If you are a homeowner you may be eligible for a loan that can be of great financial benefit. You may need some extra cash for home improvements. You may need to consolidate a bunch of little bills into one lump payment. Or you may just want to take that dream vacation you’ve never had the chance to take. You may have already considered a home equity. But what is a home equity line of credit? IT is a type of loan that a homeowner can get which will use the paid off portion of their property as collateral.Home equity is the amount your house is worth minus what you still owe on it. This is a fixed amount that can be borrowed. You cannot borrow more than the amount it is worth, but you can borrow less. Actually you can borrow any amount up to the equity you have built up in your home.There are some pros and cons for the home equity line of credit. One advantage is that it can be used for virtually anything you want to use it for. Another pro is that the interest rate is considerably lower than interest on other types of loans. This can save a lot of money, especially if you use the loan to consolidate other loans which had a higher interest rate.It sounds great, but there are a couple of cons too, For one thing, since you are using your house as collateral, you can lose it if you cannot make the payments for any reason. Also many times a variable interest rate is used to calculate payments. This means it may change with the economy. This is great if the rates go down, however, the payment amount can also go higher with interest rates. This can cause a financial crisis.It should be given much consideration before pursuing. It should be a sort of last resort loan, mostly because you are risking your home. Make sure you do your homework. Lots of research will ensure that you can get the best rate. Check with several lenders and make sure you read all the fine print. Some have several hidden charges and there is a possibility of a large balloon payment at the termination of the loan. So make sure you understand all the terms and conditions of the loan agreement before signing on the dotted line.
