photo credit: Laure Wayaffe

Smarty Pig is a new idea, started by two individuals, Mike Ferrari and Jon Gaskell. The basic gist of it is this: you want a new ipod, a Hawaiian vacation, a new bike, etc. First you start a profile on the site, then you establish your savings account and goal, and figure out your monthly contribution. Then you have the option to share with friends and family your savings goal so they can track your progress and make donations if they would like. Start saving, and before long you’ll meet your goal!

There are no fees, you earn interest on your balances, and it’s FDIC insured, just like a high yield online savings account. What a great idea! The minimum savings goal is $250, and the maximum is $100,000. To get the account started, there has to be a deposit of $25 made to the account. Interest accrues daily but is posted quarterly. Once you reach your savings goal, you can request a Smarty Pig MasterCard® Debit Card which has the funds loaded on that you’ve saved up. You can then use your card to book your vacation, buy your bike, or do whatever you’d like with it. You also have the option to get a retail gift card to a retailer and get up to 5% additional boost on the money.

I wouldn’t recommend using Smarty Pig as your emergency fund. I think you should have your emergency fund easily accessible to you at all times. After all, that’s why it’s called an emergency fund!

There are a few points I did not like: you can’t stop the transfer once you’ve started it, but you can change the funding source. <s>There is a $25 fee if you would prefer a check be mailed.</s> They have done away from the $25 fee for a check! I think this shows how wonderful the people are at Smarty Pig. They heard people didn’t like the $25 fee for the check, so they did away with it. Great job, Smarty Pig!

Otherwise, there are no monthly fees. I think Smarty Pig is a great idea for anyone who is trying to save for a goal. Give it a shot!

Posted under Economy, Loans, Make Money Online, Money

It’s no secret that since the economy took the plunge banks have started tightening up on their lending standards. Many people are excited about lower rates, but just exactly how many of them can get approved for a loan in this economy?

In February of this year, many banks were still lending at 100% loan to value (LTV). Basically what this means is that they would allow you to tap into more equity in your home, but it would cost you a higher rate than if you went with the standard 89.9% LTV.

For example, if your house is worth $300,000, and you don’t owe anything on it, before you would have the possibility of a Home Equity Line of Credit or a Home Equity Loan of $300,000 if you wanted to go 100% LTV. Today, the most you could borrow out of your home’s equity would be $269,700, which is 89.9% of $300,000.

The reason banks are doing this? To cover their assets. I know many banks went crazy lending money to anyone who wanted it about 1-2 years ago. Now they are seeing the repercussions of this in today’s economy. Banks were lending too much money and consumers just couldn’t handle it. Here came the foreclosures.

If you were to go into the bank today and ask about home equity lending, you would probably be asked a couple questions: how much do you think your home is worth, and what is the total amount of any mortgages on the property? From there, the banker would tell you what amount you could get financing up to.

Banks are using the same lending procedures for auto loans, unsecured loans, and lines of credit. If you don’t have good credit and a good income, you’re probably not going to get approved. Use common sense when you are applying for any type of loan. Make sure you ask questions first before you sign. If you have any questions about lending, I’d be happy to help!

Posted under Bank Secrets, Loans

Many people are turning to their homes these days to tap into a resource they have worked hard to get: equity. They are looking to Home Equity Loans and Home Equity Lines of Credit to solve their financial problems.

Let me first explain how each of the two products work: a Home Equity Loan (also called a HELOAN) and a Home Equity Line of Credit (also called a HELOC). Both of these products are using your home as collateral, so to obtain one you have to own your home and have some equity available as well. There are benefits of both, but also each has drawbacks. Personally I believe that you must make the decision on which one (if any) is a good idea for you to do.

The Home Equity Loan is a FIXED amount of money borrowed for a FIXED interest rate over a FIXED amount of time. The payments each month include both principle and interest. This would be a good choice for someone who knows exactly how much money they need to borrow and for how long they’d like to make the payments.

Obviously the longer the term of the loan, the lower the monthly payment will be, but also the more interest that will be tacked on. Of course, you should have the option to make principal only payments if you are able so you can wipe out the debt faster. This option is usually great for people trying to consolidate credit card debt, auto loan debt, or other unsecured debt. Terms are generally anywhere from 3 to 30 years, and most likely you’ll be able to write the interest off on your taxes.

A Home Equity Line of Credit is just what it sounds like: it is a line of credit using your home’s equity, it is a FIXED limit, but a VARIABLE rate that is usually prime based, and generally is interest payments only.

A Home Equity Line of credit is a wonderful product for someone to have that is on top of their finances; generally I wouldn’t recommend this to someone who has a ton of credit card debt because this is pretty much like a huge credit card, only it’s tied to your home. If you don’t make the payment, you can lose your home. Think wisely when you are doing a loan with your home as collateral. The Home Equity line of credit’s minimum payments can be interest only, which is great in that the minimum payment is generally pretty low, but for people who don’t understand this, it can be a night mare. They could go paying the minimum payment forever if they don’t realize they are not touching principle with the payment.

Also, as you pay down your equity line, you have more credit available to you, so again, that’s why it’s not good for someone who is not diligent in spending more than they make. Some home equity lines of credit have the option to lock in a rate on the line of credit. For example, you go buy a $15,000 car and want to finance it on your line of credit. You want to lock it in for X years at X interest rate on your line of credit. When you do this, you will be making payments towards principle and interest and knocking that out faster than if you were making interest only payments. Generally the interest you pay on the home equity line of credit is tax deductible.

I truly believe both of these can be a great asset to a homeowner; however, I also believe they can be devastating to some people. Make sure you know the ins and outs of any lending product you are getting into when you are talking to your lender. If they don’t know the answers or you aren’t trusting them, then take your business elsewhere. A smart borrower is a happy borrower!

Posted under Economy, Loans, Pay Off Debt