Need a Flexible Loan? Consider a Line of Credit

Need a Flexible Loan? Consider a Line of Credit

Myles Leva |Aug 9, 2019

What Is A Line of Credit?

A line of credit can be an incredibly useful tool for reaching financial goals. If you foresee costs such as long-term health care which may be only partially covered by insurance, or a serious home renovation, a good line of credit can help you.

A line of credit is a large loan that doesn’t get borrowed all at once, as most traditional loans do. A line of credit is an agreement between a customer and a financial institution that places a limit on the total amount of money that the customer can borrow. Certain parameters must be reached and agreed upon beforehand. These parameters include the total debt the customer can incur, the interest rate, and the timing and amount of money for minimal payments back to the lender.

The main advantage of a line of credit is the flexibility it offers. These arrangements allow customers and lenders to come to a mutually beneficial arrangement based on the specific requirements that each party has. Borrowers can also adjust their payments by deciding to either pay the minimum or pay more to incur fewer costs in the long run. Of course, a borrower can opt to pay the balance of what they owe at any time.

Who is Eligible for a Line of Credit?

There are several kinds of lines of credit, each with their own requirements. Lines of credit fall into one of two primary categories: secured and unsecured lines of credit. Most lines of credit are unsecured, meaning that you don’t need to put up collateral to get them. Secured lines of credit do require collateral, but you won’t need to get a secured line of credit if your credit score and income/savings are satisfactory.

If you’re looking to get a standard personal line of credit, you will have to meet several requirements. The most important requirements are that your credit score is at least 680, you have a reliable income, and a credit history of no defaults. For most purposes, this is the type of line of credit you’ll be going for, and these are the requirements you must meet.

The most common type of secured line of credit is a HELOC (home equity line of credit). A HELOC must be secured by the market value of the home minus the debt you incur. To be eligible for these lines of credit, you’ll be subjected to similar requirements as those for personal lines of credit. The main difference is that you’ll also need a hefty piece of collateral as well.

How Do I Get a Line of Credit?

You can get a line of credit by going to a financial institution (usually a bank) and asking for one. Once you’ve decided to pursue a line of credit, the lender will want to talk to you and come to an arrangement. The more you bring to the table, the better the deal you’ll get. Signs of good credit, such as a high credit score and a high stable income, will open the doors to a better deal. If your credit is bad, you may have to accept worse terms, and in some cases, you’ll be forced to put up collateral.

Before you set out to get a line of credit, you should take steps to improve your credit score. It can also be quite wise to save money in advance of asking for one, as it may help you get a better deal.

Getting your line of credit will require you to prepare in the same way you would if you were getting another type of loan. In fact, the biggest difference with a line of credit is that the bar is set higher. The borrower of a line of credit has access to far more money than a borrower of a typical loan.

You’ll need to bring the following:

  • Government-issued identification (and possibly your social security number)
  • Proof of income, such as a pay stub
  • Employer contact information
  • Your contact information
  • Tax returns
  • Bank and credit information

The specific requirements will depend on the lender you’re going to. For example, some lenders will insist on seeing your tax returns for the last few years, while one year’s returns will work for most lenders.

Understand the Repayment Process

The repayment process is everyone’s least favorite part of taking out a line of credit. Once you’ve qualified for and received a line of credit, you’ll be given a period during which you can borrow money from the account. This period is also known as a “draw period” and it often lasts for several years. You may even receive a special card to use for your line of credit.

Once you’ve borrowed money from your line of credit, interest will start to accrue. Once you start borrowing money and accruing interest, you’ll be expected to start making minimum payments. When you start making payments on your debts, the money you pay will be returned to the line of credit. This means that your credit limit increases again as you pay back the money you owe.

Once your draw period is over, you’re in the “repayment period,” which isn’t the most enjoyable part of the process, but it’s the part where your lender makes their profit. Once you’re in the repayment period, you’ll have a set time limit to pay it all back. At this point it’s recommended that you pay more than your minimums, otherwise interest will accrue, bogging you down financially.

Using Your Line of Credit

There are a few great reasons to use a line of credit, and some terrible reasons as well. The first question you’ll need to ask yourself is whether you’ll be able to pay it back without messing up your finances, which can have a negative effect on your life. This is especially true if you’re taking a secured line of credit.

The reasons to take out a line of credit are specific, long-term expenses such as:

  • Financing a new home
  • Financing a serious renovation
  • Consolidating other debts (which you’d be able to pay off anyway, of course)
  • For a new car or work/business vehicle

If you need to borrow money for any of the following, you should be looking for different kinds of loans and making use of a loan calculator:

  • Paying for everyday expenses
  • Paying off debts which you’re already struggling with
  • Anything you don’t have a clear plan for paying off

Regardless of the reason, make sure you understand the repayment period and any other details before signing up for a line of credit. You want to make sure that it’s realistic, and will help you, not hinder you.

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How to Apply for a Business Credit Card

Myles Leva | August 9, 2019

Paying for Business Expenses Applying for a business credit card is something a small business should seriously consider for itself. Business credit cards can provide a range of benefits to a business. They allow a company to build up credit for better borrowing conditions down the road. They’re also quite easy to apply for. In this article, we’ll go over how to apply for a business credit card and other important points to note. What Is a Business Credit Card? A business credit card is a credit card that is intended for business expenses. These cards are not meant for any individual’s personal use, but they are available to businesses of all sizes. What Is a Business Credit Card Used For? Business credit cards are meant for business expenses, and as such, they come with several perks that you wouldn’t get with a normal credit card. Business credit cards typically have far higher credit limits than normal cards, but they are also harder to qualify for. [youmaylike] As a business phenomenon, business credit cards vary their offers greatly, and certain cards are meant for certain businesses. They are also highly customizable when it comes to individual payment terms. Businesses don't always have consistent incomes like individuals do, and business credit cards handle this problem. These cards are used to gain access to a long line of credit, to control employee spending on business expenses and more. One of their other common uses is to make accounting easier, as putting all business expenses on one separate account makes reporting to the Internal Revenue Service easier. In the end, there are many uses for a business credit card. Why Would I Need a Business Credit Card? You might not need one, but if you run a business, you’ll be leaving money on the table by not at least looking into them. Business credit cards can solve many of the problems business owners face. If you need employees to make purchases for the business, a business credit card is the safest option. These cards can be given to authorized users, a status you can easily give to any of your employees. From here, these cards make it easy to monitor employee spending and spot any discrepancies. You can attach customized user privileges to each card to limit spending and place limits on where the card can be used. As mentioned, if you feel like your credit is too limited, business credit cards are a sure way around low credit. According to the American Bankers Association, the average monthly payment on a business credit card is twice as high as the average payment on a normal one. If you’ve found yourself annoyed with the Internal Revenue Service over the complicated reporting processes for business owners, you’re not alone. This is where a business credit card can solve another problem. Simply handing over your business credit card statements to your accountant will make them love you. It will also provide them with the information they need to predict future spending. Another great use for a business credit card is lifting your liability for debts. Liability for credit card debt is determined by the liability offered by the card. If you’re using a personal credit card for business expenses, you are liable for all debts. On the other hand, if you use a business credit card with commercial liability, your business is liable for any debts, which changes the game. Keep in mind that some cards offer joint liability, which leaves both you and your business liable for any debts. Make sure you know what you’re getting into before signing any paperwork. Lastly, just as personal credit cards offer rewards programs, so do business cards. The main difference here is that business credit card rewards are tailored to your business needs. How to Apply for a Business Credit Card Before you apply for a business credit card, you should make sure you’re eligible. For the most part, you only require the following to be able to apply for one: A legal name for your business. A business structure to apply with, such as a Limited Liability Corporation. An explanation of the nature of your business. You’ll typically be given a list of industry types to choose from. A tax ID number issued by the Internal Revenue Service Your roll in the business you’re representing Various business/financial information including: Annual revenue. Number of employees. Length of time in business. Estimated monthly expenses. If you have this information ready, you can apply for a business credit card. At this point, it would be wise to shop around and find the best option for your business. Your decision on the business credit card you choose will have larger ramifications than your choice of a personal credit card. Applying for a business credit card is much the same as applying for a personal one. There are a few differences, but the main thing to remember is that business credit cards are taken more seriously than normal ones, so you’ll have to face a higher bar of entry. This doesn’t mean getting a business credit card is hard, but it does mean you need to arrive more well-prepared than you normally would. To make things easier, you can prepare for certain obstacles in advance. You may need to sign a personal guarantee that you will pay off any debts. Also keep in mind that if you’re the one applying for a business credit card, and your business doesn’t already have one, they will conduct a personal credit check. It may be best to try to optimize your personal credit if you plan on applying for a business credit card in the future. Some Options at a Glance Here are some of the most popular options for small business credit cards: Chase Inc Business Preferred This is a great option for a few reasons. With the Business Preferred card from Chase Inc, you get 80,000 ultimate reward points when you spend $5,000 with the card in the first three months. The card also provides generic, but highly useful benefits for business owners. Business Platinum Card from American Express The Business Platinum is ideal for businesses that spend a lot on flights and travel. This card offers numerous rewards on flight and hotel expenses and makes sure you get something serious back if you use it for these expenses. Chase Inc Business Unlimited The Chase Inc Business Unlimited offers unlimited 1.5% cash back. While we’ve said enough already, they also offer several other perks that are overshadowed by their first one.

Everything You Need to Know About Filing Your Own Taxes

Katie Macomb | August 9, 2019

It's Not Fun, but It Has to be Done Benjamin Franklin wrote a 1789 letter that states, “But in this world nothing can be said to be certain, except death and taxes.” Even at the United States’ early beginnings, federal taxes were a necessary evil to fund various public projects and administrative costs. Today, federal taxes serve much of the same purpose. While virtually no one likes to prepare and file their taxes, it is a necessity if you want to avoid fines and further hassle. It is no secret that preparing and filing your taxes is notoriously complicated. Many people lament that it should not be so difficult to pay the government. However, some of the complications allow people to save money if they discover specific tax benefits. Knowing how to file your own taxes may be a good option if your tax situation is relatively straightforward, or if you are willing to learn the process. Why Do You Need to File Your Taxes Every Year? The short answer is that federal law requires that most individuals file taxes annually. Income taxes are assessed every year based on your income earned during that period. You then pay a percentage of that income to the government, less any deductions, adjustments, or credits that you qualify to receive. If you do not file (and pay) your taxes, then you may be assessed penalties and interest. The Internal Revenue Service (IRS) can even go as far as garnishing your wages and repossessing your property if you do not file and pay as required. The Benefits of Filing Your Own Taxes If you are one of the 43% of Americans that are doing your own taxes, you are certainly not alone. Roughly 53 million people prepared and filed their own taxes in 2018. There are many benefits to filing your own taxes, including: Saving money: Hiring a tax professional is expensive, and many people can prepare and file their returns on their own, completely free of charge. Control: Some people like knowing the exact information that is included in their return and being able to control the data, and for some, knowing precisely how the numbers work out, is comforting. Gain helpful information: When you prepare your taxes, you can see what items saved you money this year or which issues you should address so you can save money next year. While filing your own taxes is complicated, it can be beneficial under the right circumstances. There are several programs online that walk you through the process to help ensure you are taking advantage of all of your available deductions and credits. The Drawbacks of Filing Your Own Taxes In addition to the benefits, there are also some disadvantages to filing your own taxes. These include: Time and effort: Preparing and filing your taxes takes time and work You have to sift through financial information and deal with concepts that you may not understand well. The process can be frustrating and take a considerable amount of time. Error risk: If you do not completely understand how your taxes work, you run the risk of making a mistake because of misconceptions. If that happens, it could lead to underpayment and audits down the road. Questions: Even if you use a tax preparation software, you may still have questions that will remain unanswered unless you do significant research or reach out to a tax professional. For some people, the risk of having a substantial error that triggers the IRS’s attention is enough to scare them away from preparing their own taxes. Preparing for Filing Your Taxes When you begin work on your taxes, you should have information gathered throughout the year. Some of the most common items that you will need include: Social Security numbers for you, your spouse, and any dependents Information about wages, such as W2s or 1099s Investment income information Documents that represent any other source of income Information regarding adjustments to income, such as student loan interest paid, IRA contributions, and health savings account contributions, just to name a few Information regarding potential credits, including, for example, child care expenses, education expenses, or retirement savings contributions Data about any tax payments that you may have made throughout the year Keeping good records will help make tax preparation easier at the beginning of the year. [youmaylike] The Basics About What You Can Claim When Filing You must pay income taxes on all your income earned throughout the year. However, that income is reduced by a few things. The further you can reduce your taxable income, the less you tax you will pay. There are three general categories of tax reduction methods: Standard or Itemized Deductions Everyone can claim either the standard or itemized deductions. Standard deductions are a set amount that is based on your filing status. Itemized deductions are based on actual expenses that you incurred throughout the year. You can choose to use the higher deduction. The higher the deduction, the less tax you will have to pay on your income because your income decreases on paper. Itemized deductions include things like medical expenses, state and local tax payments, and home mortgage interest deductions. Itemized deductions will only decrease your income by a certain percentage, or up to a specific point. Adjustments Some adjustments to your income may also be available. These include things like paying student loan interest or alimony. Adjustments are more valuable compared to deductions because they decrease your income dollar for dollar. Credits A credit decreases your taxable income as well. Some credits are refundable while others are not. For example, you get a child tax credit simply for having children that qualify for that credit, but that credit will not be paid out to you if you do not have any tax obligations. On the other hand, the Earned Income Credit, which is available for low-income filers, will be refunded to you even if you do not owe any taxes. There are a wide variety of deductions and credits available. Take a look at the federal forms and related schedules to determine whether you might qualify for any of these. How to File Your Own Taxes If You Live Overseas If you earned income in the United States as a U.S. citizen or resident alien, you likely need to pay taxes on that income. This is true even if you live overseas. You can still choose to e-file or mail your tax return to the IRS once you have it prepared, just as if you physically lived in the United States. In some cases, you will be taxed on the income that you earned throughout the world. However, you may be able to deduct a portion or all of the revenue that was not made in the United States in some circumstances. Filing Online The IRS offers an online filing option that is free for individuals that have an adjusted gross income below a specific threshold. Generally, your income must be below $66,000 to qualify for this service. You can also file online by using a commercial tax preparation software. Examples of this type of software include: H&R Block TurboTax TaxCut TaxSlayer There are many programs available that will file your taxes for you, often for a fee. Knowing how to file your own taxes can be a great way to save money, but it can be tricky as well. If you want to file your taxes yourself, be sure to read the form instructions thoroughly and get familiar with various tax saving opportunities before you begin preparing your return.