Home Equity Loan Basics
Home Equity Loan Basics Much like top up or small recharges used by pre-paid connection holders, an equity loan is a second loan offered to home owners by the main lender. These kind of loans are usually sought by those who are looking at a major ...
Home Equity Loan Basics
Much like top up or small recharges used by pre-paid connection holders, an equity loan is a second loan offered to home owners by the main lender. These kind of loans are usually sought by those who are looking at a major renovation work at their home or want an expansion, that is in case of home loans. Some people also need equity loans for their child’s education. Like most other loans, equity loans are also of different kinds, the most common of it being the second mortgage. In this case, the figures of the contemporary value of your home and the remaining repayment of the earlier loan become crucial. The equity that you would be given would be decided on the basis of what value your home currently has and how much of the first loan you still have to pay. You can expect to get equity close to the subtracted value.
Most suitable in cases where there is a fixed amount of money that is needed by the loan seeker, equity loan’s repayment schedule goes in such a way that the entire loan can be paid off over the set period of time. Though there are different systems for different kinds of equity loans, in case of home equity loans, there is usually the HELOC or the Home Equity Credit Line which works somewhat as a credit card using which you can borrow money. Generally there is a minimum amount which you will have to borrow each time and the credit limit of this card will depend upon your income, debt and expenditure history. At the end of the time period of usage, you will find the option of renewing the card or you may need to repay a chunk of the debt before you are allowed to start using it.
Here are a few tips for those getting or thinking of getting a home equity loan:
- The most important thing to consider is whether you are ready to take one another debt. Does your current financial condition allow you to do so? Is your employment situation stable and likely to remain so in the coming time? If it isn’t you could end up losing your house to the bank or whoever is the lender.
- Have you checked the repayment period? Are you comfortable with it and sure that you can accommodate with it? Have you done a thorough calculation with your renovator regarding the costs involved?
- Since home loans have become very common now, there are a lot of fraudulent lenders who are simply looking for people whom they can fool and get them to accept huge loans which they can’t repay.
- Just like all loans, try as many options for the lender as possible and bargain.
Remember that no matter how less the rate of interest is or how easier the system is, you will have to repay the loan some time or the other. Thus it is advisable to not take on more than you can afford.