Borrowing Basics

Things you should know before you borrow

How much should you borrow?

You want a loan you can comfortably afford, not the largest amount you could possibly receive. Know your budget reality and find a loan that fits well with it.

Your debt vs. your income

When you borrow, your debt-to-income ratio (DTI) is important. Your DTI is the percentage of your monthly income that's set aside for your monthly payments (monthly payments/total income = DTI). Generally, a lower DTI ratio makes it more likely that a loan will be approved.

Your credit score and your interest rate

Your credit score represents your credit history, based on your credit bureau report. Generally, a higher credit score makes it more likely a borrower will qualify for a loan and get a better interest rate.

Fixed rate vs. variable rate

Fixed rate loans allow you to make the same payment each month for a fixed term. Variable rates are tied to an index, such as the Wall Street Journal Prime Rate, and the payments may vary as they are based on outstanding balance.

Home Equity Top

The basics

Your home's available equity

Equity is the difference between your mortgage balance and your home's appraised value. If you owe less than your home's appraised value, you have equity you can put to use. Lenders use a loan-to-value ratio (LTV) to determine the amount you are eligible to borrow (mortgage balance/appraised value = LTV).

Appraising your home

An appraisal is a tool used to determine the fair market value of your home. It is essential for calculating your loan-to-value (LTV) ratio, which will determine the amount you are eligible to borrow.

Your options

Home equity line of credit

A home equity line of credit is a revolving credit line that is secured by the equity in your home. It's flexible and ideal for ongoing financial needs.

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Home equity loan

A home equity loan is secured by the equity in your home. It is a fixed payment loan in the form of a one-time lump sum payment.

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Mortgage refinance

A mortgage refinance allows you to shorten the term of your loan and pay it off quicker and/or lower your monthly payments.

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Auto Top

Refinance your auto loan

Lower your interest rates
Reduce your car payment and have extra cash each month
Pay the same amount each month and pay off your loan sooner

Private party purchase

Typically, you'll pay less than a dealer purchase
Secure financing prior to purchase

Dealer purchase

Many vehicles to choose from
Convenience of shopping and financing in one place
Warranties and service agreements available

Details

Personal Lines of Credit & Loans Top

Secured

When you need funds, consider financing before cashing in your savings or investments. Your savings or investments are used to secure your loan. Secured loans typically have lower rates as they are secured by liquid assets.

Unsecured

An unsecured loan allows you to borrow money without collateral. Interest rates are generally higher than rates for secured loans due to the lender's increased risk.

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