Financial Education for Millennials Considering a HELOC
Mar 30, 2023
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HELOC Basics
A HELOC is a line of credit that uses the equity in a home as collateral. It is a revolving loan, meaning that it works like a credit card, with a set credit limit and variable interest rates. With a HELOC, borrowers can use the funds for anything they want, such as home renovations, debt consolidation, or even a vacation.
HELOCs can be a useful financial tool for homeowners, but they do come with risks. If the borrower defaults on the loan, they could lose their home. Additionally, HELOCs often come with variable interest rates that can increase over time, making it difficult for borrowers to manage their monthly payments.
Why Financial Education is Important
Before considering a HELOC, it's essential for millennials to have a solid understanding of financial management. This includes understanding how credit scores work, creating and sticking to a budget, and understanding the risks associated with borrowing money. Financial education can help millennials make informed decisions about whether a HELOC is the right choice for their financial situation.
A HELOC can be an excellent financial tool if used responsibly. It can help homeowners make home improvements that can increase the value of their home, pay off high-interest debt, or finance a large purchase. However, if not managed properly, a HELOC can lead to financial ruin. By understanding the potential risks and benefits of a HELOC, millennials can make an informed decision about whether it's the right choice for their financial situation.
Tips for Managing a HELOC
If a millennial decides that a HELOC is the right choice for their financial situation, there are several tips they should keep in mind to manage the loan responsibly:
1. Understand the terms of the loan: Before signing on the dotted line, it's essential to understand the terms of the loan, including the interest rate, repayment period, and any fees associated with the loan.
2. Create a budget: It's important to create a budget and stick to it to ensure that the monthly payments can be made on time.
3. Use the funds responsibly: It's essential to use the funds from a HELOC responsibly. This means using the funds for essential expenses, such as home improvements or debt consolidation, rather than using the money for non-essential purchases.
4. Monitor the interest rate: Because HELOCs come with variable interest rates, it's important to monitor the interest rate and be prepared for potential increases in monthly payments.
In conclusion, a HELOC can be a useful financial tool for millennials, but it's essential to have a solid understanding of financial management before considering one. By educating themselves on financial management, understanding the potential risks and benefits of a HELOC, and following the tips for managing a HELOC, millennials can make informed decisions about their financial future.
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Hitch, Inc. #2363780
2158 NW Toussaint Drive. Bend, Oregon 97703
1. Qualified applicants may borrow up to 95% of their home’s value. This does not apply to investment properties.
2. HELOCs have a 10-year draw period. During the draw period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) the total of all accrued finance charges and other charges for the monthly billing cycle. During the draw period, the monthly minimum payments may not reduce the outstanding principal balance. During the repayment period, the borrower is required to make monthly minimum payments, which will equal the greater of (a) $100; or (b) 1/240th of the outstanding balance at the end of the draw period, plus all accrued finance charges and other fees, charges, and costs.The lender will calculate this amount by taking the outstanding Account Balance on the last day of the draw period and dividing it by 240 months and then adding any finance charge that accrues but remains unpaid during the monthly billing cycle plus any other fees, charges and costs to the fixed principal payment that is due. During the repayment period, the monthly minimum payments may not, to the extent permitted by law, fully repay the principal balance outstanding on the HELOC. At the end of the repayment period, the borrower must pay any remaining outstanding balance in one full payment.
3. The time it takes to get cash is measured from the time the Lending Partner receives all documents requested from the applicant and assumes the applicant’s stated income, property and title information provided in the loan application matches the requested documents and any supporting information. Most borrowers get their cash on average in 21 days. The time period calculation to get cash is based on the first 4 months of 2024 loan funding's, assumes the funds are wired, excludes weekends, and excludes the government-mandated disclosure waiting period. The amount of time it takes to get cash will vary depending on the applicant’s respective financial circumstances and the Lending Partner’s current volume of applications. Closing costs can vary from 3.0 - 5.0%. An appraisal may be required to be completed on the property in some instances.
4. Not all borrowers will meet the requirements necessary to qualify. Rates and terms are subject to change based on market conditions and borrower eligibility. This offer is subject to verification of borrower qualifications, property evaluations, income verification and credit approval. This is not a commitment to lend.
5. The content provided is presented for information purposes only. This is not a The content provided is presented for information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. Other restrictions may apply.