Home Equity Loan 101 – Class in Session!


It’s not just in the United States that equity within the home is used or leveraged to derive large sums of cash from, it’s everywhere around the world! However, there is certain aspects of the home equity loan that fully separate it from the vast amount of other loans out there and this is what makes it special, lets examine!Specifically, we’ll compare the overall value and risk as compared to various borrowing modalities and their additional downside potential. Firstly, a major competitor (even though many don’t consider this as being one) is credit cards. This is the most popular way of borrowing on earth and the overall worst for the consumer, if not paid back in full monthly.Merely comparing the interest rates is all that is needed here, as home equity loans ‘destroy’ credit cards in this area by a whopping 12-20%! Although, you are using your home as collateral, your rate is usually rock bottom in comparison. What about standard personal loans?These loans are usually also ‘less your collateral’ and this means that the risk is heightened for prospective lenders! Also that means a higher rate of interest (usually 20-50% higher than HEL) and terms less favorable for borrower.
Another major product utilized in the ‘real world’ quite often in terms of loans is the payday loan. This note is the least generous in terms of how much you can obtain, and the rates have been known to eclipse credit cards if you ‘tangle’ with the wrong lender!With the equity loan, your rates are very attractive usually (even with lower FICO scores) and your terms can be also extremely flexible. How? You can obtain a fixed second mortgage home equity loan or a home equity line of credit whereby your withdrawing as needed without a fixed amount.The credit line is either a grouping of actual checks or even a credit card you can use that the bank issues you after being approved where your control is paramount! Furthermore, the home equity mortgage loan can be kicked out to as much as 30 years and you can’t say that about many others.Evaluate the current home equity loan rate as it will effect your overall savings when borrowing, but take comfort in knowing that it’s usually the ‘cheapest’ money on the market and is still very easy to acquire!