What is a HELOC and why should I have one?

helocHELOC’s have become over the last couple of decades a lending staple for consumers that own their primary residence for many reasons. What the heck is a HELOC, you ask.

First, let’s clear up what a HELOC stands for. HELOC is an acronym for Home Equity Line of Credit.   A HELOC is a consumer loan line of credit product that is typically secured by a primary real estate residence. Most often a HELOC is secured by a 2nd mortgage and the line amount is determined on the value of your home less the amount owed on your existing 1st mortgage and the repayment ability of the homeowner. The line is typically available for any discretionary spending needs of the homeowner and the amount available to use depends on the level of repayment by the borrower. Many HELOC’s require monthly payments of just the accrued interest due on the amount owed.

Now, the big question. If I’m a homeowner with equity in my home, why do I need a HELOC? While everyone’s situation is unique and their specific needs change over time, here is a bullet point list of the benefits that makes the HELOC such an attractive product for most homeowner’s.

  • Let’s leadoff with the big one. Currently, all interest paid on a HELOC that is secured with a mortgage on your residence is tax deductible.   No other consumer debt product that offers discretionary spending through a line of credit offers this important benefit. Credit cards do offer benefits for short term discretionary spending needs if you are planning on paying the incurred debt off quickly, but for your purchases with a longer repayment schedule, the tax deductibility feature offers a huge potential benefit.
  • The HELOC typically has an interest rate that is usually much lower than most credit cards. The rate is typically variable, just like most credit cards, and like most credit cards the interest rate usually is tied to a bank or national prime rate.   Due to the tax deductibility feature of the HELOC, your actual tax affected rate can be even lower.
  • Once approved, a HELOC can be used for any discretionary spending needs. Depending on the amount available, it is always there for that home improvement project, that new car you have been putting off buying for a couple of years, or helping to pay that large student tuition coming up in the fall for your college-bound child. You will not receive a phone call from your credit card company asking about the purchase, or even worse, have the credit card cancel the purchase due to concerns about possible card fraud due to the significant size of the transaction.

If you have an interest in learning more about a HELOC and how it may meet your specific financial needs, your lending team at Lafayette Community Bank would happy to sit down with you at your convenience. We offer highly competitive terms on all of our consumer loan products and always strive to determine the best loan product that meets your financial need. Call any of our convenient banking centers and ask to speak to one of our many loan specialists today!

Things you need to know when starting a business

open-sign-2 First things first. We talk about our “Gross Domestic Product” or GDP. That is the total dollar value of all the goods and services produced by any country. In the United States our 2013 GDP came in at $16.8 Trillion. Not bad at all, and the good news is its growing. Small businesses contribute about 46% of all non-farm GDP in the United States. So it sounds like small business is the place to be in the United States. The United States is the land of opportunity, but there a few things all prospective business owners should know. Nationally, Bloomberg reports that 8 out of 10 new businesses fail within the first 18-months.   So, you have a 20% chance of being successful, the question is “What can I do to improve my chances for success?”

  • Know your prospective customer. What do they want, how do they want it, where do they want it. What motivates them to buy? Are they ready, willing and able to pay for what you are selling? The more prospective customers you talk to the better. You can interview friends and family, but you will not always get honest answers because they will not want to disappoint you. Talk to other small business owners, attorneys, and accountants—people you may not even know. Survey them. Collect honest opinions and feedback, you may find that you are trying to sell something or service that people may not be interested in or may already have, and therefore reluctant to change.
  • Understand your market. Is there market demand for my product or service? Is it consumable is the demand constant?   Who is the competition, where is the competition?   How big is the market, what is the opportunity? If you are trying to sell high-efficiency florescent light bulbs delivered to your door, consider what are the options, who else sells them online, or in store? How long does a high-efficiency light bulb last? Can I offer them at a comparable or even better price? Will the market pay what I am asking?
  • Product or Service Differentiation is Key. If your business is just like everybody else’s you are not going to attract attention or customers. More than likely you are going to have competition. If you do something just like everyone else, there is no incentive to try your brand, product or service. Give them a reason to try your business and when you have them give them a compelling reason to stay.

 

  • Know your value proposition. You should know this by heart and be able to tell customers what it is, easily and succinctly. If you have trouble telling customers what this is, take this as a sign. Think about branding campaigns of the past and how well they work. “There’s a lot riding on your tires.” This is a famous Michelin ad featuring a child wrapped by a tire. Michelin tires are really expensive when compared to other brands, but no one puts a price on the safety of their kids. Michelin pulls that emotional cord and it works. The new Subaru ads are the same way. The cars are well known for safety. In their ads today they show the cars being passed down to young drivers who have been protected by that very car. Or they have ads showing the car after an accident and the family is fine. Again they are making an emotional appeal. Subaru’s are not inexpensive cars and they are built really well. People don’t mind paying for quality and safety. The key is knowing what motivates people to buy the product or service you are offering.

 

  • Prepare a business plan. This is imperative. #1., #2., #3., and #4., all need to be included. You must also know exactly how much it’s going to cost to start the business and how you plan to fund it. In banking it’s called Sources and Uses. In other words, what are my sources of funding and what will the funds be used for? You also need to include a projection of revenue and expenses by month for the next 3-to 5-years.   Include all the assumptions you used to construct the projection. Tie the revenue back to: how many will I sell? Identify the market and how much of it you plan to take. Illustrate the number potential customers and how you reached that number. Talk about pricing and how price was set. Tie the cost of goods sold back to vendors and suppliers, and use confirmed bids and prices. Back up all your expenses with data, i.e., how much rent, utilities, insurance, advertising, utilities, legal, wages, etc., all cost and go over your plan with trusted advisors. SCORE is a great place to start and they are a part of our local Chamber of Commerce. You can also talk to bankers, accountants, attorneys or other business owners you may know.
  • Capital: This came up in #5. It’s very difficult to start a business without capital. It’s equally hard to sustain a business with inadequate capital. In most cases, the new business owner must look to their own savings, family or friends for the “seed capital” to start their business. Bankers have a tendency to look for businesses that have a demonstrated track record. Simply put, bankers look for the existence and sustainability of revenue stream that sufficiently covers all expenses plus any required debt payments. The best time to develop a capital plan is before serving notice to your current employer and launching your new business.

There is much to think about and consider! Entrepreneurs with a vision and a plan started all businesses at some point and time—we see them all over our community.   Recently we launched a new business incubator known as “Match Box” to help promote the exchange of ideas and approaches so that a wider audience might benefit.   In summary, new small businesses are a key driver of our local and national economy. We welcome small business owners at Lafayette Community Bank, we strongly believe in investing right here in Tippecanoe County. Come and see us today or give us a call!

Identity Theft: Things to do to protect yourself

identitytheft

Identity theft affects millions of people every year, but there are several simple things you can do to help protect yourself.

  • Shred your bills, receipts, financial statements or any record with your name address or birthday with a crosscut shredder.
  • Review your bank statements, annual social security earnings statement and your annual credit report for abnormal activity or changes.
  • Your wallet and purse are a big target for thieves. Empty your wallet of all extra credit cards, social security cards, birth certificate, passport, identification cards you don’t need on a weekly basis, as well as receipts and credit card statements.
  • Be careful using an ATM’s or prepaid phone card. “Shoulder surfers” can get your “pin” and get access to your accounts.
  • Protect your mail. Identity thieves are always on the lookout for incoming mail just sitting in your mailbox. Have your checks delivered to the bank or pick your checks up at the bank. Do not put checks in the mail from your home mailbox. Drop them off at a U.S. Mailbox or the U.S. Post Office. Get your mail as soon as possible. If you are going away, arrange for a trusted friend to pick up your mail.
  • Always log out of websites you shop or bank on.
  • Erase financial programs and stored information from your computer’s hard drive and your old cell phone before you dispose of them.
  • Create strong passwords that use a combination of letters, numbers and symbols, and avoid using the same password and username for multiple accounts.
  • Cancel all credit cards that you do not use or have not used in 6 months. Thieves use these very easily—open credit is a prime target.
  • Do not put your telephone numbers on your checks.
  • In conjunction with a credit card sale, do not put your address, telephone number, or driver’s license number on the statement.
  • Make a list of all your credit card account numbers and bank account numbers with customer service phone numbers and keep it a safe place. (Do not keep it on the hard drive of your computer if you are connected to the Internet.)

While Identity theft is a growing and serious problem, you will never completely eliminate the risk. These are a few suggestions that will help you significantly reduce your exposure and risk to Identity theft.

Bank Community Involvement

Community InvolvementLafayette Community Bank owes its very existence to the Greater Lafayette community. Founded in 2000, local business owners and community leaders came together to start a new bank. Our primary focus then, and now, is to provide banking services to the community we call home.

There is a quote by John F. Kennedy that says, “To whom much is given, much is expected.” The Greater Lafayette community has entrusted us to safeguard their deposits, and they trust that we will reinvest those deposits for the betterment of our community. That requires a high level of trust and confidence.   We return that trust and confidence every day in the form of loans and financial services that benefit our customers and our community at large.

But that’s not quite enough. We believe that we must make tangible contributions to the community we serve.   We have a philosophy that promotes and encourages volunteerism. We have a total of 40 employees at our bank, and in any given year we have over half of our employees involved and participating in organizations throughout our community.   We also provide monetary support. In the last 13-years we have contributed over $250,000 to local organizations. From United Way, to March of Dimes, to Almost Home Humane Society, local schools, youth sports, and the Honor Flight just to name a few. Every year we support nearly 70 different organizations or charities in our community.

We do this because it’s the right thing to do. We are proud members of this community, and we plan to be for many years to come. We have been given the opportunity by all of you to become your community bank, and serving and supporting our community is our way of saying thank you. We are honored to provide banking services in what we believe to be the greatest place to live in Indiana—the Greater Lafayette community.