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  • How can I manage debt and maintain my credit score this new year?

    by Zenia Bahel | Nov 24, 2018

    There is one very important thing you need to consider—Your credit score can be easily influenced which implies that a missed credit card or loan payment can drop your credit score by several points. And with the holiday season, the propensity to spend increases significantly. So it is extremely important to create a budget and stick to it by spending wisely. Plus, here is what you can do to keep financially fit this holiday season:

    Check your credit report and credit score

    A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts Federal law allows you to get a FREE copy of your credit report from every credit reporting agency such as Transunion, Experian and Equifax. Plus, you can also use resources such as Credit Karma and Credit Sesame to help you better evaluate your credit situation on a continual basis. 

    A credit score is a three-digit number generated by a mathematical algorithm using information in your credit report. It’s designed to predict risk, specifically, the likelihood that you will become seriously delinquent on your credit obligations in the 24 months after scoring. Plus, a closed credit card, too many credit line inquires or inaccurate credit reporting can also lower your credit score. So make sure you are consistently monitoring your credit score even if you aren't applying for a loan. 

    CREDIT SCORE EMOJIS

    Decide which debts to pay off first.

    Paying off credit card debt first is often the best strategy because credit cards have higher interest rates than other debts. Of all your credit cards, the one with the highest interest rate should receive priority on repayment because it's costing the most money to carry that debt, month over month. Use your debt list to prioritize and rank your debts in the order you want to pay them off. You can also choose to pay off the debt with the lowest balance first.

     

    Focus on clearing charge-offs and collections

    If you feel you do not have enough funds to pay on all of your debts, you should focus on making the minimum payments to your current accounts and keep them in good standing. You don’t want to sacrifice your good accounts for those that have already negatively affected your credit score.  

    Trinity Debt Management offers this information to help you better understanding understand credit reporting and collections. View the document here 

    Choose a personal loan instead of a credit card to pay non-education related expenses

    Most credit cards have a adjusting rate; this implies that it changes with the Prime Rate. If Prime rises, your credit card rate will rise (Prime has already increased four times this year). Plus, if your credit score drops, that could also lead to an increase in your credit card rate. But most personal loans have a fixed interest rate for the length of the loan term. Therefore your rate will not be adjusted by any changes to Prime. Plus, personal loans typically have an interest rate lower than most credit cards.

    Would you like to learn more about debt counselling? Contact us

    December 2018 

     

  • All You Need to Know About a Home Equity Line of Credit (HELOC)

    by Zenia Bahel | Jul 13, 2018

     
    A home equity line of credit allows you to borrow against the equity in your home. So now you may wonder, how does your home build equity? Equity is basically the value of your home, less any outstanding liens—such as a mortgage. So let’s say, for example, that your home is valued at $200,000 and you still owe $100,000 on your home’s mortgage, then your home’s equity is currently at $100,000.

    HELOCs are a revolving line of credit; they work like your credit card. Let’s suppose, you have a HELOC of $100,000, then you can draw up to $100,000 when you need the financial resources. So you only pay interested on the amount you use. For example; if your house needs a new roof and it costs $20,000 to replace it, you can draw that amount from your $100,000 credit line. Draw periods are usually 5 to 10 years, during which you are required to make payments. You may only have to pay interest during this period or may have to make payments to both interest and principle. The term of the HELCO and the payback requirements will be dependent on the financial institution.

    You do need to remember that your loan value will usually be less than the equity of your home. The concept is similar to getting a mortgage. According to WSJ, “Most home-equity loans and HELOCs use the following formula to determine how much to lend: 75-80% of current home’s value (determined by an appraiser’s visit, which you pay for) minus the amount you owe on your mortgage. However, some lenders will lend you even more than 80% of the value of your home – up to 100% or even 125% of the home’s appraised value.”




    What is the difference between a HELOC and a Home Equity Loan?

    A Home Equity Loan (also known as a second mortgage) normally offers a fixed rate for the life of the loan with a set payment amount and term. You receive the entire loan amount at the time of closing and once the amount is paid in full, the Home Equity Loan will be closed. 

    A Home Equity Line of Credit gives you the option of borrowing only what you need, when you need. According to our Lending Director, Michael Smalley, “Both are great options. A HELOC is intended for a member who desires flexibility and may not be spending the entire amount right away. This type of loan also is great to have as a safety net.”


    What kind of interest rate do I get with a HELOC?

    Just like your credit card, the home equity line of credit normally has a variable interest rate that fluctuates over the life of the loan. Most lenders base their HELOC rates off of the Prime Interest Rate. So the interest rate on your HELOC could change a number of times throughout the life of the line. Therefore, payments on your HELOC draw will vary depending on the prime rate and how much you have borrowed.

    How do I take an advance on my HELOC?

    You can draw on the credit line by writing a check, or transferring the funds to your checking account or in other ways depending on the financial institution. At Century Federal, you can transfer needed funds to your Century Federal checking account and use at your discretion. We can also provide a HELOC checkbook for those who want the option.

    Will I need an appraisal if I apply for a new HELOC or request an increase to my current HELOC?

    The purpose of an appraisal is to provide an accurate value of your home to help determine the available equity. Whether or not you need an appraisal is largely dependent on the amount you borrow. Financial intuitions use various resources to get an accurate valuation of a home. Appraisals may be needed for both new HELOCS and existing ones for which you want to increase the value.

    Century Federal uses an automatic valuation model (AVM) which determines the value of your home based on public records and also based on records from financial institutions responsible for title insurance. You will also need to provide the title documents, insurance documents and property tax documents to determine the accurate value of your home. The documentation will be needed for new HELOCs and if you want to increase the value of your existing HELOC. However, if the AVM does not the match the values the borrower expected, a formal appraisal may be required.  


    What type of fees will I incur when I apply for a new HELOC or request an increase to my current HELOC?

    Many financial institutions charge an annual fee for a HELOC irrespective of whether you draw an advance or not. The fee amount will vary based on the financial institution. Also, depending on the HELOC amount you require, you may need a formal appraisal. In the event of a formal appraisal, financial intuitions will charge you an appraisal fee.

    There may also be additional fees involved in the event that you want to close the line earlier than the term requested. You can incur fees if you close the loan within the first 12-18 months. Fees for closing the HELOC early can vary from $350-$500. So make sure to read the fine print carefully so that you are aware of the different fees associated with a HELOC.

    Century Federal HELOC

    Century Federal offers HELOCs with a minimum credit line of $5,000 and a maximum credit line of $250,000. We offer a HELOC for up to 85% Loan-To-Value, i.e. that the line amount will be 85% of the available equity in your home.  The draw period for our HELOC is 13 years from the origination date. We do require a formal appraisal for a HELOC of $125,000 and above.

    August 2018

  • Impact of New Federal Tax Reform

    by Zenia Bahel | Jan 09, 2018

    Are you wondering how the tax reform bill will impact you and your family? After the recent passing of the bill, many of our members are thinking just that. You'll see some of the impact in a couple of weeks, likely by February. The most obvious change will be in your take-home income. Because the income tax rates will be lower, employers will take out less money from many workers' paychecks. So many Americans will see their take-home pay rise. Other changes won't affect you until you file your 2018 taxes, which are due in April 2019. That is, your 2017 income is and was taxed under the current law, so when you file your returns by April next year, it's the law in effect now that will govern your filing.

    View a full recap of the bill here.

  • 2017 Q4 Additional Dividend Notice

    by Zenia Bahel | Jan 03, 2018

    One of the benefits of credit unions is that our profits are awarded back to our members. If a credit union has a good year and its reserves and capital are in excess of what is necessary, it will often make a special end-of-year payout (dividend) to its members. However, in the last decade these additional dividends haven't been common in the credit union industry.

     

    In appreciation for continued member loyalty, Century Federal has added an additional 0.25% to the dividend rate for all eligible Regular Share Savings Accounts the fourth quarter of 2017. This additional dividend was posted to member accounts on 12/31/17. We encourage members to review their transaction history through Online Banking for details about the specific amount posted to their eligible accounts. 

    (Published in January 2018)