Home Equity Loans - Basics You Need To Know
Monday, February 14, 2011
A home equity loan represents the money you borrow from a money dealer that you are willing to secure with around seventy percent of the value of your house. Therefore, the equity does not reflect the entire value of your house, but rather the amount you already paid for it. What this means is that you will need to satisfy certain conditions if you want to apply for these loans. If you get an approval, then you will be able to ask for a sum that does not exceed that sum of money you already paid.
The home equity homes are very dangerous and you should always think twice before asking for one. Because you are putting your home at stake, one of the first things that you should consider is whether you are able to make at least the minimum payments every month. Although many of the lenders do not approve offering home equity loans to people that do not have a stable job, you should take this unfortunate situation and other unexpected events into account. For example, if you know that your company is making massive lay offs in another part of the country, then maybe it is better that you find another method to get some money.
However, if you decide that you need that home equity loan, then you should know that one of its biggest advantages is that it provides low and fixed interest rates. Furthermore, these loans require more than ten years to repay and you can benefit from tax deductible interest rates if the collateral is your primary residence. The trick is to read the documents for the loan before you sign it, so that you do not get additional fees or a lot of other upfront costs.
Similar to the credit cards, these loans are basically lines of credit that you can use any way you choose to. However, unlike the credit card where the main risk is accumulating debts if you spend it unwisely, the risks involved in a home equity loan are much higher, as you are borrowing additional money and you can end up losing your home and having to pay debts. Their main benefit compared to credit cards is that they have a considerably lower interest rate, as it is considered a secured debt.
