For people who have already achieved both of the things in the title, this is going to seem like a painfully obvious article. But for people who have never really had much in the way of possessions and money, this may not be something they’ve totally appreciated before.
Having stuff can go a long way in getting you more stuff. This is the basis of credit and equity. These two processes are very closely intertwined. But because most people don’t take advantage of them, it’s clear that most people don’t understand them.
So I’m here to toot my horn and spread the word. Get this stuff right, and you’ll have a much better life, financial and otherwise.
What is ‘equity’?
Equity is about owning the big stuff in your life, not just renting it. When you buy your house, you’re paying for it a little at a time. Unlike back in the days when you were a renter, that money you spend stays with you. You can’t spend it, but you keep it in what is called Equity. Equity is the percentage of your house that you own. When you pay off your mortgage, you have 100% equity in the price of your home. The same goes for your car, on a smaller scale.
But one cool thing about equity is that you can borrow against it. The equity acts as collateral, and it’s some of the best collateral you can get. Because lenders know that you’ll be VERY motivated not to lose your house or car, they’ll issue you equity loans at lower rates than other kinds of loans.
So you own your car, you get $2000 loaned to you at a low rate, and you work hard to pay it off quick so that you don’t have to worry even a little bit about your car getting taken back by the creditor. The same goes for home equity loans.
The process normally goes really smoothly, allowing you, the owner, to spend the loan on other stuffs that can make you more money in the process. That’s one of the snowball effects of asset ownership.
Equity vs. credit
But this is where equity bumps up against credit. Because you were issued a very low interest car equity loan in the example above, with a company like usacartitleloans.com, you will save money in the long run over a loan in the same amount but at a higher interest rate. Let me break that down.
Let’s say you own nothing. You’re leasing your car and renting your home. But you need a loan. Because you have no valuable property, your lender has to assume that you might default on the loan. So they give you the loan at a much higher interest rate than they give the guy who owns his house and car, because he clearly has wealth enough to be a lower default risk.
Over the years, the person with the lower interest rate will pay thousands, or tens of thousands, or hundreds of thousands, less on a loan of the same amount than the person with the high interest rate. In the meantime, they’ll have lots of extra money to spare to spend on more assets and other things.
It’s another snowball effect, one that favors people with good credit and valuable property. This isn’t easy for people to develop, but it’s worth it. So buy your house (especially at these historically low interest rates) and your car. They’ll build other opportunities for you – if you know what you are doing.
Get the proper information and be sure you understand how to use debt into a good use (namely “good debt”)instead of buying useless gimmicks (namely “bad debt”)
As always, don’t take my words for it. Please consult with your trusted financial adviser on how to use your assets to acquire more assets.