A convenient and easy means of borrowing, home equity loans have gained enormous popularity in recent years. Since their conception, people in need of constant credit have increasingly preferred them.Home equity loans refer to the credit people borrow against the equity of their home, keeping the home as collateral. Such credit helps to turn our equity into cash, enabling us to spend on home improvements, college education, medical expenses, or to consolidate debts.Interest rates are variable, changing every month in tune with the prime rate or the index. The prime rate refers to the interest rate published in some major newspapers or a US Treasury Bill rate, which is the base rate for all companies in the country. With this base rate, companies charge a margin which is different for all companies, making interest rates differ from one company to the other.Equity varies, as it indicates the difference between the estimated value of a home and the outstanding mortgage against it. Hence, depending on the home value and outstanding loans, lenders or credit institutions grant a credit line.Besides this, other factors come into play. In determining our actual credit line, lenders also consider our ability to pay, by researching our incomes, debts, and credit history, besides other things.Bureaus compile essential information on our name, social security number, credit history, public records, and even a list of all financial inquiries made. All this information is then boiled down to a credit score, or FICO score.The costs for establishing and maintaining a home equity loan line of credit amounts to around 2% to 5% of the loan. It includes fees for property appraisal, title search, attorney or title agent, and preparation of the document, besides other things. Additional costs include transaction fees levied by some companies, annual maintenance fees, and others. Access to credit is possible by checks, credit card, or electronic transfer.Available for different time periods such as 5 years, 10 years, or 15 years, with easy access and revolving credit, a home equity line of credit is an extremely useful and convenient means of borrowing for any need.
