Home Equity Lines Of Credit: Pros And Cons

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A home equity line of credit is similar to a second mortgage. The difference between a home equity loan and a home equity line of credit or HELOC is mainly the way the loan is given. Homeowners cash in on their home and finance their dreams with the help of a HELOC at low interests rates.HELOC has its pros and cons. Most of these loans have very little or no closing costs. This results in lower monthly payments compared to fixed interest rate loans. The variable mortgage interest rates are usually much lower than the standard fixed interest rates loans. Customers pay the interest only on the money used and not on the entire loan amount. The remaining unused balance of the equity line can be used as an emergency fund. These are some of the pros of HELOC a borrower can enjoy.On the flip side, HELOC have a lot of disadvantages. The interest rates are not fixed and they may fluctuate. Most lenders charge borrowers a yearly fee for their services. Many lenders exploit the borrower, especially senior citizens, minorities and people with bad credit. They are more susceptible to the lender?s abusive and exploitative strategies. Customers need to do a lot of research before selecting a particular lender.It is also essential for customers to submit all valid documents to the lender for verification and authentication. They should check whether they have enough income proof to make the repayments in time. All the terms and conditions have to be read carefully to identify the fine print of the loan agreement. Many borrowers end up signing agreements with many hidden clauses and charges.

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