Category: World

HELOC	Home Equity Loan
Secured by your home equity	Secured by your home equity
Low interest rates	Low interest rates
Usually variable rate	Variable or fixed rate
Draw funds multiple times	One-time payout
Upfront and annual fees	Upfront fees, but no annual fees

Secured by Home Equity

Both home equity loans and HELOCs are secured by the value of your home. The amount of equity that you have directly impacts the amount that you can borrow. More equity means a higher borrowing limit.

Interest Rates

An advantage to securing a home equity loans and a HELOCs with your home is that it greatly reduces the lender’s risk. That means these loans have some of the lowest rates of any type of debt.

One important difference between the two is that HELOCs tend to have variable interest rates. That means the rate can change over time based on market rates. With a home equity loan, you usually have the choice of variable or fixed rates.

Access to Funds

An important difference between HELOCs and home equity loans is when you can access funds.

HELOCs let you draw funds multiple times as the need arises. That makes them ideal for people who might need cash quickly or who need to withdraw cash multiple times.

Home equity loans give a one-time distribution of cash, which makes them better for one-time expenses such as paying for a home renovation.

Fees

Both HELOCs and home equity loans include fees. Both loans usually carry origination fees and closing costs that you pay upfront. However, only HELOCs have annual maintenance fees that lenders charge to keep the line of credit open. Home equity loans don’t tend to have ongoing fees to pay.

How To Get a HELOC

If you think that a HELOC is right for you, here’s how you can find one.

Compare Lenders

The first thing to do when you’re looking for any type of loan is to shop around and compare different lenders. Each lender will offer different rates, fees, and other features for their loans. If you take the time to look at a few different options, you might find one that’s offering a much better deal.

Gather Your Information

Before applying, make sure you have all the necessary documents ready. You’ll need things like:

• Personal identification, including Social Security number
• Income information and employment history
• Home documents, including a recent mortgage statement
• Proof of homeowners’ insurance
• Property tax bills
• Information about other outstanding debts
• A list of your assets and account statements

Submit an Application

Once you’re ready, you can submit an application for a HELOC. Provide all the requested documents and work with your lender to verify the details of your home value, employment and income history, and answer any other questions they might have.

Appraisal

If your lender approves you for a HELOC, they’ll want to confirm that your home is worth enough to properly secure the loan. They’ll order an appraisal of your home to determine its value. The result of this appraisal can play a role in determining how much you can borrow with your HELOC.

Closing

If the appraisal comes back and shows you have sufficient equity, the next step is closing. You’ll sign all of the loan documents and paperwork. You will have three days to cancel the HELOC if you change your mind.

Use Your Line of Credit

After the three-day waiting period, your HELOC is officially open and you can start accessing the line of credit. You will have a draw period—typically 10 years—from which to access the funds as needed. During this time, you will start making monthly payments to include a portion of the principal (the amount you borrow) plus accrued interest.

Alternatives to HELOCs

HELOCs are one option for homeowners looking to get cash out of their homes, but there are alternatives to consider.

Home Equity Loan

A home equity loan provides a one-time distribution of funds that homeowners can use for things like paying a large medical bill, funding home improvement, or consolidating debt.

Home equity loans are typically fixed-rate loans and are ideal for one-time expenses. They’re not the best choice for situations where you might need to withdraw funds multiple times.

Cash Out Refinance

A cash-out refinance lets you refinance your entire mortgage and take some of the equity out of your home as cash. For example, if you owe $200,000 on your mortgage and have a home worth $300,000, you could refinance your mortgage with a new, $250,000 loan to replace the existing loan and get $50,000 in cash.

Like home equity loans, cash-out refinances are best for one-time expenses because they offer a one-time payout of funds. However, because they replace your entire mortgage, they tend to be most useful when you can refinance to a lower rate or want to trade an adjustable-rate mortgage for a fixed-rate one.

Reverse Mortgage

A reverse mortgage lets homeowners age 62 or older turn their home equity into a source of income during retirement. These loans are far more complex than HELOCs and other equity-based loans, so it’s important to do your due diligence before getting one.

In general, they can be a good choice for older homeowners who need to supplement their income but aren’t useful for many other situations.

Frequently Asked Questions (FAQs)

Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!

Definition and Example of a Stock Quote

Stock quotes give information about a particular stock’s recent trading activity on a given exchange. How close this data is to real time will depend on the exchange and where you are looking for the information. During the trading day, you can usually see both the prices buyers are willing to pay (bids) and the prices sellers are offering (asks), along with a range of other information. These quotes enable buyers and sellers to find each other and make trades.

For instance, if you wanted to know information about how shares of the Coca-Cola Company were trading, you’d look for the company’s stock quote. You’d see its ticker symbol, which is KO. You’d also see the price of each share, which was $64.74 on May 6, 2022. The stock quote shows you much more than just the current share price. It includes valuable data that you can use to evaluate the company’s shares as you decide whether to buy or sell.

How Stock Market Quotes Work

Both buyers and sellers require data about a particular stock to make a decision and execute a trade. At the very least, they’ll need the name of the stock, its ticker symbol, agreed upon price, and the number of shares they want to buy or sell.

Whether you’re trading on the New York Stock Exchange, the Nasdaq, or another stock exchange, a given stock quote will show some or all of the following information, often in an abbreviated format:

• Open: This is the stock’s opening price. This and all prices are quoted to a hundredth of a cent.
• 52-week high and low (or range): These two numbers record the highest and lowest prices at which the stock traded during the previous 52-week period, but they do not include the previous trading day. The numbers may be adjusted for stock payouts or large dividends.
• Stock symbol (SYM): This is the stock ticker symbol. You can find the symbol for a given company on many financial websites by simply typing the name of the company.
• Dividend (DIV): A dividend is a portion of profits paid to a company’s shareholders. Unless noted in a footnote, this reflects the annual price per share based on the last regular disclosure.
• Yield percentage (Yld%): The yield percentage expresses the dividends and any other disbursements paid to stockholders as a percentage of the stock’s price.
• Earnings per share (EPS): This is a company’s net earnings divided by its total number of shares. A higher number indicates greater profitability.
• Price-to-earnings ratio (P/E): The price-to-earnings ratio is the price of the stock divided by its EPS. This number helps investors compare stock prices more directly to those of other companies.
• Sales volume (Sales 100s): This shows the total amount of stock sold that day, expressed in hundreds. In other words, sales volume is expressed with two zeros missing. For example, if the number reported is 1,959, that means sales volume for that stock was 195,900 for the day.
• High: This is the highest price paid for the stock during the previous day.
• Low: This is the lowest price paid for the stock during the previous day.
• Last (or close): This is the last price at which the stock traded on that day. It does not mean that is the price at which the stock will open the next day, however.
• Change: This describes the difference between the last trade and the previous day’s price.
• Year-to-date percentage change (YTD% CHG): This number is the stock price percentage change for the calendar year. The percentage is adjusted for stock splits and dividends of more than 10%.
• Net change (CHG): The net change is calculated from the previous day’s close, so you are comparing what the stock closed at today to what it closed at yesterday.

You may also notice some footnotes throughout the listings. These point out any number of extraordinary circumstances, including new highs or lows, the first day of trading, or unusual dividends.

What a Stock Market Quote Means for Individual Investors

Once you understand how to read a stock quote, you can begin to make educated decisions regarding investments. With the data you gather, you can learn how to value a company and even make predictions about a stock’s performance. You’ll get to know how to read a stock’s volatility and better gauge your risk when investing.

You can follow a stock’s price throughout the day, although you should be aware that the quotes you see on many free internet sites are delayed. Data providers may delay quotes by 20 minutes or more, enabling them to sell truly live quotes at a premium.

Use a watchlist to track stocks you’re interested in over time. Although past performance does not guarantee future results, tracking your picks helps you learn to identify stocks that meet your trading criteria. It also allows you to detect patterns that can help you in your trades.

Hosting a place on Airbnb can be a lucrative undertaking—although financing the initial investment might seem daunting. To help you gain a greater understanding of financing an Airbnb business, we’ll cover the main options for funding, tips to help you successfully finance the venture, and answers to some frequently asked questions.

Can You Finance an Airbnb Business?

There are several different options for financing an Airbnb business. Keep in mind that it can typically be more challenging to procure funds for an investment property destined to be rented than a property purchased as the borrower’s main residence. This is because lenders often consider it to be a riskier investment and in general require a higher cash deposit to secure its financing.

From a lender’s point of view, if money runs tight, you’re more likely to continue paying the bills on your main residence and your second home will probably be less of a priority. Short-term rentals are also considered riskier than long-term rentals, as they require more attention to keep the space regularly occupied. A few weeks without guests could create difficulties in paying back the borrowed funds.

Airbnb Financing Options

While launching an Airbnb business can seem like an expensive undertaking, there are viable options available to help you finance your venture. Here are some of the common ways you can fund your new investment.

Mortgage

Taking out a mortgage for your rental property could give you a reliable loan with favorable interest rates. However, qualification may be difficult—you might need to contribute a bigger down payment, have a personal credit score of at least 640 to 700, maintain higher cash reserves, and have a lower loan-to-value ratio.

Home Equity Loan or Line of Credit

A home equity loan, often known as a second mortgage, can provide you with a lump sum of cash that you can then put toward an investment property. The money is repaid on a regular basis with set rates. Home equity lines of credit (HELOCs), meanwhile, work like credit cards—borrowers have access to a certain amount of funds. The funds used must be repaid with interest.

Owner-Occupied Investment Property

If you purchase a multi-unit property and live on-site, you may qualify for better terms, lower interest rates, and funding that otherwise wouldn’t be available. You must meet specific criteria in regards to how much time you live in the space, how soon you must move onto the property after closing, and more, so make sure that you understand all of the requirements beforehand.

Small Business Funding

Consider looking into small business funding options from the US Small Business Administration or through Airbnb partnerships with Fannie Mae, for example, when deciding how to back your Airbnb business. One advantage of small business funding is that the money can be used to fill most business needs you may have, whether that’s buying inventory and equipment or covering day-to-day costs.

Hard Money Loan

Hard money loans are short-term loans from private lenders that are backed by property or assets. If a borrower defaults on the loan, the lender can take possession of the collateral. These loans tend to have easier qualifications as the lender is more interested in the value of the asset or property you’re buying.

Hard money loans usually come with higher rates, higher fees, and shorter repayment terms. Borrowers often consider hard money loans after they’ve been denied more traditional forms of financing, or if they’re looking for a quicker route to funding.

Tips for Successfully Financing an Airbnb Business

Financing an Airbnb business doesn’t have to be complicated. Here are some pointers to keep in mind to ensure a smooth funding process:

• Understand the investment you’re making. Why are you investing, and what are you hoping to get out of it? Being clear about your objectives will help you identify what kind of funding to pursue.
• Shop around and compare offers from different lenders. When considering your financing options, make sure to find the best fit for your needs.
• Estimate your predicted expenses. You’ll want to consider maintenance costs and any additional insurance you may need. Also consider the time commitment of cleaning, upkeep, and responding to guests if you will be in charge of these tasks or the cost associated with them if you will hire someone else to manage them for you. Cleaning expense has been an important cost item for Aibnb entrepreneurs. Recently, Airbnb added a cleaning fee as a charge for guests to cover this recurring cost item.
• Do your research. Before purchasing a home to use as an Airbnb rental, you’ll want to familiarize yourself with the local laws regarding short-term rentals. Also, check the listings in the area to get a feel for their vacancy rates and price points.

Frequently Asked Questions (FAQs)

If you’ve ever read a report from an investment analyst, you may have seen stocks described as “overweight.” It can be a confusing term. Most people are used to seeing more simple “buy” or “sell” ratings.

If an analyst rates a stock as “overweight,” they think that the stock will perform well in the future. They believe it is worth buying, as it could outperform the broader market and other stocks in its sector. On the flip side, an “underweight” rating means they think future performance will be poor. Usually, the rating refers to predicted performance over the next six to 12 months.

You can think of “overweight” and “underweight” as being the same as “buy” and “sell.” But there’s a little more to it than that. Let’s take a look at the rating system to find out where “overweight” and “underweight” fit in.

Three- and Five-Tier Rating Systems

Stock analysts are employed by investment firms to perform research and issue recommendations. This often comes in the form of a rating.

You may be most familiar with the three-tiered rating system of “buy,” “sell,” and “hold.” Those are easy to remember because they offer guidance on what you should do with a stock.

Not every firm uses the same terms. Some use systems with five tiers instead of three. Some analysts don’t use “overweight” at all. Instead, they might use terms like “outperform” “add” or “accumulate.” Instead of “underweight,” they may use “underperform,” “reduce” or “weak-hold.”

In general, “overweight” is nested between “hold” and “buy” on a five-tier rating system. In other words, the analyst likes the stock, but a “buy” rating suggests a stronger endorsement.

But it can be even more confusing. Some firms use a three-tier rating of “underweight” “equal weight” and “overweight.” This is because some are shying away from offering clear “buy” or “sell” advice. In this case, it’s fine to view “overweight” as meaning “buy.”

Why the Reference to Weight Is Used

You may hear “overweight” used in a different context, often relating to the makeup of an investment portfolio.

In most cases, your portfolio should be made up of a diverse mix of stocks and other investments. You should try to avoid being too heavily invested in any one thing. When you have a good mix like this, it means that your portfolio is properly “balanced.”

When your portfolio is unbalanced, it may mean that you are too heavily invested in one thing. This is also known as being “overweight.” And if you don’t have enough of a certain investment in your portfolio, you are considered “underweight.”

So, what does this have to do with analyst ratings? Keep in mind that stock market indexes, such as the S&P 500, are constructed based on market capitalization. Each stock gets a certain amount of “weight” in the index. So, for instance, in May 2021, Apple had a weighting of 5.70% in the S&P 500. This is because it is one of the world’s largest companies.

If an analyst provides an “overweight” rating on a stock, they are saying that the company should soon receive a higher “weight” in any index it is a part of.

But none of this is very useful for the average person. For most of us, it’s best to view an “overweight” rating as simply another way of talking positively about a stock.

Ratings Are Just Guides

For each stock, there will be countless people giving opinions on whether it’s a good investment or not. Ratings are simply one piece that goes along with past price performance, earnings reports, profit margin, and other information.

No one should ever buy or sell a stock based on what one single person thinks. And this is especially true because analysts often disagree. Thus, trying to figure out what an analyst truly means by any rating, whether “overweight” or something else, is not very useful.

Frequently Asked Questions (FAQs)

	7(a) Loans	504/CDC Loans
Franchise Uses	Establishing and operating the business as well as real estate or heavy equipment	Purchase of real estate and large equipment or machinery
Eligibility	Be a small business, operating as a for-profit in the US, have invested equity, demonstrate good credit history	Operating as a for-profit in the US, have a net worth of less than $15 million, have a net income of less than $5 million
Lenders	Most SBA lending partners	Certified Development Companies (CDCs), promoting economic development in communities
Guarantee Percentages	85% for loans up to $150,000 and 75% for loans above $150,000	100% of CDC’s portion (usually 40% of the total loan)
Loan Amounts	Maximum $5 million	Maximum $5 million
Maturity Terms	10 years for equipment or working capital and up to 25 years for real estate	10- and 20-year terms

SBA 7(a) Loan

The 7(a) loan program is a popular SBA loan because it allows for a wide variety of uses for the funds. Business owners can, for example, increase working capital, purchase equipment or land, construct new buildings, and outfit offices. With franchises, this loan type can cover initial franchise fees but not those associated with franchise development.

You can receive up to the maximum of $5 million in funding with a 7(a) loan and the guarantee and repayment depend on the amount funded. The SBA guarantees up to 85% on loans of $150,000 or under and up to 75% of larger loans. Repayment on loans for real estate and major fixed assets can extend up to 25 years, while working capital extends up to 10.

SBA 504/CDC Loan

The 504/CDC loan program is similar to the 7(a) in terms of eligibility and maximum loan amounts, but these loans tend to be for bigger real estate projects. 504 loans are made through Certified Development Companies (CDCs), as an underlying goal of this program is to promote economic development in communities.

Business owners can receive up to $5 million to buy real estate, finance construction, or purchase long-term equipment, which are common expenses for opening a new franchisee. The usual structure of a 504 loan includes:

• 50% of project costs are covered by the lender (non-guaranteed)
• 40% of project costs are covered by the CDC (100% guaranteed by SBA)
• 10% of the project cost from the borrower

Maturity rates on these loans range from 10 years for machinery and equipment and up to 20 years for real estate. This loan also comes with a 3% fee that can be financed with a loan and fixed interest rates.

Which Option Is Right for Your Franchise?

Both the 7(a) and 504 loan programs can help you meet your financing needs for your franchise. The main consideration when deciding between the two is the scale of the project and how you will use the loan funds.

Let’s say you are opening a franchise in a new location. Your major expenses may include real estate, construction, and long-term equipment. So, a 504 loan may be a better option because it can cover the property and machinery.

If, instead, you intend to use the funds for the daily operations of a franchise or purchasing an already established franchise, a 7(a) loan may be the better option. You can use these funds for almost anything when it comes to working capital, startup costs, inventory, and real estate.

How To Apply for an SBA Franchise Loan

Applying for an SBA franchise loan is similar to a normal loan application. However, you need to be ready to provide your documentation to both the lender and the franchise.

Here are the main steps in the application process.

Gather Your Documentation

The first part of any loan application is gathering the necessary documents. The more prepared you can be in this initial step, the smoother your process will be. Use the 7(a) checklist and the 504 Authorization File Library to identify what paperwork is needed. This includes forms like business financial statements, personal income tax returns, and resumes.

Gather the Franchise’s Documentation

The next important step is gathering documents focused on the franchise. You’ll want to ensure you have the proper paperwork from the franchise ready for the lender. This could include franchise licensing agreements, profit and loss statements, and asking price.

Identify Your Local Lender

Once you’ve organized the documentation, you’ll need to find a lender or Certified Development Company to submit your application. The SBA provides an online local assistance tool that identifies certified agencies near you.

Submit and Prepare for Questions

The final step is the application itself. You should be well prepared if you’ve spent the time gathering the necessary information. However, you may need to be prepared for additional questions based on lender needs. The lender will then submit your paperwork to the SBA as required.

Franchise Loan Alternatives

If an SBA franchise loan isn’t right for you, consider these alternatives:

Franchisor Loans

Some franchisors offer financial support to franchisees to get the business operating. This support could include specific loan options, royalty reductions to offset costs, and secured loans through partner lenders.

Traditional Bank Loans

A traditional bank loan can an option for businesses with stronger creditworthiness or a longstanding relationship with a bank. However, traditional loans tend to have less favorable terms than an SBA loan.

Other Business Loans

Other loan options include a short-term loan or equipment loan. Alternative lenders offer smaller loans on a shorter repayment period with a quick application process, while equipment loans through banks or alt lenders cover just the purchase of machinery.

The Bottom Line

SBA loan programs can be a good option if you need funding to open and operate a franchise business. Both 7(a) loans and 504/CDC loans can provide the funding to purchase needed materials and real estate or increase working capital to use on an SBA-approved franchise.

Depending on your needs, timeline, and franchise, you may want to pursue other funding options such as traditional loans. No matter which funding option you choose, keep your documents organized and consider consulting a financial advisor for more specific guidance for your situation.

Frequently Asked Questions (FAQs)

Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!

Definition and Example of Actual Cash Value

Actual cash value (ACV) is how an insurance company measures a property’s worth at a given moment in time. It accounts for depreciation. You may come across the term if you make a car insurance claim, or a claim on your homeowner’s policy.

Some policies use replacement cost instead of ACV to calculate your payout, but you must select this provision on your policy. Otherwise, ACV is the amount of money your insurer will pay if your car or home is damaged beyond repair.

If you total your car, the payout won’t be the same amount as what you paid for it. It will be for how much the vehicle was worth at the time of the accident. Your car is a depreciating asset. It loses value over time.

• Alternate name: Market value
• Acronym: stroke

note

Actual cash value is the estimated value of what your car (or other asset) would be worth on the open market at a particular point in time.

How Does Actual Cash Value Work?

Actual cash value is calculated by taking the replacement cost of the insured item (how much it would cost to replace it in full at market price) and subtracting depreciation due to age and the wear and tear that builds up after purchase.

Your insurer will figure out whether your car is a total loss by comparing its value to the estimated cost of repairs. It will be a total loss if the cost to return it to its pre-damage condition exceeds the value of the car.

The threshold for a total loss occurs at a certain percentage of its fair market value, and that can vary by state. For example, your car would be a total loss in Kansas or New York if the cost to repair it were 75% of its value, but the threshold is only 50% in Iowa. Then there are states like Texas where a car must lose 100 % of its fair market value to count as a total loss. Your insurer will pay you the car’s fair market value minus any deductible in your contract in that case.

note

The claim will be paid to the lender or lienholder if you still have money on the car and it’s a total loss.

How Much Value Is Lost Over Time?

A number of factors are used to figure out how much depreciation has occurred. They will vary, based on your carrier and your contract, but they often include:

• Pre-loss condition (the state your car was in before the damage)
• Mileage
• Add-ons and upgrades
• Recent sale prices of cars like yours in the same city
• “Salvage value” (the price that its parts and metal could fetch on resale)

Each insurer uses its own system to measure total loss payouts. They don’t use Kelley Blue Book to figure out these numbers, but they may use a third-party tool or resource. You can still get a ballpark figure of what you might receive by using Kelley Blue Book to help you estimate the value of your car.

note

You may want to opt for a replacement cost policy instead of one that uses ACV if you own an RV. It’s common for RV awnings to suffer damage from weather, sun, and wear over time.

ACV and Gap Insurance

ACV can become more complex if you financed the purchase of your car and haven’t paid it off yet. The ACV payout might not cover what you still owe your lender. Gap insurance addresses this issue. It helps you cover the “gap” between what you get as payout and what you owe.

You may want to look into buying gap insurance if you plan to finance a new car for 60 months or longer, if you’re putting less than 20% down, or if you’re leasing your car. Many people take their chances to avoid the extra monthly bill for this type of insurance. You might want to set aside the money in an emergency fund to cover the difference between the car’s value and your loan balance instead.

Current Cash Value vs. Replacement Cost

Current Cash Value vs. Replacement Cost
Current Cash Value	Replacement Cost
Lower premium each month.	Higher premium each month.
Payouts take deflation into account.	Payouts will cover cost to replace.

Unlike ACV, replacement-cost payouts give you the money necessary to replace your car or home or another insured item, at least to a degree.

• Cars: You’ll be able to buy a new car with the payout if your car is totaled but you have replacement cost coverage.
• Homes: The replacement cost will be set at a dollar value. You’ll receive $250,000 that you can use to rebuild your home if it crumbles to the ground, and your contract is set at $250,000.

The tradeoff with replacement cost coverage is that it costs more in premiums. You might opt ​​for a current cash value plan if you want to save money now. However, a replacement cost policy could be wise if you can afford higher costs now and want to ensure that you won’t need to dip into savings in case of a tragic event later.

It’s always wise to review your options, no matter which type of insurance you choose. Read the contract in full to make sure you’re covered in the way you expect.

Key Takeaways

• “Actual cash value” is an insurance industry term for determining the value of an insured item after taking any depreciating factors into account.
• Insurers have their own methods to measure current cash value. Factors include mileage, age, and add-ons for cars.
• Actual cash value is not the same as replacement cost, which covers the cost to replace the insured item if it’s totaled.

Thanks for your feedback!

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

Early Withdrawal Penalties at Major Banks
bank	One-year CD penalty	Five-year CD penalty
Ally	60 days of interest	150 days of interest
Bank of America	90 days of interest	365 days of interest
Capital one	Three months of interest	Six months of interest
Chase	180 days of interest	365 days of interest
Discover	six months of interest	18 months of interest
Synchrony	90 days of interest	365 days of interest
TD Bank	six months of interest	24 months of interest
Wells Fargo	six months of interest	12 months of interest

Walking Away With Less Money

When you incur penalties on a CD withdrawal, you can lose money and walk away with less than you deposited, in addition to missing out on interest that you would have earned.

For example, suppose you have a 12-month maturity CD that you cash out in the 11th month. You’ll probably walk away with more than you initially put into the CD—although not as much as it could have been had you held off for one more month.

Continuing with this same example, suppose you were to cash out after two months. You haven’t yet earned the six months’ interest as required by the penalty schedule. However, the bank will still take that amount by deducting it from your initial investment deposit. This action is called “invading the principal.”

How To Avoid CD Early Withdrawal Penalties

If you absolutely must cash out early, look for a way to avoid penalties. First, it never hurts to ask. The staff might waive the penalty for you, particularly if it’s an emergency and if you’re at a friendly institution or a smaller credit union. Otherwise, all they can do is say no.

You can usually qualify for a waiver for death, disability, court-determined incompetence, and other major life events. In those types of cases, speaking directly with a representative is particularly important. Banks are permitted to offer these waivers, but that doesn’t necessarily mean that they will. They’re not required to do so by law.

‘Liquid’ No-Penalty CDs

Liquid CDs are similar to standard CDs, but they work more like traditional savings accounts in that they allow you to pull money out early. Sometimes, liquid CDs have limits as to how early and how much you can withdraw, and you might have to make at least a minimum deposit, but they’re worth investigating.

Your “locked in” period is relatively short with these CDs—less than a week in many cases. Still, no one would invest in traditional CDs if this option were that easy. Since you have more flexibility, you’ll receive a lower interest rate in exchange for this freedom.

Alternative CD Strategies

You can try to use other flexible options to avoid penalties when you’re tucking your money away in the future. CDs aren’t bad options, but there might be better alternatives if you find that you keep having to pay penalties.

CD Ladders

Laddering CDs is a strategy where you’ll periodically have one of several mature CDs, often on a six-month or annual basis, giving you the opportunity to take the money penalty-free at that time.

Step-Up CDs

Step-up CDs offer more flexible interest rates. Your rate will increase to keep pace when interest rates rise. This alternative can be attractive if your concern is being stuck with a paltry rate for the whole CD term. Again, these CDs pay less on average than traditional CDs.

Money Market Accounts

Money market accounts pay more than savings accounts, but generally not as much as CDs. The advantage is that you can do limited spending from a money market account using a debit card or a checkbook.

Credit Cards

Credit cards are an expensive way to borrow, but if you need money quickly and your CD will mature soon, it might cost less to put emergency expenses on a card and pay it off as soon as the CD matures. However, a much better idea is to keep a solid emergency fund.

Frequently Asked Questions (FAQs)

Definition and Example of Tax-Loss Harvesting

Tax-loss harvesting can be valuable to an individual who invests in taxable brokerage accounts, as a means of either reducing or eliminating capital gains or reducing ordinary taxable income. The strategy isn’t appropriate for tax-deferred accounts like 401(k) or IRA accounts, because the original investment and earnings already grow tax-free in those accounts.

It’s all about balancing gains with losses. A capital gain occurs when you sell a security like a mutual fund or ETF for more than its purchase price. You would incur a capital loss if you were to sell an asset for a lower price than that at which you bought it. You don’t truly realize the gain or loss on any security as a taxable event until you sell it.

You’ll owe capital gains tax if you have a gain. Long-term capital gains on securities that are held for over one year are taxed at lower rates. A maximum rate of 20% applies, but most taxpayers will pay zero in capital gains tax or a 15% rate.

You’ll have a short-term capital gain if you sell a security you’ve held for one year or less. These are taxed at higher ordinary income tax rates.

How Tax-Loss Harvesting Works

Suppose you invested $1,000 in Fund A and $1,000 in Fund B two years ago. Fund A is now worth $1,500, and Fund B is worth $500. You’ll realize a $500 capital gain on Fund A and a $500 capital loss on Fund B when you sell. The gain and loss would offset each other, so you wouldn’t owe any tax.

Now suppose that you invested $6,000 each in Fund A and Fund B, but Fund A is worth $7,000 now, and Fund B is worth $2,000. You would have a capital gain of $1,000 and a loss of $4,000. This would result in a net loss of $3,000. You wouldn’t owe any tax on the gain. You could also reduce your taxable income by that $3,000.

What It Means for Individual Investors

Tax-loss harvesting isn’t without its potential pitfalls:

• Be aware of the “wash-sale” rule. Some investors like to buy back the same fund that they earlier harvested or sold, but the IRS rule surrounding wash sales stipulates that you can’t deduct the loss if you sell a security at a loss and buy a “substantially identical” security within 30 days before or after the sale. An exception applies if you incurred it in the course of doing ordinary business.
• Don’t confuse tax-loss harvesting with capital gain distributions, which are those that a mutual fund pays from its net realized long-term capital gains. You can use losses to offset these capital gains distributions, but you can’t use them to offset distributions of net realized short-term capital gains. These are treated as ordinary dividends rather than capital gains.
• A wise investor can also reduce taxes in a regular brokerage account by reducing income from dividend-paying mutual funds and taxes from capital gains distributions through a strategy called “asset location.” You can place tax-efficient investments that generate little to no income within taxable accounts.
• Tax-loss harvesting is a year-round activity. It’s often a year-end investment strategy. A savvy investor should be mindful of all fund purchases and sales throughout the year. Make investment decisions based on financial objectives, not market whims.

Do I Have to Pay Capital Gains Tax?

You’ll only pay capital gains tax on “net gains,” which are your gains minus your losses. You can use a capital loss to offset a capital gain if your gains exceed your losses. You can reduce your taxable income by the lesser of $3,000 or your total net losses if your losses exceed your gains during the tax year. You can only reduce your taxable income by up to $1,500 in losses if you’re married and file a separate tax return.

An investor can carry forward and apply any unused losses to future tax years if net losses exceed $3,000.

Definition and Examples of Amortization

Amortization is the way loan payments are applied to certain types of loans. Typically, the monthly payment remains the same, and it’s divided among interest costs (what your lender gets paid for the loan), reducing your loan balance (also known as “paying off the principal loan”), and other expenses like property taxes.

Your last loan payment will pay off the final amount remaining on your debt. For example, after exactly 30 years (or 360 monthly payments), you’ll pay off a 30-year mortgage. Amortization tables help you understand how a loan works, and they can help you predict your outstanding balance or interest cost at any point in the future.

How Amortization Works

The best way to understand amortization is by reviewing an amortization table. If you have a mortgage, the table was included with your loan documents.

An amortization table is a schedule that lists each monthly loan payment as well as how much of each payment goes to interest and how much to the principal. Every amortization table contains the same kind of information:

• Scheduled payments: Your required monthly payments are listed individually by month for the length of the loan.
• Main repayment: After you apply the interest charges, the remainder of your payment goes toward paying off your debt.
• Interest expenses: Out of each scheduled payment, a portion goes toward interest, which is calculated by multiplying your remaining loan balance by your monthly interest rate.

Although your total payment remains equal each period, you’ll be paying off the loan’s interest and principal in different amounts each month. At the beginning of the loan, interest costs are at their highest. As time goes on, more and more of each payment goes toward your principal, and you pay proportionately less in interest each month.

An Example of Amortization

Sometimes it’s helpful to see the numbers instead of reading about the process. The table below is known as an “amortization table” (or “amortization schedule”). It demonstrates how each payment affects the loan, how much you pay in interest, and how much you owe on the loan at any given time. This amortization schedule is for the beginning and end of an auto loan. This is a $20,000 five-year loan charging 5% interest (with monthly payments).

month	Balance (Start)	Payment	Major	Interest	Balance (End)
1	$20,000.00	$377.42	$294.09	$83.33	$19,705.91
2	$19,705.91	$377.42	$295.32	$82.11	$19,410.59
3	$19,410.59	$377.42	$296.55	$80.88	$19,114.04
4	$19,114.04	$377.42	$297.78	$79.64	$18,816.26
. . . .	. . . .	. . . .	. . . .	. . . .	. . . .
57	$1,494.10	$377.42	$371.20	$6.23	$1,122.90
58	$1,122.90	$377.42	$372.75	$4.68	$750.16
59	$750.16	$377.42	$374.30	$3.13	$375.86
60	$375.86	$377.42	$374.29	$1.57	$0

To see the full schedule or create your own table, use a loan amortization calculator. You can also use a spreadsheet to create amortization schedules.

Types of Amortizing Loans

There are numerous types of loans available, and they don’t all work the same way. Installation loans are amortized, and you pay the balance down to zero over time with level payments. They include:

Auto Loans

These are often five-year (or shorter) amortized loans that you pay down with a fixed monthly payment. Longer loans are available, but you’ll spend more on interest and risk being upside down on your loan, meaning your loan exceeds your car’s resale value if you stretch things out too long to get a lower payment.

Home Loans

These are often 15- or 30-year fixed-rate mortgages, which have a fixed amortization schedule, but there are also adjustable-rate mortgages (ARMs). With ARMs, the lender can adjust the rate on a predetermined schedule, which would impact your amortization schedule. Most people don’t keep the same home loan for 15 or 30 years. They sell the home or refinance the loan at some point, but these loans work as if a borrower were going to keep them for the entire term.

Personal Loans

These loans, which you can get from a bank, credit union, or online lender, are generally amortized loans as well. They often have three-year terms, fixed interest rates, and fixed monthly payments. They are often used for small projects or debt consolidation.

Credit and Loans That Aren’t Amortized

Some credit and loans don’t have amortization. They include:

• Credit cards: With these, you can repeatedly borrow on the same card, and you get to choose how much you’ll repay each month as long as you meet the minimum payment. These types of loans are also known as “revolving debt.”
• Interest-only loans: These loans don’t amortize either, at least not at the beginning. During the interest-only period, you’ll only pay down the principal if you make optional additional payments above and beyond the interest cost. At some point, the lender will require you to start paying principal and interest on an amortization schedule or pay off the loan in full.
• Balloon loans: This type of loan requires you to make a large principal payment at the end of the loan. During the early years of the loan, you’ll make small payments, but the entire loan comes due eventually. In most cases, you’ll likely refinance the balloon payment unless you have a large sum of money on hand.

Benefits of Amortization

Looking at amortization is helpful if you want to understand how borrowing works. Consumers often make decisions based on an affordable monthly payment, but interest costs are a better way to measure the real cost of what you buy. Sometimes a lower monthly payment actually means that you’ll pay more in interest. For example, if you stretch out the repayment time, you’ll pay more in interest than you would for a shorter repayment term.

note

Don’t assume all loan details are included in a standard amortization schedule. Some amortization tables show additional details about a loan, including fees such as closing costs and cumulative interest (a running total showing the total interest paid after a certain amount of time), but if you don’t see these details, ask your lender.

With the information laid out in an amortization table, it’s easy to evaluate different loan options. You can compare lenders, choose between a 15- or 30-year loan, or decide whether to refinance an existing loan. You can even calculate how much you’d save by paying off debt early. With most loans, you’ll get to skip all of the remaining interest charges if you pay them off early.

Key Takeaways

• Amortization is the process of spreading out a loan into a series of fixed payments. The loan is paid off at the end of the payment schedule.
• Some of each payment goes toward interest costs, and some goes toward your loan balance. Over time, you pay less in interest and more toward your balance.
• An amortization table can help you understand how your payments are applied.
• Common amortizing loans include auto loans, home loans, and personal loans.

Thanks for your feedback!

Definition and Examples of an Insurance Declaration Page

The insurance declaration page It is part of your insurance policy. It comes at the front of your paperwork and adds up the key data about your insurance.

• Alternate name: Policy declarations page, declarations page
• Acronyms: DEC page, dec page

For example, you would receive a declarations page when you purchase a new car insurance policy.

How Does an Insurance Declaration Page Work?

The insurance declaration page is part of your policy. You will get it once your policy is issued. It comes after the binder of insurance and you should have the same data that was sent to you in the binder of insurance.

Despite the name, the document may be longer than a single page. Depending on the details of your coverage, it may span many pages. You should get a new page every time you buy or renew a policy.

The dec page is a key part of your policy. It shows:

• The main coverages that lead to how a claim will be paid
• The limits for each section
• The premiums charged
• Who is insured and what is covered

The dec page contains all of the key information about your contract, including what or who is covered, how to file for a claim, and other details. You should review the dec page in detail to make sure that it is correct.

Common problems found on insurance dec pages may include:

• Errors such as a typo in a name or address
• The wrong type of coverage (for instance, a named perils policy instead of an open perils policy)
• Incorrect deductibles
• Incorrect coverage amounts
• Missing riders
• Missing discounts

All of the things you asked for or agreed to when accepting your new policy should be on the dec page. Any errors can make it hard to file a claim. If you find any, contact your agent to have them fixed.

Once you are done looking over your policy, keep your dec page in a safe place, as it is part of your contract.

What Does an Insurance Declaration Page Cover?

An insurance declaration page will sum up the key data from your policy, which should include:

• The policy number
• Name and address of the policyholder
• Whom and what is covered
• The insurer name, address, and contact info
• What type of coverage the policy includes
• Limits and deductibles
• Endorsements
• How long the policy is valid for
• Discounts and surcharges
• Cost of the insurance, often divided into payments
• Other named insureds, such as banks
• Limits of liability

Many declaration pages will also include the process of how to file a claim. If this is not on the dec page, it should be listed in a separate part of your paperwork.

Why Do You Need an Insurance Declaration Page?

In some cases, it’s helpful to have your insurance dec page on hand. In others, it’s required.

For instance, when you shop for insurance, having your dec page on hand makes it easy to compare products, and when you switch insurers, your new company will want proof of your current coverage.

If you have a loan on any insured property, the lender may require a copy of the dec page. For instance, your auto lender may ask for it, because the dec page will say what and how much coverage your car has, while your insurance ID card will not. The dec page will also show the lender who is listed as loss payee and/or additional insured on the policy. The mortgage company on your home may require the dec page for your homeowner’s insurance as well.

Many times, your insurer is the one that sends your dec page to the lender, but sometimes it gets lost, and you will need to provide a copy.