Don’t Get Caught in a Debt Collection Scam

No one likes to be in debt. It’s a downward spiral that never seems to end, and it’s an expensive burden to carry, too. Unfortunately, scammers often exploit the feelings of helplessness and overwhelm to lure victims into their debt-collection scams. Let’s take a look at these scams and how to keep yourself from falling victim. 

How the scams play out

In a debt-collection scam, a scammer posing as a debt collector will call a victim and demand payment for an outstanding debt. The caller insists on a specific means of payment, usually a wire transfer or prepaid debit card. The scammer will sometimes threaten to tell the victims’ family members about the debt if it’s not paid up immediately. The alleged debt may be completely fabricated, or an actual debt the victim has that the scammer has learned about through social engineering or by hacking the victim’s private accounts. In either scenario, though, the caller is not a debt collector and represents only themselves. Of course, any money the scammer collects will go directly into their own pocket. 

Red flags

Here’s how to recognize a debt-collection scam:

  • The alleged debt collector demands immediate payment. A legitimate debt collector will always provide you with the option to dispute the debt and discuss payment arrangements. 
  • The caller insists on a specific means of payment. Scammers love having their victims cough up money through a payment method that cannot be undone, such as wire transfer or prepaid cards. 
  • The “debt collector” knows very few details about the debt. A genuine debt collector will have all the information on the debt and be able to answer any questions you may have. 
  • There is no contact information for the debt collection agency the caller allegedly represents. Ask for a phone number and street address for the agency. If none are forthcoming, it’s likely a scam. 

Protect yourself

Debt-collection scams can be difficult to spot, but with the right knowledge, you can protect yourself. Follow these tips to stay safe.

  • When called by an alleged debt collector, verify the debt. Request written validation of the debt, including detailed information about the creditor, the amount owed and the nature of the debt. Legitimate debt collectors should be able to provide this information.
  • Never share personal information with an unverified contact. If you’re asked to provide sensitive information by an unknown contact, it’s likely a scam.
  • Check for licensing and credentials. Debt collectors are often required to be licensed in the state where they operate. Research the collector’s credentials and licensing status through your state’s attorney general’s office or consumer protection agency.
  • Know your rights.  Familiarize yourself with your rights under the Fair Debt Collection Practices Act (FDCPA) and other relevant consumer protection laws. These laws outline the rules that legitimate debt collectors must follow when attempting to collect a debt. For example, they can only contact borrowers at reasonable hours, they cannot call them at their workplace, harass them about a debt using threats or violence, lie about money owed or falsify the name of the agency they represent, among other restrictions. 
  • Keep detailed records. Maintain thorough records of any communication you have with debt collectors, including dates, times, names and contact details. If you suspect a scam, these records can serve as evidence if you need to report the incident.
  • Request written communication. Ask the debt collector to communicate with you exclusively in writing. Legitimate collectors should be willing to provide written documentation of the debt and any payment arrangements.
  • Stay informed. It’s a good idea to check your credit report on a regular basis for any unfamiliar or fraudulent accounts. Monitoring your credit can help you quickly identify any unauthorized activities related to debt collection. It’s also advisable to keep up with the latest scams so you are better equipped to identify and avoid them. 

Debt collection scams can make the nightmare of debt even worse. Use the tips here to stay safe!

What Do I Need to Know About the Recent Student Loan Changes?

Q: There have been so many changes to federal student loans over the last few years, and I’ve heard there are more coming. As a college graduate with a federal student loan, what do I need to know about these changes and how will they affect my payment plan?

A: Student loans have undergone quite a few changes over the last few years. Backtracked statements and moving rollout dates have only made the headlines more confusing. As a borrower, though, it’s important to keep up with these changes and stay informed about how they will impact you. Here, we’ve outlined the important changes you need to know about and included steps you might need to take to benefit from these adjustments. 

A brief overview of recent student loan changes 

First, let’s take a look at the timeline of student loan changes of the last few years: 

  • Mar. 2020-Forbearance (a temporary pause) on student loans is enacted by the federal government in response to financial hardships caused by the coronavirus pandemic.
  • Apr. 2022-The Education Department announces an Income-Driven Repayment (IDR) plan and Public Service Loan Forgiveness (PSLF).
  • Oct. 2022-Congress passes the Joint Consolidation Loan Separation Act.
  • June 2, 2023- A debt-ceiling deal is passed by congress. A provision in this deal prevents any further payment pause extensions on federal student loans. 
  • June 30, 2023-President Biden’s proposal to erase up to $20,000 in federal student loans is struck down by the U.S. Supreme Court.
  • July 14, 2023-The Education Department announces that the first major wave of loan forgiveness is coming for over 804,000 borrowers.
  • July 30, 2023-Parts of the IDR plan goes into effect.
  • Sept. 1, 2023-Interest on student loans resumes accrual.
  • Oct. 1, 2023-Student loan payments resume.
  • July 1, 2024-The rest of the IDR plan goes into effect. 

Forbearance ending on Oct. 1, 2023

After more than three years of student loan pauses, payments are set to resume this October. In the meantime, though, interest will begin accruing again on Sept. 1. Borrowers who’ve grown accustomed to skipping their monthly payments will need to readjust their budgets for these “new” bills. 

Steps to take: If you have an open student loan, prepare for the change in your budget instead of waiting until it hits you by surprise. Review your budget to see whether you have room for this new expense or if you need to make some major adjustments. If you are unsure of how much your monthly payment will be, contact your loan servicer now to find out. 

PSLF account adjustment, or waiver

On July 14, the Education Department announced that loan forgiveness is coming for more than 804,000 borrowers who’ve been paying off their student loans for at least 20 years. In total, close to $39 billion in student debt will be automatically wiped out with this adjustment. Millions more borrowers will have three years of additional credit toward forgiveness under the new plans when their accounts are updated next year. 

If you’ve been steadily paying off a student loan for at least 20 or 25 years (including forbearance) you’ll be student debt-free after the adjustment. If you borrowed less than $12,000, you’ll be debt-free even if you’ve only been paying off your student loan for 10 years. 

Steps to take: The adjustment is mostly automatic. However, if you have a loan from the Federal Family Education Loan (FFEL) Program, Perkins or Health Education Assistance Loan (HEAL) Program, you must apply to consolidate them at by the end of 2023 to enjoy the full benefits of this adjustment. The consolidation process can take a while, so get started as soon as you can. 

A new IDR plan

The existing income-driven REPAYE plan is being replaced by a new, broader plan called Saving on A Valuable Education, or SAVE. SAVE is expected to halve the monthly payments for many borrowers. 

Steps to take: Borrowers can sign up for this new plan before forbearance ends this fall. However, the full plan will not take effect until July 2024. If you are already enrolled in the REPAYE plan, your loan will automatically be moved into the SAVE plan in October.

Also, if you qualify for the PSLF waiver above, but you’ll have a balance remaining after the adjustment, you’ll need to sign up for an IDR plan when payments resume this fall to keep building credit toward loan forgiveness. If you believe you are in this category, be sure to contact your servicer to get your paperwork submitted soon. This way, it’ll be set up to go into an IDR plan as soon as forbearance ends. 

Student loan servicer switches

In April, 2023, the Education Department signed contracts with five federal student loan servicers, which are expected to go live in 2024. Eventually, the department plans to launch a central servicer portal at, but for now, it’s important to know the name and contact info of your servicer. If the department transfers your loans to another servicer, your current and new servicers will notify you of the change.  

Steps to take: Make sure your contact information is up to date with your current servicer. 

Other student loan changes underway

There are several other changes underway for student loans:

  • Fresh Start program for delinquent or defaulted loans. Borrowers with past-due loans now have more opportunity to get them back on track through the new “Fresh Start” program. Eligible borrowers must sign up for Fresh Start within one year of the end of forbearance on or by calling the Education Department at 800-621-3115.
  • Updated bankruptcy guidance. The departments of Education and Justice jointly released updated bankruptcy guidance in November 2022 to standardize the requirements for borrowers to discharge their federal student loans in bankruptcy.
  • Joint Consolidation Loan Separation Act. Passed in October 2022, this law allows consolidated student loans of spouses to be separated so that each partner can access debt relief for their loan. 

Use this guide to stay informed on recent student loan changes. 

Should I Take Out a HELOC to Pay Off My Credit Card Debt?

Q: I’m struggling to pay down my credit card debt and I’m wondering if it’s a good idea to use my home’s equity to pay it off. Maybe then I could make some real progress. Should I take out a HELOC to pay off my credit card debt?

A: Your home’s equity can be a versatile financial tool, but using it to pay off your credit card debt can potentially be risky. Let’s take a look at the pros and cons of using a HELOC to pay off credit card debt so you can make an informed decision about this financial move.

Pros of using a HELOC to pay off credit card debt

Under specific circumstances, it can be a good idea to use a Home Equity Line of Credit to pay off consumer debt. 

Here are some of the pros of using a HELOC to pay off credit card debt:

  • Favorable interest rates. Interest rates on HELOCs tend to be lower than interest rates on most credit cards. Moving the debt to a HELOC can potentially save you thousands in interest payments. 
  • Potential tax benefits. The interest payments on a HELOC can be tax-deductible if the funds are used to increase the value of the home. You may be able to pay off your credit card debt, improve your home and then enjoy the tax benefits of a HELOC. Be sure to consult with a tax professional about this before considering this factor.
  • Streamlined monthly payments. When you consolidate your credit card debt to a single loan, it’s easier to keep on top of the monthly payments. 

Cons of using a HELOC to pay off credit card debt

Unfortunately, using a HELOC to pay off debt has significant possible disadvantages as well. 

Here are some of the cons of using a HELOC to pay off credit card debt:

  • It uses your home as collateral. A HELOC is a line of credit taken out against your home’s value. This means if you default on the payments, you risk losing your home.
  • You can end up upside-down on your home loan. If your home’s value drops at some point in the HELOC’s term, you can end up owing more on your home than it’s actually worth. 
  • You may end up in even more debt. If you don’t change your financial habits, transferring your debt to a HELOC can land you right back in deep debt. Without solving the underlying issue, such as insufficient income or the inability to control your spending, you can end up using your new line of credit (or even the credit cards you just paid off) to overspend and ultimately have more debt than when you started.
  • Fluctuating interest rates. While a HELOC’s APR may initially be lower than a typical credit card’s APR, its rates are generally variable and subject to fluctuations in the market. The APR can rise over time, increasing your monthly payment amount and making budgeting and affordability challenging.
  • Extended repayment terms. HELOCs can have repayment terms of 10 years or longer. This means that transferring credit card debt to a HELOC is not a quick fix for your debt. 

Before using a HELOC to pay off credit card debt

If you decide to go ahead and take out a HELOC to pay off your credit card debt, first consider these factors:

  • Your debt repayment strategy. Evaluate your spending habits and assess whether a HELOC will help you address the underlying causes of your credit card debt. Develop a realistic debt repayment strategy that includes a budget, emergency fund and a plan to avoid incurring additional debt in the future.
  • Financial stability. Examine your overall financial situation, including income stability, employment prospects and future financial goals. Before opening a HELOC, you need complete confidence in your ability to make timely payments while maintaining your other financial obligations.
  • Loan terms and fees. Be sure to thoroughly research and compare HELOC offerings from different financial institutions. Pay close attention to interest rates, repayment terms, rate adjustments, fees and any potential penalties.

Taking out a HELOC to pay off credit card debt is generally not recommended, but it can be a viable option under specific circumstances. Use this guideline to make an informed decision about this financial move. 

What Happens When a Mortgage Lender Checks My Credit Score?

Q: I’m shopping for a mortgage and wondering if I’m going about it the right way. What happens when a mortgage lender checks my credit score? And how do I find the perfect lender?

A: Your mortgage may be the biggest loan of your life. Therefore, it’s important that you do your homework well and carefully research any potential lender. However, as you note, shopping for a mortgage lender generally involves a check on your credit. Let’s take a closer look at the mortgage-shopping process, how a credit check affects your score and some tips for choosing the lender that’s right for you.

Credit score 101

First, let’s brush up on credit scores and why they matter. 

Your credit score is a three-digit number that serves as an indicator of your creditworthiness and financial responsibility. Your credit score can be anywhere from a “poor” 300 to an “excellent” 850. The score is calculated through a variety of factors, including your credit utilization, payment history, outstanding debt, types of credit and history of credit. The higher your score, the easier time you’ll have getting approved for a mortgage, and the lower the interest rates you’ll be offered. 

What is a credit check?

When you apply for a mortgage, the lender will typically pull your credit report from one or more of the three major credit bureaus: Equifax, Experian and TransUnion. This is known as a credit check. The lender will use the information on your credit report to determine your creditworthiness and whether or not you are a good candidate for a mortgage.

During the credit check, the lender will review your credit report and look for any red flags that may indicate that you are not financially capable of carrying a mortgage. This may include factors like missed payments, high levels of debt or a history of bankruptcy. If the lender determines that you are not a good candidate for a mortgage based on your credit report and review, they may deny your application or offer you less favorable terms.

How does a credit check impact my credit score?

When a lender pulls your credit report, it can have a temporary negative effect on your credit score. This happens because each credit inquiry is recorded on your credit report, and can be seen as a red flag by lenders. The good news is, the impact is usually small and temporary, and your credit score should bounce back within a few months.

The impact on your credit score will depend on a variety of factors, including the number of credit inquiries, the types of credit inquiries and your overall credit history. If you have a long and established credit history with a good payment history, a single credit inquiry may have little to no impact on your credit score. On the other hand, if you have a short credit history with missed payments or high levels of debt, a single credit inquiry may have a larger impact on your credit score.

Should I limit my mortgage applications to mitigate the effect on my credit score?

Actually, you can shop around for a mortgage without any additional impact on your credit score, as long as you are mindful of the passing time. All credit checks from mortgage lenders within a 45-day window will be recorded as a single inquiry on your credit report. Creditors know you are only going to buy one home, so the multiple inquiries do not indicate multiple loan applications. You can take your time shopping for a mortgage and getting loan estimates from various lenders. Just be careful to do all your research within the 45-day window. 

How can I improve my chances of getting approved for a mortgage?

It’s best to work on boosting your credit score before you start shopping for a mortgage. Here are some tips for bringing up your score:

  • Pay your bills on time and in full
  • Keep your credit card balances low
  • Avoid opening many new credit cards 
  • Check your credit report regularly and dispute any errors

How do I find the mortgage lender that’s right for me?

When researching potential lenders, you can start by asking family and friends who’ve recently taken out a mortgage for lender recommendations. Look up online ratings and reviews of potential lenders as well. As you check out various lenders, look for those that offer excellent customer service, reasonable closing costs and fees, transparency about the loan process and, of course, favorable loan rates. 

Shopping for a mortgage will have a temporary impact on your credit score, but it’s a necessary step in the home-buying process. Use the tips outlined here to find the mortgage lender that’s right for you and to learn what happens when they check your credit score. 

If you’re ready to apply for a home loan, stop by Advantage One Credit Union today. We’re completely committed to your financial success.

TikTok Inspo: You’re a mortgage lender, offering a less-than-ideal home loan. Can you sell us on your mortgage? Explain why you have the best loan out there in a 15-second video.

The Homebuying Process for First-Time Homebuyers

Buying a home is a long and, sometimes, overwhelming process. That’s especially true for a first-time homebuyer. However, with some self-education, good planning and preparation, the process can be smooth and less stressful. Let’s take a look at the 11 steps of the homebuying process and what to expect along the way.

Step 1: Prepare your finances

Before you begin the homebuying process, ensure you’re financially ready to handle a mortgage. Here are some tips for preparing your finances ahead of the homebuying process:

  • Set a realistic budget. How much house can you actually afford? Before you start your search, take some time to determine how much house debt you can carry. Consider your existing and expected income as well as ongoing expenses. 
  • Boost your credit score. If you’re thinking of buying a home within the next year, take steps now to bring your score up. Make full and on-time payments, avoid opening too many new credit cards and keep your credit utilization low. You’ll also want to check your score before applying for a home loan to ensure you’ll qualify for a mortgage. 
  • Save for a down payment. If you haven’t already done so, start saving for a down payment now. 

Once you have your finances worked out, you can start shopping for a mortgage.

Step 2: Choose a lender

When choosing a lender for your mortgage, you can decide to use your current bank or credit union, another financial institution or to utilize the services of a private lender. 

When researching potential lenders, look up online ratings and reviews. Also, look for lenders that offer excellent service experiences, reasonable closing costs and fees, transparency about the loan process and favorable loan rates. Don’t be afraid to ask potential lenders all your questions; they should be more than willing to provide you with answers. 

Step 3: Get preapproved for a mortgage

Once you’ve chosen your mortgage lender, you can apply for a preapproval on your loan. Getting preapproved for a mortgage before you start your search will make the homebuying process easier. It will also help ensure you keep your search within your budget.

Depending on your lender, the preapproval process can take several months, or just a few days. The lender will ask for your financial history and other personal information. If you have a co-borrower, the lender will need this information about them as well. If the information you provide is satisfactory, as is your credit report, the lender will begin constructing the details of your loan.

When they have determined how large a loan you are eligible for, they will grant you a preapproval letter. This letter can be a good bargaining chip if you find yourself competing against another borrower for the same property.

Step 4: Find a real estate agent

A real estate agent can help you find the perfect home that fits your budget and preferences. They have access to a broad range of homes on the market and can negotiate on your behalf.

Step 5: Find your dream home 

Once you have a pre-approval and a real estate agent, it’s time to start shopping for homes. Here are some tips to keep in mind as you look for your dream house: 

  • Know what you want. Make a list of your must-haves before you start house-hunting. Is a large backyard a deal-breaker for you? Do you need a specific number of bedrooms? Knowing what you want will help you narrow down your options.
  • Be prepared to negotiate. The seller may counter your offer, so be prepared to negotiate on the price. Your real estate agent can advise you on the best course of action.
  • Beware of red flags. Inspect a home thoroughly before considering it for a purchase. Look for structural issues, like doors that don’t close, cracks in the foundation and sagging ceilings as well as the presence of mold and unexplained smells. 

Step 6: Make an offer

Once you’ve found the home you want to buy, you can put down an offer. If your offer is accepted, the deal will officially be “under contract”. This means you’ve made an offer on a home which the seller has accepted, but there are a number of contingencies that must be addressed before the sale is finalized. At this point, you’ll likely need to pay “earnest money,” or a portion of the down payment. 

Home sales are typically under contract for 4-8 weeks, though this can vary with each lender and sale. You won’t be sitting around waiting for the closing, as you’ll need to complete steps 7-10 at this time. 

Step 7: Get your mortgage

As soon as your offer has been accepted, your mortgage lender will get to work on the details of your loan. If you’ve gotten a preapproval, you should have most of this ironed out already, though the final number-crunching will depend on the loan amount, the property value, the type of mortgage you choose and the size of your down payment. Throughout this time, you’ll need to provide your lender with various financial documents and sign a host of documents as well.

Step 8: Schedule a home inspection 

Hire a professional home inspector to thoroughly check out the home. This will reveal any issues with the home that you may not have noticed. If the inspection uncovers any major issues, you can choose to walk away from the deal, or to negotiate with the seller for a lower price.

Step 9: Obtain homeowner’s insurance

Homeowner’s insurance is necessary to protect your investment. Shop around for the best rates and coverage and make sure you have a policy in place before the closing date. 

Step 10: Schedule an appraisal

The home appraisal, which determines the actual value of the home, assures the lender they are not lending you more money than the home is worth. Your lender will likely choose the appraiser, though the homebuyer usually pays for and schedules it. 

Step 11: Close and move in

Congrats – you’ve made it! You’re ready for the closing, which is when the property will change hands. Be sure to set aside several hours for the closing and to come prepared with all the funds you need to cover the remainder of the downpayment and all closing costs and fees. 

Once you’ve closed, the home is yours. All that’s left to do now is to pack up and move in. Best of luck in your new home sweet home!

TikTok Inspo: Are you selling a home? Convince prospective buyers in a 15-second video that yours is the one they need.

What are Some Red Flags to Know About When House-Hunting?

Q: I’m currently house-hunting, and aside from the obvious defects, what are some red flags I should be looking out for while checking out potential new homes?

A: When looking for a new home, it’s important to be familiar with potential signs of defects and disrepair. Here, we’ve compiled a list of 10 red flags to watch for in a new home. 

  1. Doors that don’t close completely

If the doors of the house you’re viewing don’t quite meet the jambs, you’re potentially looking at a sign of major structural damage. The house may have settled, which means there are problems with its foundation. If the door is made of wood, it can also mean the wood has warped, which likely indicates a moisture issue. In either case, these aren’t problems you want to endure.

  1. A musty smell

The nose knows. When a house has a distinctly musty smell, you can assume there is mold present. Inhaling any kind of mold spores can lead to respiratory problems, headaches, skin conditions and more. The house won’t fare too much better with mold. The wet spores can lead to destroyed drywall and ceilings and necessitate costly repairs. 

  1. An up-and-coming neighborhood

Describing a neighborhood as up-and-coming may seem like a positive way to sell a house, but it can also mean the neighborhood is still developing. Setting down roots in a newly formed community means risking the chance that it doesn’t quite turn out the way you expect or hope. It can also mean dealing with lots of construction in the neighborhood as new homes are built. 

  1. A saggy ceiling 

When checking out a house, look up. If the ceiling sags, you may be looking at a leaky roof, an internal plumbing issue or an insect infestation. 

  1. Overpowering air fresheners

If you’re hit by an overpowering scent of air fresheners or diffusers when you walk into a house, beware. The strong smells may be strategically placed to cover up for something else, like pet-stained carpets or mold. Ask to see the house again at another time, without any artificial scents being used so you can see what it really smells like. 

  1. Selling “as is”

If a home is listed “as is,” be prepared for issues. The seller is openly admitting they don’t want to fix any existing problems in their home. Look out for these defects, or ask the seller to point them out to you so you know what you’ll be dealing with before you decide to go ahead. 

  1. Poor ventilation

If the house seems humid and stuffy, that’s a red flag. It likely indicates poor ventilation which does not allow the hot air to escape. This can lead to moisture issues, which in turn can lead to mold and decay.

  1. Substandard shingles

If the shingles on the house you’re viewing are peeling, cracked or curling, the roof is probably nearing the end of its life. Replacing it can be incredibly expensive, and it’s not something you want to deal with right after moving into a new home. 

  1. Sloping floors

In many homes, the floors are slightly out of level due to normal settling. If you feel like you’re walking downhill in the living room, though, that’s a problem. Noticeable sloping can be indicative of a foundational problem, broken floor joists or rotted support beams. If you do notice extreme sloping in a home, walk away. If you love everything else about the home, you can have a structural engineer tell you why it’s sloping and how much it’ll cost to fix the underlying issue. 

  1. Below market price

If a house is priced well below market value, there’s likely a reason it’s so cheap. Houses priced below market value tend to have big structural issues the owner does not plan to fix before selling. If you fall in love with an under-priced house, be sure to have it thoroughly inspected and to get a general idea of what it’ll cost to make it livable. 

Finding your dream home isn’t easy. Look out for the red flags described here to be sure there are no big surprises after moving day. 

TikTok Inspo: Can you sell us a red-flag home? Describe a listing in a short video, using as many of these red flags as you can. 

Time to Move or Time to Improve? Moving Vs. Home Improvement

Q: My family is growing out of our current home and we’re desperate for more living space. My house can also use a major face-lift. I’m wondering: should I move to a new house, or make some major improvements to my current home?

A: Choosing to move to a new home or to make improvements to your current home is a big decision. The right answer will depend on your general financial situation and other personal circumstances. Here, we’ve outlined the pros and cons of each choice so you can make the decision that is best for you. 

Moving to a new home

For most people, a home is the largest purchase they will make during their lifetime. It can take years to save up for a down payment on a home, and many months of planning and wise decision-making before a home purchase is finalized. 

Pros of moving:

  • Opportunity for a fresh start. You can choose a new location that better suits your needs, such as a superior school district, proximity to family or work or a more desirable community.
  • More living space. This is especially beneficial if you have a growing family or want to add more amenities to your home, such as a home office, designated playroom or gym.
  • Potential for appreciation. If you buy a home in an area that is experiencing growth, your property value may increase over time, resulting in a return on your investment.
  • No dealing with renovations. If you purchase a home that’s already in move-in condition, you won’t have to deal with the headache of renovations at all. 

Cons of moving:

  • Exorbitant upfront costs. Moving to a new home doesn’t come cheaply. You’ll need to spring for closing costs, a down payment, the actual move and for any new furniture you may need to purchase for your new residence. Selling your current home will also cost you in renovations, agent fees and title insurance.
  • Emotional attachment to your home. Did your son take his first steps in the kitchen of your current home? Did your dog have her puppies in the garage?  If you’ve been living in this home for many years and it holds lots of happy memories, you may be reluctant to leave. 
  • Difficulty finding the perfect home. You may need to settle for a home that is less than perfect in many ways. That may end in more stress and regret.
  • Stress of selling your home. The housing market is unpredictable, and you may not be able to sell your current home for the desired price. Of course, if you don’t own your current home, this does not apply to you.
  • Potentially higher interest rate on your mortgage. If rates have increased since you bought or refinanced your current home, or your credit score has slid, you may end up with a higher interest rate on your new mortgage. That could mean paying much more over the long run.

Questions to ask before deciding to move

Before you go ahead with the decision to move to a new home, ask yourself these questions: 

  • What are the market conditions like in my current neighborhood? Will I be able to get my asking price on my home within a short amount of time?
  • What are the market conditions like in my desired neighborhood, and how are they trending? Will I be able to find a home that suits my needs and is within my price range?
  • Do I have enough money saved up to pay for the move? Will I need to wait until I sell my home or take out a bridge loan to cover the gap?
  • Is this a good time for my family to move?

Improving your current home

Now, let’s take a look at the option of improving your current home with a Home Equity Line of Credit (HELOC). A HELOC gives you quick access to cash by using your home as collateral. You can withdraw the funds, as needed, over a period of time known as the draw period. When this time is over, you’ll no longer be able to advance funds and will repay the loan, with interest, over the repayment period.

You can also take out a Home Equity Loan (HEL), which will provide you with one lump sum, generally at a fixed rate and payment, and you start paying back immediately. 

Pros of improving your home:

  • Completely customize to fit your needs. When you design your own home, you can have it customized to perfectly suit your family’s needs and your own tastes. Think trampoline floors in the playroom and built-in bookshelves in the family room.
  • No stress of relocating. When you renovate your home, you can continue to enjoy the same home and neighborhood you’ve lived in for years. 
  • Increase the value of your home. Home improvement projects increase your home’s value, increasing your net profit when you do decide to sell in the future. 
  • Save on moving costs. Why pay thousands of dollars in closing and moving costs when you can have a beautiful new living room for the same price?

Cons of improving your home:

  • Stress of renovations. Dealing with a home improvement project can be super-stressful. There are loads of decisions to make, an endless mess and workers in your home at all hours of the day. 
  • Risk of foreclosure. Taking out a HELOC or HEL puts your home at risk of foreclosure if you are unable to make the payments. This can have long-term consequences on your credit score and financial stability.
  • Additional debt. A HELOC or HEL adds another debt to pay each month, which can be a burden on your budget. 

Questions to ask before deciding to improve your home

Before you go ahead with the decision to improve your current home, ask yourself these questions: 

  • Can I afford the monthly payments on a HELOC?
  • How much will a home improvement project cost me?
  • Will I be able to handle living in a construction zone?
  • Do I want to continue living in this neighborhood?

Your Turn: Have you chosen to move or to improve? Tell us what drove your choice in the comments. 

All You Need to Know About Buying a Home in 2023

If you’re planning to buy a home this year, you likely know you won’t be dealing with typical circumstances. The real estate market has been completely upended by the pandemic along with its ensuing financial fallout, and it has yet to recover. While the extreme market conditions that characterized the last two years are beginning to settle down, the market is still far from stable.

Here’s what to expect when buying a home this year, and how to make the most out of the current market conditions.

Flattening home prices

Home prices shot up by 18.2% year-over-year in 2021, and then a generous 9.6% in 2022. The National Association of Realtors (NAR) predicts median existing home prices will inch up just 0.3%, and new homes will rise by 1.3% in 2023. This is fabulous news for buyers who were looking at inflated prices on homes these last two years. 

Stabilizing mortgage rates

Mortgage rates more than doubled in 2022, from approximately 3% to more than 6%, further driving up the price of buying and owning a home. In contrast, the 30-year fixed mortgage is expected to average between 5.2% and 6.8% in 2023, according to recent predictions by

Fannie Mae, Freddie Mac, the Mortgage Bankers Association and the NAR. While the Federal Reserve still plans to raise rates, it’s slowed its pace, with the most recent increase in December being just 0.50%, as opposed to previous 0.75% hikes. Lenders will likely slow down their interest rate increases as well.

More negotiating room for buyers

In recent years, the home-buying process was characterized by fierce bidding wars, which left little to no room for buyers to negotiate. That’s about to change. With the supply of available houses on the market creeping closer to matching the demand, buyers will have more negotiating power and will be able to stand firm on their personal preferences, like home inspections and a lower price. 

Tips for buying a house in 2023

If you plan to buy a new house this year, here’s how to prepare for and ensure a smooth and successful process. 

  • Get your finances in order. It’s a good idea to verify you can afford to buy a new home before you start your search. If it’s possible, take a good look at your finances for at least half a year before you plan to start looking for a new home. How much money do you have saved up for a down payment? How much can you afford to spend on a monthly mortgage payment? Ask these questions before getting started to avoid disappointment later on in the game. 
  • Boost your credit score. You’ll need a minimum credit score of 670 to qualify for a home loan from most lenders, so make sure your score is up to par before you hit the market. Work on paying down debt, paying your bills on time or early and lowering your credit utilization in the months leading up to your search. You’ll also want to avoid opening new cards at this time. 
  • Understand your mortgage options. Depending on your personal circumstances, you may benefit from a mortgage backed by the Federal Housing Administration (FHA), which only requires a 3.5% down payment, or a VA mortgage, which requires no down payment. Similarly, a 30-year fixed-rate mortgage may be in your best interest, or consider going with a 15-year adjustable-rate mortgage (ARM). Make sure you know your options well so you can make an informed choice. 
  • Shop around for a mortgage lender. Do your research before choosing a lender. Look for a lender that offers the kind of mortgage you need, and ask for referrals from recent clients. You’ll also want to compare the loan estimates you get from different lenders, looking at the rates, fees, estimated closing costs and anticipated monthly mortgage payment. 
  • Get your pre-approval before you start your search. This way, you’ll know exactly how much house you can afford, and sellers will regard you as a serious buyer.
  • Move quickly when you’ve found a possible yes. The market may be cooling down, but it’s still competitive. If you want to buy a home this year and have your finances worked out before you start shopping, it’s a good idea to make an immediate offer on the home you like.

If you plan to buy a home in 2023, you’ll be dealing with a market that’s slowly settling down, but is still far from stable. Use this guide to learn what kind of market conditions you’ll be facing and how to prepare for the process.

Your Turn: Do you plan to buy a home in 2023? Share your best tips in the comments. 

What is a Personal Line of Credit?

Q: I need access to an indefinite amount of funds for expenses, so I’m thinking of taking out a personal line of credit. What is the difference between this product and a personal loan or a credit card?

A: Personal lines of credit can be a great way to access necessary funds for covering various expenses, with minimal hassle and easy payback terms. Let’s take a look at how this loan product differs from traditional personal loans and credit cards, as well as why it can be a fantastic option. 

What’s a personal line of credit?

A personal line of credit (PLOC) is a form of revolving credit up to a specified amount that works much like a credit card. The borrower can use the money as needed until the maximum allowable credit line (aka “limit”) is used. As the borrower makes monthly payments toward the balance, the available credit is updated to reflect the principal balance that has been repaid.

A PLOC has two phases: the draw period and the repayment period. During the draw period, which typically lasts two years, the borrower can take out as much money as needed from the available credit line. Once the formal repayment period begins, the borrower can no longer take out cash from the credit line. It should be noted that the borrower does not have to wait for the repayment period to commence; they can typically begin repaying the used line as soon as they start drawing.                                                                                          

How is a personal line of credit different from a personal loan?

Unlike a PLOC, a personal loan provides the borrower with a lump sum of money that is generally used immediately for a specific purpose. Personal loans usually feature a fixed interest rate and a fixed payment amount throughout the term. You’ll make consistent payments toward the loan’s interest and principal throughout the life of the loan.

How is a personal line of credit different from a credit card?

As a form of revolving credit, a PLOC is similar to a credit card. Both are unsecured and can feature high interest rates, which will probably be adjustable rather than fixed. However, a PLOC generally has a lower interest rate than a consumer credit card. It also has a limited draw term, unlike a credit card, which can be open for years.  

When is it a good idea to choose a personal line of credit? 

While a personal loan can provide the freedom to use the money you borrow as needed and a fixed repayment plan, a PLOC can be a great flexible borrowing option in many circumstances, such as a home improvement project or any other ongoing purpose for which the borrower does not know exact costs. It can also be a good way for a borrower with fluctuating income to get through the tighter months. Finally, it can be used to pay for a major life event, such as a wedding or adoption, for which the borrower does not have an exact price tag, but for which they will be planning over the course of many months.  

A PLOC offers the borrower many benefits, including:

  • Flexible borrowing of funds spread out over many months
  • Instant access to funds when needed
  • No repayments unless the funds are used

Before you take out a PLOC

Before going ahead with your application for a PLOC, make sure you understand the exact terms and conditions associated with your line of credit. You should be clear on when your draw period ends and you’ll no longer be able to access your funds, whether there is a cap on your interest rate and the maximum amount of funds you’ll be able to use from your line of credit.

A PLOC can be an excellent way to access a large amount of funds with manageable payback terms. To learn more about this loan product, call, click or stop by Advantage One Credit Union today.

Your Turn: Have you taken out a PLOC? Tell us what you love about this loan product in the comments.

Don’t Get Caught in a Pre-approval Scam

You’ve got mail! But beware, because this particular missive telling you that you’ve been preapproved for a large loan – maybe even a mortgage – may not be as it seems! The exciting news may be accompanied by a check that’s made out to you and even for the full loan amount! It’s a dream come true. Until, of course, it all turns into a living nightmare. 

Here’s what you need to know about preapproval scams and how to stay safe.

How the scams play out

In a preapproval scam, a target receives a letter in the mail, an email or a text message informing them they’re preapproved, or “prescreened,” for a large loan. The letter is often accompanied by a live check, or an unsolicited check that can be cashed in by the named recipient – which is you. The letter may also be highly relevant to your life. For example, if you’re in the market for a new home, the offer may feature an alleged preapproved mortgage loan. If you’re looking for a new set of wheels, the letter will likely offer a bogus auto loan. More commonly, though, will be the offer of a personal, or unsecured loan, through a live check. 

When you go ahead and cash that check, you may be playing right into the hands of a scammer. 

The authentic-looking check cannot be cashed unless the recipient shares their personal information. Of course, this means providing a scammer, or a scam ring, with all the info they need to empty your accounts, commit identity theft or worse. In addition, the check may appear to clear but then bounce a few days later, leaving you to pick up the tab for any of the money you’ve spent. Finally, if you really do need to take out a large loan, the bogus offer can set you back significantly by hurting your credit score.  

Checklist for legitimate preapproval offers

If you have a credit history, you’ve likely received these preapproval offers at least several times. Some of them are actually legitimate offers to cover a loan for a large amount. How, then, can you tell which of these offers are legitimate or scam?

First, it’s important to know that, while some of these offers may be legit, that doesn’t mean they’re good for your financial health. If you cash that check and/or accept that loan offer, you’ll be bound by the loan terms, which you may not be truly aware of until the first repayment bill becomes due. Most of these preapproval offers will have exorbitant interest rates and may demand full repayment quicker than typical loans obtained from a bank or credit union. 

Now, let’s take a look at how you can determine whether one of these preapproval offers is legit. If you receive an offer as described, look for this information to verify the authenticity of the offer: 

  • A disclosure of the loan fees
  • The annual percentage rate (APR), which is the annual cost of the loan 
  • The payment schedule
  • The loan agreement
  • A privacy notice about the sharing of your personal information
  • An opt-out notice for future offers
  • Contact information for the sender, which includes a number and street address

If any of this info is missing from the preapproval offer, you’re likely looking at a scam. 

If you’ve been targeted

If you’ve been targeted by a preapproval scam or a legitimate but shady offer, there are steps you can take to protect yourself from further harm and to stop the annoying letters from landing in your mailbox. 

First, let the Federal Trade Commission (FTC) know about the circulating scam. Next, it’s important to note that, under the Fair Credit Reporting Act, you have the right to opt-out of future loan offers for five years, or permanently. To opt-out for the next five years, call 1-888-5-OPTOUT (1-888-567-8688) or visit OptOutPrescreen. To opt-out forever, visit OptOutPreScreen to request a Permanent Opt-Out Election form. Return the signed form and you should be off the list of all preapproval offers. Finally, keep your online interactions safe from scams by using the strongest and most up-to-date security settings across your devices and being careful about the information you share online.

Preapproval scams can be super-annoying and destructive, but you can outsmart them. Stay safe!

Your Turn: Have you been targeted by a preapproval scam? Tell us about it in the comments.