Reasons to Consider a Home Equity Loan
- Author Andrew Obidowsk
- Published June 13, 2008
- Word count 528
If you are a homeowner and are in need of some extra cash, you may
want to consider getting a home equity loan. Equity is the amount of
value you have paid off on your property. For instance, if your home
mortgage is worth $150,000 and you have paid off $50,000 of your
mortgage, you have $50,000 in equity on your home. With this equity
you have in your home, you can take out a home equity loan on this
money.
There are two types of home equity loans available; Standard Home
Equity Loans and Home Equity Lines of credit. With a Standard Home
Equity Loan, your loan is assured by the amount of equity you have in
your home. This is the type of loan option you should choose if you are in
need of a very large loan. A Home Equity Line of Credit is akin to a credit
card. With this option, you can withdraw money from an equity account
that has been set up with your equity amount. This is a better option for
you if you are not needing a large amount of money.
A Standard Home Equity loan generally is a little more difficult to obtain,
only because it has a more complex process. These loans generally
have a fixed term to them, meaning you will have a pre-determined
number of payments over a set period of time. They generally will also
have a fixed interest rate and fixed monthly payment. The amount of the
loan you receive will be provided to you in one lump sum.
With a Home Equity Line of Credit, an account is set up for the money to
be placed into. You can then make withdraws on the money as you need
it, and then make payments back into the account. These types of loans
generally have a fluctuating rate of interest, however you will only have
to pay this interest if you have a balance on your account from the
money you have borrowed.
There are many reasons why a person may choose to take out a Home
Equity Loan. Many people take out these kinds of loans if their home is in
need of repair or reconstruction. If there are large changes they want to
make, such as a new heating and cooling unit or new windows, they will
take out a home equity loan to pay for them. Others will use a home
equity loan as a means to get out of other debts. They will use their
Home Equity loan as a form of debt consolidation, to pay off some of
their other debts and only have to make one monthly payment. And still
others may take out a loan to pay for a new car, or even a large family
vacation.
There are countless reasons why a person may choose a home equity
loan. Once you get the money, it's up to you what you choose to do with
it. Just keep in mind that this is a loan you will have to pay back, and if
you fail to do so, it could very well cost you your home and all of your
equity.
Andrew Obidowsk home equity loan and home owner loans can provide fast simple ways to receive extra cash. But if you plan to just renovate your home you should look in to a home improvement loan.
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