks: What's the Difference and Why Does It Matter?

When most people think of financial institutions, it's likely that big-name banks are the first to come to mind. While these may have more brand familiarity due to their larger marketing efforts and national branch range, local credit unions are an option everyone should check out. Credit unions offer the same services and products as larger banks, but are often a better choice for the individual banker. Here are five reasons why.

1. Your Role

When it comes to banks versus credit unions, the role you play is one of the biggest differences. Traditional banks are for-profit institutions, which means they're always looking for how they can make money off of you. Credit unions, on the other hand, are actually not-for-profit institutions where members are actually shareholders. Bottom line: banks own you, but you own the credit union.

2. Interest Rates and Loan Terms

While it may seem counter-intuitive, local credit unions are actually in a better position than traditional banks to offer you competitive interest rates — this includes on interest you earn with your accounts, and interest you pay on loans. The interest rates and fees for large banks are set at the corporate level, and branch managers and personal bankers have little to no ability to adjust anything. In contrast, credit unions have a lot more control over their rates and fees, and loan decisions are usually made by the loan officer right there at the credit union, which means you may have better luck getting a loan if you have out-of-the-box circumstances, like self-employment income or bruised, damaged, and even no credit. Credit unions are here to help, let us help you get the rates and payments you deserve!

3. Services and Technology

Decades ago, it's true that banks may have been able to offer a greater range of services or have more up-to-date tech than credit unions, but this isn't the case anymore. Today, credit unions offer all the same products and services that big-name banks do — sometimes even with more benefits — and they operate with the same technology, like online banking, chip-enabled debit cards and automatic bill pay.

4. Network Size

While credit unions are local, that doesn't mean you're limited by a small network. The CO-OP Shared Branch Network means most credit unions can actually offer you a larger network than most banks. It includes 5,600 credit union branches and nearly 30,000 fee-free ATMs, as of 2019, and ensures you have access to your money whenever you need it.

5. Motivation

When it comes to your money, it's normal to be motivated by the numbers. However, who has the lowest interest rates on loans or the highest CD rates isn't all you should be looking at. Credit unions are different from banks because they are there for their members. They are operated by local people from your city who want better financial options. They are invested in helping you succeed financially and are often better able to help you decide on the financial products and services that are best for your situation.

If you're looking for a new financial institution or are unhappy with your current bank, consider your local credit union. You can have confidence that your money is where it should be and take pride in being part of a network of people helping people.

Sources:

https://www.co-opfs.org/Shared-Branches-ATMs
https://www.co-opfs.org/Solutions/Networks/Shared-Branch-Network


 

 

4 Reasons Why Consolidating Debt is the Best Financial Solution

 Date Published: January 22, 2019

According to CNBC, the average American has nearly $38,000 in personal debt, and that doesn't include mortgages. For most people, this breaks down into a combination of credit cards, medical bills, and installment loans — like car payments. If the constant shuffle of trying to figure out what's due when is causing you stress and making you feel overwhelmed, consolidating your debt can be a great option to take control of your finances. Here's why.

It Saves You Big Money on Interest

When you consolidate debt, you can often get a lower overall interest rate than what you're currently paying. This means that you can save hundreds or even thousands in interest, even if you have to pay a fee for the consolidation. This is especially true if a large portion of your debt includes high-interest credit cards. To save the most money, take a look at your current interest rates and compare them to several different consolidation offers to ensure you're getting the best deal.

It Gets You Out of Debt Faster

While making the minimum payments on your credit cards and other debt gives you more money in your monthly budget, it also keeps you in debt longer. Paying just the minimums on your credit cards — and assuming you don't charge anything else while you're paying them off — can take some people 7-10 years to pay off. When you consolidate your debt, you usually take out one larger loan that covers all of your debt payments, but it's for a specified time period. So at the end of 3 years, 5 years, or whatever the term is, everything is paid off.

It Helps You Get in Control of Your Payments

Having to make multiple debt payments every month can be difficult. They're usually all due on different days, and it can be a challenge to keep them straight. And if you do accidentally miss one, it can mean a big jump in your interest rate and lots of fees. Debt consolidation lets you move all of your monthly debt payments into one lump sum, so there's now only one payment every month to keep track of. In some situations, you may even be able to talk to the financial institution and pick the due date for the payment, so it's at the most convenient time for you.

It's Not Just for Credit Cards

While debt consolidation can be an excellent choice for people who have a lot of credit card debt, it's still a beneficial option for those who don't use plastic cards. If you have medical bills, car payments and other miscellaneous payments for things like laptops, debt consolidation can still help you get a better handle on your debt, while feeling more in-control of your financial situation.

If this sounds like something that may be right for you, Best Financial has specific programs that make it quick and easy to consolidate debt. They can help explain what debt consolidation is and what it can do for your particular financial situation, to help you get on-track — and stay out of debt.

Sources:

https://www.cnbc.com/2018/08/20/how-much-debt-americans-have-at-every-age.html

 


Why You Should Do Holiday Shopping With a Credit Card

Date Published: December 12, 2018

Holiday shopping is so much fun. You get to imagine what your friends and family will say when they open up the perfect present. It's a joy to get into the spirit as you see your favorite shops all decorated for the season. Even just walking by the window of a big department store could put you in the mood to go shopping for gifts. When you shop for holiday presents, it's always a good idea to pay with a credit card, and here's why.

Perks and Points

Many credit cards come with perks and points for each purchase that make it worth it to use for your holiday shopping. For example, Best Financial Credit Union has an incredible Star Points Bonus Program. You can earn one point for every single dollar you spend with your Platinum card. Use the points towards gift cards, products for purchase or travel rewards, so you can turn your purchases into a nice trip down the line! Gaining credit card points through holiday purchases helps to balance out this typically expensive time of year. Presents for everyone, travel to visit family and expensive meals in or out add up, but you can get some of that value back through your credit card points.

Protection

Some credit cards cover your purchases with extra protection. If the price goes lower on a product you bought, you may be able to get a refund for the difference if you paid with your credit card. Some cards even offer you a warranty on electronics and other goods that could break over time or an extended return time that is longer than the general store policy. Some credit cards also offer insurance coverage for rental cars, so if you are traveling for the holidays, that could be a good option, as well. Check with your specific credit card policy to see what types of protections your card offers.

You Control When You Pay

When it comes to the holidays, it can be a struggle to have enough cash on hand to pay for your purchases all at once. That's where credit cards come in. With Best Financial Credit Union's Visa Credit Card, you even get a 25 day grace period. That means if you pay off your full balance within 25 days, you will not get charged any interest. You could go shopping on December 1 and have all your purchases paid off by Christmas interest-free. Even if you do let your purchases rollover, using a credit card for your holiday gift choices lets you pick when and how you pay it off. You can pay more each month to pay it off faster, or pay the minimum. The point is, paying with a credit card puts you in control of your finances.

Consider a Store Card

Store credit cards are a good option - but only if you regularly shop at a store. Many store cards act as memberships that give you a discount of up to 15% on in-store purchases. However, consider that these types of cards don't often have the same perks as your regular credit card, and they usually have higher interest, too. For most people, it's worth it to get a credit card through their bank or credit union, so they can save with lower interest rates and get some of the value of their purchases back through credit card rewards. However, if you are very loyal to one store and plan to shop there quite frequently, it may be worth it to look over the benefits of that card.

Easy to Pay Off

When you pay with a credit card for holiday purchases, it's easy to pay off. You can use an online portal to pay when it is right for you. Most people even set up automatic payments. With some financial institutions, you can set up payments to occur only within certain limits. So, for example, you can say you want to automatically pay off the whole balance unless it is over a certain amount, in which case you can specify the amount to pay. Now that you can use an online portal to pay your bill, you don't need to make a special trip to the bank to do it. You can just sign-in online via your computer or mobile device and pay when and where it is convenient for you.

Some people worry about getting into credit card debt, but when you use your cards in a smart manner, it is actually a great idea to pay for holiday and year-round purchases with one. You can build your credit which prepares you for larger purchases like a car or house, and structure your payments to stretch your money further so everyone ends up happy in the New Year!
Learn more about Best Financial Credit Union's Visa Credit Card, and then apply before the holiday shopping craze hits to take full advantage of earning points on your gift purchases. The holidays will be here before you know it!

Sources:
https://www.creditkarma.com/advice/i/credit-card-rewards-avoid-holiday-debt/
https://creditcards.usnews.com/articles/dos-and-donts-of-using-store-credit-cards-for-holiday-shopping
https://www.bestfinancialcu.org/loans-credit-cards/visa-credit-cards.html
https://creditcards.usnews.com/articles/dos-and-donts-of-using-store-credit-cards-for-holiday-shopping

 


Should You Buy or Lease Your Next Car?

Date Published: October 8, 2018

A car payment is probably one of your biggest expenditures each month, second only to your rent or mortgage payment. Determining whether to buy or lease your next car is a big decision that affects your monthly budget for many years. Knowing the pros and cons of each option helps you arrive at the smartest decision for your budget.

Pros of Leasing

Some advantages of leasing your next vehicle include:

  • Lower car payments:  The payments each month are likely to be much lower when you  lease a vehicle . This is because the car payments are only being applied to the estimated depreciation of the automobile along with any applicable finance charges, instead of to the principal and interest on the loan.
  • Drive a nicer vehicle:  Since leased vehicles are new or slightly used and the monthly payment is lower, you'll be able to afford a pricier automobile than if you purchased it.
  • Free perks:  Auto dealers want to ensure that their leased cars are well-maintained in order to maximize their resale value. Many dealers throw in free oil changes and scheduled maintenance in order to sweeten the deal when leasing cars.
  • Dependability:  Since leased vehicles are new or just slightly used, the manufacturer's warranty is still valid. This means you get to drive the vehicle during the years when breakdowns rarely occur, and if they do -- the cost is covered under the warranty.
  • Possible tax advantages:  If you're a business owner, leasing a vehicle can possibly provide some tax breaks. Discuss these tax advantages with your accountant.
  • No worries or haggling:  You don't have to fret about the resale value of your car or dread haggling with a salesman over the trade-in value. Once your lease is over, just return it to the dealership and hand over the keys.

Cons of Leasing

The disadvantages involved in leasing a vehicle include:

  • Never-ending car payments:  Many people who lease vehicles do so repeatedly. This means the payments begin again and they never have the satisfaction of owning a fully paid-off vehicle.
  • Limited mileage:  Unfortunately, lease contracts don't include unlimited mileage, therefore you have to keep an eye on the odometer so you don't go over the mileage limit. The dealer can charge additional fees per each mile you go over the limit -- as high as 10 to 50 cents per mile.
  • The automobile must remain in good condition:  If the vehicle is returned in a less than satisfactory condition; for instance, an unusual number of dings, dents or other types of damage, you'll be responsible for the repairs.
  • Early termination fees and penalties:  If for some unforeseen reason, you break the lease, you could be charged  thousands of dollars in  fees for the unused portion of your lease terms.
  • Modifications are taboo:  Unless the modification is something like professional window tinting, you must return the car as it was on the showroom floor.
  • Your credit must be quite good:  Most dealerships require a higher credit score from consumers who want to lease. Therefore, if your credit score is questionable, this may not be an option.

Pros of Buying

The advantages of buying a car include:

  • It's an investment:  After paying off the loan, you'll likely be able to recoup some of the money you invested after selling the car. This provides you with trade-in value on your next car or a hefty down payment if you sell to a private individual. It's also exciting not to have to make a car payment each month.
  • Modify as you desire:  Unlike leased vehicles, you can  modify your own car  any way you like, by adding racing stripes, cool wheels, or any other features you covet.
  • No mileage worries:  With leased vehicles, you pay high fees for each mile you go over the stated limit, but this isn't true with a purchased car.
  • Financing is easier:  Although it's important to have a good credit score so that you can get the best interest rates on your automobile loan, the dealers don't require as  high of a credit score  from buyers. Refinancing is another option available to car buyers.

Cons of Purchasing

The disadvantages of purchasing a vehicle include:

  • Depreciation:  If you purchase a new automobile, it depreciates approximately a couple of thousand dollars -- or more -- once you drive it off the lot. Each month the car depreciates even more, but over time this balances out because you owe less than the value of the car if you purchased a reputable make and model.
  • Warranties expire:  Once the warranty is no longer applicable, you are responsible for any maintenance on the vehicle.
  • Down payments are often necessary:  In order to have an affordable car payment, you may need to make a hefty down payment. Some people don't have the money to pay much on a down payment, therefore they may have to settle for a less expensive car.

How FlexSense Auto Loans Can Help

Consider applying for a  FlexSense Auto Loan  with Best Financial Credit Union in order to make purchasing a car more affordable. You will have flexible payment options compared to those available at other financial institutions. This results in the payments being similar to those of a leased car, yet you don't have any early payoff penalties. No down payment is necessary, and there are no hidden costs. Consumers can use this type of loan when purchasing a brand new vehicle or one that is 5 years old or less. You have all the advantages of a purchased car with the lower payments of a leased vehicle. Check out the benefits of this type of loan when considering your next vehicle options!

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