Do
you own a house? If so, you already have realized the Greatest American Dream,
which many of us continue to work hard to have. Additionally, because you
already have a house, you already have easy access to money through Home Equity
Loan or Home Equity Line Credit.
It
is thus easier for you to acquire funds for myriad of reasons. Lenders can
provide you a credit of up to 75% of your total equity.
Funding
children’s college education or renovations for your house or even for purposes
of paying off the entire balance of your primary mortgage may be available
through home equity loan or line of credit.
You
may even opt to consolidate your debt, like your credit cards and other
unsecured credits with the options available in a home equity loan or line of
credit.
This
facility is getting to be very popular nowadays because of the convenience of
owing only one institution and the added advantage of lower interest rates. In
addition, interests in consumer loans like your home equity loan or line of
credit is tax deductible.
The
facility of acquiring loan through home equity loan or line of credit is
flexible in various payments terms depending on the institution that is
providing you with the loan.
All
of these flexibility and advantages of acquiring a home equity loan and line of
credit notwithstanding needs some intelligent decision-making. This is because
even with the numerous advantages available in a home equity loan or line of
credit, the only one and most important factor to consider is the fact that you
put your house as collateral.
Consequently,
failing to pay your debt may cause you to loose the most precious asset you
have, your home.
For
this reason, before you embark on the convenient way of acquiring a loan
through home equity loan or line of credit, you may need to consider if you
really need this facility.
There
may be other loan facilities available where you can choose from, thus you may
not need to put your house as collateral. However, admittedly considering taxes
and interest rates may lead you back to home equity loan or line of credit. In
this case, you may need to seek additional advice.
I
have been mentioning home equity loan or line of credit. This is because the
two differ in one most significant factor. Home equity loan is a facility where
you get the proceeds of your loan lump sum. On the other hand, home equity line
of credit is a facility where you have a credit line, just like in a credit
card, where you may opt to get funds only when you need it.
However,
in a home equity loan, you pay equal installments throughout the duration of
the paying period and you pay part interest and part principal loan. In the
case of home equity line of credit, the interest rates are variable and you may
choose to pay interest only.
The
negative side of this is that you need to pay a balloon payment at the end of
the term, which may be hard for you if you are not ready to pay such a huge
amount. You may end up taking another loan, which will put you at a
disadvantageous position later on.
Finally,
financial experts recommend that before you embark on acquiring a home equity
loan or line of credit, you may need to do your homework by shopping around for
the best terms, payment options, and conditions where the lender may consider
you in default. Analyzing your needs may be an additional advantage for you to
make the intelligent decision.
For
additional information and advice, you may refer to various financial
management websites before you decide if home equity loan or line of credit is
good for you. You may find other loan facilities that will not be as risky, but
understanding what you need and how you need it may be necessary.
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