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Understanding Home Equity Loans

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									Title:
Understanding Home Equity Loans


Word Count:
501


Summary:
Almost any given day of the week there’s a good chance you’ll see at least one advertisement for a home
equity loan on television. They are certainly growing in popularity. How do they work; however, and are
there any benefits in them for you?



Keywords:
loans, home, equity, secured, improvements, property, house, interest, value, charges



Article Body:
Almost any given day of the week there’s a good chance you’ll see at least one advertisement for a home
equity loan on television. They are certainly growing in popularity. How do they work; however, and are
there any benefits in them for you?


Basically a home equity loan allows you to borrow money using your home as collateral as long as you have
paid down the original home loan so that you now have equity built up in the home. Let’s say you originally
bought the home for $100,000 and have paid that loan down to $75,000. The home has also appreciated in
value and is now worth $125,000. You could potentially take out a home equity loan for $50,000.


There are definitely some advantages to home equity loans. One of the most important is that you can
usually obtain a lower interest rate on a home equity loan than many other types of loans. In addition, even
if you have problems with your credit, you can probably still qualify for a home equity loan because you’re
using the equity you’ve built up in your home as collateral. In addition, the interest you pay on the loan is
typically tax deductible. Finally, unlike other types of loans in which you may only be able to borrow a
small amount, with this type of loan you usually borrow far more.


Individuals who are considering large purchases often find home equity loans to be quite attractive. Such
expenses might include the purchase of a vehicle, remodeling expenses, vacation, medical or education
costs. In some cases, it can also be beneficial to consolidate debts that carry a high interest rate and pay them
off with a lower interest home equity loan.


Like most everything else in life; however, there are some disadvantages to a home equity loan. One of the
most important is that if you cannot meet the new payments for the loan, you could be at risk of losing your
home. In addition, as more and more home equity loan lenders pop up, it has become increasingly apparent
that some are being run by conmen who are only out to make a quick buck. Be sure to always check out any
lender you consider with the Better Business Bureau to make sure they are actually legitimate.


Of course, the large number of lenders offering home equity loans today can actually be a positive factor for
you because it means you have more bargaining power in terms of shopping around for the best rates.


Still not sure whether a home equity loan is right for you? Always make sure you are getting the best quote
possible and ask yourself whether the reason for the loan is worth the risk you may be taking. If you feel that
it is and you are confident you will be able to meet the payment schedule without becoming overburdened
financially, start by doing your research first to ensure you have all of your bases covered.




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