How The Mortgage Industry Affects Your Personal Loan
You don’t have to be an economist to realize that the recent mortgage industry fallout is affecting all aspects of lending. In a recent Money Magazine post, Jeffery Rothfeder has broken down how this economic instability affects us all (and what to do about it).
Home equity loans and lines of credit
What’s happening: These are generally holding at about the prime rate, now 8.21 percent if your credit score is above 680 and you can prove income. But you can’t tap 100 percent of equity anymore; you’ll be lucky to get 80 percent.
What to do: Just because you can get a home-equity loan or HELOC doesn’t mean you should. Home prices are falling nationwide, and you don’t want to borrow against shrinking equity unless it’s the cheapest way to finance a necessary purchase, such as college or medical care.
Credit cards
What’s happening: Hurting from subprime exposure, banks are looking to increase revenue. Coincidence or not, credit-card terms are slightly higher. Intro offers have gone from 12 months at 0 percent to three months at 1.9 percent and up, says Curtis Arnold of CardRatings.com.
And issuers are increasingly triggering rate increases, he adds. Discover, for example, hiked its highest-risk customers from 17.99 percent to 18.99 percent.
What to do: Now more than ever, pay on time and check your bill to be sure your APR hasn’t risen.
Auto loans
What’s happening: Car loans have hovered for the past year around 7.4 percent, with highs of 25 percent for those with poor credit. So far these have been impervious to the crunch, says Chintan Talati of Edmunds.com.
What to do: You may be tempted, as in the past, to use a tax-deductible HELOC to buy a car, but think twice. Real estate is unstable, it’s harder to get prime on a HELOC and paying it back requires discipline. If you can get a 7 percent to 8 percent auto loan, take it.
The article can be viewed in its entirety by clicking here.
October 5th, 2007 at 4:41 pm
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October 5th, 2007 at 9:02 pm
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October 6th, 2007 at 10:31 am
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October 6th, 2007 at 3:25 pm
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