You have surely heard about debt consolidation through home equity. Many debt advisors suggest applying for an equity loan in order to use the money to pay off consumer credit card debt. Though the idea of reducing debt by unifying the payment and replacing unsecured debt with a secured loan may sound tempting, there are other factors that should be considered. There is a big question mark as to the convenience of resorting to loans to pay off consumer debt.What Is The Purpose?Via obtaining one of these loans you can get enough funds to cancel outstanding consumer debt. When compared to credit card debt. These loans provide cheaper financing because the interest rates charged are more than significantly lower. Therefore, you would be exchanging expensive debt for inexpensive debt thus reducing the amount of your monthly payments by up to 60% or even more.Moreover, your debt will be unified into a single loan with a single monthly payment. It all seems very promising as you obtain a debt reduction and simplify your bills too. However, not all debt advisors agree about this. Though most of them admit that there are benefits to be obtained from consolidating with these loans, there are also many among them that point out that the drawbacks can overrun the benefits.What Are The Objections?The main objection about exchanging consumer debt for a home equity loan or line of credit is that by doing so you are paying off credit card debt which is unsecured with a secured form of finance. This implies that you are increasing the risk for you and decreasing it for the lender. Why? Because the lender now has an asset that can be subject to foreclosure in case you fail to repay the money owed.The property that provides the equity is used as collateral for the loan thus, securing its repayment. This extra assurance is what helps you obtain a lower interest rate and more flexible loan conditions. But, in turn, it risks your property which can be sold in a public auction in case you default on the equity loan. Advisors point out that if you are currently unable to afford your monthly payments, chances are that you may fail to afford the loan payments too and collecting will be a lot easier for the lender with a secured form of financing.Is It Advisable Or Not?As usual, there is a bit of truth on both sides. You can really free up a lot of cash by consolidating your consumer debt with a home equity loan but the consequences can be disastrous if you fail to repay the loan. The asset can be subject to foreclosure and it is also true that unsecured debt can be negotiated with the lenders or credit card issuers to obtain similar or equal results than with consolidation.However, what these advisors fail to point out is that the lenders have legal actions to recover their money even if the debt is unsecured. It may be more expensive and it may take longer but they can still endanger your property by taking legal actions to recover their investment. Therefore, the use of home equity to pay off credit card debt should be considered as an option but taking the necessary precautions. You should just make sure that the resulting payments will not imply too many sacrifices and put your property at risk.
From time to time, everyone needs to borrow money. Whether it is for educational expenses, home repairs or remodeling, or purchasing a major appliance, the ability to borrow money is one of life’s little necessities. For those with unappealing credit files, however, the task at hand may not be that simple. However, if you have bad credit but you own your own home, you can use the equity that you have built up in your home over the years to receive a bad credit homeowner’s loan.A bad credit homeowner’s loan can essentially be considered another mortgage on your home. You will need to find a lender that is willing to add another mortgage onto the existing mortgage that you have; you do not have to stick with the original lending institution that holds your first mortgage, either. There are many lenders who only service bad credit homeowner’s loans. In fact, most of the best bad credit homeowner’s loan creditors are established online.Put Years of Expertise to Work For YouThese online lenders have years of writing these types of loans under their belt. They have both the resources to provide funding and the expertise to work with you to get a rate on your bad credit homeowner’s loan that you can afford.To apply for your bad credit homeowner’s loan, you will fill out a secure application on the lender’s website. The application is easy to complete; however, any difficulties you might have can be dealt with only a mouse click or phone call away.Loans in Any AmountYou can ask for any amount that you need. Most bad credit homeowner’s loans are between $5000 and $20000. You can ask for more or less, depending on your needs. Another factor to consider when selecting the amount that you wish to borrow is how much money you need and how much can you afford to repay each month, according to your income and budgetary constraints.There is a lot of competition online for bad credit homeowner’s loans. This works to your advantage because online lenders can typically offer a better interest rate than your local bank in your hometown, or even your credit union. Online lenders also have higher approval rates.Further, unlike a traditional bank that is vested in stern criteria to qualify individuals for loans, the online bad credit homeowner’s loan servicers have more relaxed policies. They also treat borrowers with respect. They have dealt with many borrowers who need nothing more than a second chance to make up for past mistakes, and they offer that wholeheartedly. When the little guys (at your local bank) say no, these big guys say yes.When you receive your bad credit homeowner’s loan, make it your number one priority to become a better borrower and good steward of your credit. By honoring the terms of your loan agreement, you do your credit report a world of good while saving yourself money on interest in the future.
Over the years, you have been a faithful steward of your mortgage. But the time may have come when you need to borrow money now for things you need to purchase. A great way to fund your purchases is to cash out the equity in your home with a home equity loan.Money You Need NowA home equity loan uses the built up equity in your home to give you the money you need to buy things like major appliances or electronics, or to build on to your home, adding a room or other addition. You might use it to pay for your next vacation, or to pay for education for yourself or your children. Purchasing an automobile is also a great use for it. Whatever your needs are, your home equity loan can be a great way to find financing.The way that it works is simple. You will be putting the equity in your home up against the money that you borrow. The lender will place a lien against your home until you have paid the loan in full. It is important to remember, however, that if you default or fail to follow the terms of your loan that the lender can foreclose on your home just as the holder of your mortgage can.Borrow Amount Equal to Your EquityThe amount that you are eligible to borrow on your home equity loan is typically equal to or less than the amount that you have built up in home equity. For example, if the total that you have paid thus far on your mortgage is $100,000, you can generally borrow up to $100,000. Borrow only what you need, but borrow as much as you need – homeowners usually are approved for just one equity loan over the course of their mortgage.Huge Tax SavingsHome equity loans are superior to other types of consumer loans because the interest that you pay can be taken as a tax deduction when you file your income taxes each year. This can add up to substantial tax savings over the life of your home equity loan. Remember, however, that if you do not qualify to itemize because you don’t have enough deductions (which means that you always take the standard deduction) then you will not realize this savings each tax year.Further, the tax break limit for claiming home equity loan interest is $100,000. Any amount that you borrow over the $100,000 limit will not be eligible for this credit. The tax savings that you can get on your loan can make the money you borrow end up costing you close to zero percent in interest charges once you have received your deductions!The best place to get your home equity loan is on the Internet. There are many fine online lenders who can get you the money you need from the convenience of your own home. With user-friendly websites and great customer service, these lenders make it easy to get the money you need.
You may have taken out a home equity line of credit to help you cover the expenses of life – anything from adding an additional bedroom to your home to putting your twins through four years of grad school. But if you suddenly received a letter stating that your home equity line of credit has been frozen, you are probably wondering where to turn next.Most home equity credit lines bear the stipulation that the creditor can freeze your line under situations that are outlined in Regulation Z, under the Federal Reserve Board’s codes. For many home equity lenders, this is interpreted as being able to shut you off from your available line of home equity credit if market conditions in your area make the value of your home decline, or if your income has been reduced to where they feel you are at great risk of defaulting on payment to them for credit already extended.Get Around Regulation ZYou have several options. You can argue with your lender to attempt to persuade them to reinstate your credit line. You can back up your argument by pointing out your good payment history (if payments have come due under your agreement); or by listing homes in the area that have recently sold at or above market value. Discussing the freeze with customer service for your lender has a small, but not impossible, chance of getting your credit line unfrozen.Your best option is to vote with your feet by choosing a different lender. True, you may have to pay additional closing costs over what you have already paid for your current, now-useless credit line, but you can switch lenders.In fact, there are online lenders who deal very effectively with taking on borrowers who have had a frozen credit line. With less strict stipulations regarding market values, these lenders can refinance your current line while making the additional credit you need available to you.Apply Online For the Credit Line You NeedTo apply, you will need to gather all the information pertinent to your current home equity line of credit. Visit the lender’s secure online site where you can begin the application process. You will be asked to verify certain things – like your income, employment, etc. Most of the needed documentation can be either emailed or faxed to the new lender.As with a your original home equity line of credit, your new credit line will allow you to use your home equity line of credit for up to twenty five years. At the end of that period, you will have the opportunity to renew your credit line, or begin repayment. Oftentimes, you can pay during the time that your home equity line of credit is open; this greatly reduces the amount that you will owe at the end of the term.If you have had your home equity credit line frozen, voting with your feet by choosing a new lender can not only make a bold statement to the lender that you have other options, but can also save you money by the possibility of getting better rates online.
Owning a home opens many doors in the financial world. Tenants and non homeowners might sometimes have a hard time getting the kind of finance they need due to the lack of security for the lender. They will more often than not find themselves in the need of an excellent credit score and a spotless credit history in order to obtain a loan. We all know this is not realistic, not everyone has a credit score of 800 and has never missed a payment. So bad credit tenants and non homeowners will have to settle for a sky-high interest rate loan with less than favourable terms.Provided that you are a homeowner, you have many different alternatives when it comes to obtaining finance. No matter what type of loan you are looking at and no matter what credit range you have. The sole factor of you owning a home presents a security blanket for the lender. If you default on the loan, the lender will be able to seize your property to make up for the money loss.As a homeowner, you have, or have been building, what is called equity on your home. This represents the true value of your property, minus the outstanding mortgage balance. For example, if your house is worth $100,000 and you still owe $50,000 worth of mortgage loan, the equity on your home will go up to $50,000. Once you finish repaying the mortgage loan, your equity will be worth $100,000.Home Equity LoansHome equity loans have become very popular in the last few years because they are extremely versatile and easy to get approved for. They provide the applicant with the chance to obtain a loan on excellent terms by pledging their home as a security for the loan. Of course that individuals should be fully aware of the consequences that may arise from defaulting on this loan: their homes might be lost. But leaving this aside, home equity loans are usually a great funding choice if the risks are taking into consideration and applicant can afford to repay the loaned money.Home Equity Lines Of CreditThere is an alternative to the common home equity loan and it is called a “Home equity line of credit” or HELOC, for short. This option works like the regular equity loan in terms of security for the lender and interest rate terms, but carries one major difference: it is a revolving credit, very much like a credit card but with better terms. You will be able to take as much money as you need within the specified limit and then repay it on a monthly basis. Once you repay the amount of money you withdrew, you will be able to withdraw money again.A line of credit is perfect for those who need finance for a varied number of expenses, but who do not exactly know how much money they will need in the long run, or will not need a large amount of money. With this alternative, you only pay interests on the money you use.Many homeowners have benefited from this amazing financial product as the obtained money can be put to any use whatsoever.
Working as a financial consultant, I get hundreds of emails and calls everyday inquiring about many different financial products. I have noticed that home equity loans are a very common source of doubt for my customers. As regards home equity lines of credit… well, let us just say that great many people do not even know of their existence. It is a real pity that these products are not better known because they are incredibly versatile as they can be used for many different purposes. They are also very cheap sources of finance.That is why I decided to write an article on the basic concepts of both of these fantastic financial products.Home Equity LoanHome equity loans are usually referred to as second mortgages, because they are secured against the value of the house. The borrower uses the equity on his property as a collateral for the loan. So… what does equity mean? Equity is the different between the property’s market value and the remaining balance of the mortgage and any owed debts related to the property. If you have finished paying the mortgage on your home (or never applied for one), then the equity on your home is 100% of the real value. If you have already paid 40% of the home, then the equity will be worth 40% of the real value of the property.Loans based on the equity on your home are marvellous. They are granted almost to any home owner and their terms are usually extremely favourable. Not only are the interest rates very low, but they are also deductible!What use can the borrower give to the money? Well, that is the beauty of this type of loan. You can do anything, the world is your oyster! Whether you need to remodel your house, add rooms to it, go away on a long vacation, purchase a used or new car, or even acquire a second property, home equity loans can help you in so doing. There is no limit to what you can do, only your imagination.Repayment plans range from 5 to 20 years, and as you might have noticed, they are somewhat shorter than the repayment plans on mortgage loans.Home Equity Lines Of CreditThis credit is also know as an open-end home equity loan. It is also a loan based on the equity on your home, but it has one major difference: you decide how much and how often to withdraw funds. The lender sets a limit on how much can be withdrawn, but once this amount is repaid, the borrower can take out funds again, and so on.Lines of credit based on equity are perfect for you if your monthly income is variable (as often happens with self-employed people). There is a minimum monthly payment which consists of the interest rate if you have not withdrawn any funds.If what you are looking for is flexibility, then a line of credit will be just perfect for you. No fixed monthly payments, instant availability of funds at your best convenience, among other advantages.Now you are fully aware of what these two equity based credit products have to offer, it is up to you to choose the one which best meets your requirements.