Have you noticed that every time you watch your favorite TV show, a home equity loan commercial seems to pop up? Or, you rush out to your mailbox and discover yet another offer wanting you to take out a home equity loan?
Without question, home equity loans have exploded in popularity over the past few years. It has become the way of getting the money you need to solve your financial needs. But, many people don't fully understand just what they are. Here are some of the basics on what these types of loans are all about.
In simple terms, a home equity loan is money that you can borrow by using your home as collateral. The amount you can borrow is based on the current value of your home, less the amount you still have due on your original mortgage.
For example, let's say you have a home that is valued at $500,000. Your current loan balance is sitting at $400,000. You could possibly obtain a loan for $100,000.
The total loan amount will be determined by variables such as your current credit history, etc. Keep in mind though, even if you currently have some credit issues you're dealing with, a bad credit home equity loan is not that difficult to get. It just takes a little more effort in finding.
You can use the funds for whatever you wish. This can be both a positive and negative though. Here's why.
Home equity loans are great for uses such as home improvement projects, college expenses, medical bills, and of course, bill consolidation. Getting out from under debt is a major reason that people get a home equity loan.
But, people will also borrow money on the equity in their homes for items like a new car, appliances, exotic vacations, or other luxury items. Well, it's your money and you can certainly use it as you see fit, but be careful.
Make sure that you can afford the monthly payment for years to come. Since a home equity loan is secured by your home, if you go into default on the loan, the lender can take possession and sell your home to satisfy the debt.
Check out several offers before making a final decision to sign any loan agreement. Take your time and you'll be fine. Getting the right home equity loan for the right reasons could very well be the solution you're looking for.
Article Source-http://EzineArticles.com/?expert=Terry_Edwards
Tuesday, October 30, 2007
What is home equity debt?
A home equity loan is a one-time lump sum that is paid off over a set amount of time, with a fixed interest rate and the same payments each month. Once you get the money, you cannot borrow further from the loan. Bankrate surveys home equity lenders and is a good source for current rates.
A home equity line of credit, or HELOC, works more like a credit card because it has a revolving balance. A HELOC allows you to borrow up to a certain amount for the life of the loan -- a time limit set by the lender. During that time, you can withdraw money as you need it. As you pay off the principal, you can use the credit again, like a credit card.
A HELOC gives you more flexibility than a fixed-rate home equity loan. It also is possible to remain in debt with a home equity loan, paying only interest and not paying down principal.
A line of credit has a variable interest rate that fluctuates over the life of the loan. Payments vary depending on the interest rate, the amount owed and whether the credit line is in the draw period or the repayment period.
During the equity line's draw period, you can borrow against it and the minimum monthly payments cover only the interest, although you can elect to pay principal.
During the repayment period, you can't add new debt and must repay the balance over the remaining life of the loan.
A line of credit is accessed by check, credit card or electronic transfer ordered by phone. Lenders often require you to take an initial advance when you set up the loan, withdraw a minimum amount each time you dip into it and keep a minimum amount outstanding.
With either a home equity loan or a line of credit, you have to pay off the balance when you sell the house
A home equity line of credit, or HELOC, works more like a credit card because it has a revolving balance. A HELOC allows you to borrow up to a certain amount for the life of the loan -- a time limit set by the lender. During that time, you can withdraw money as you need it. As you pay off the principal, you can use the credit again, like a credit card.
A HELOC gives you more flexibility than a fixed-rate home equity loan. It also is possible to remain in debt with a home equity loan, paying only interest and not paying down principal.
A line of credit has a variable interest rate that fluctuates over the life of the loan. Payments vary depending on the interest rate, the amount owed and whether the credit line is in the draw period or the repayment period.
During the equity line's draw period, you can borrow against it and the minimum monthly payments cover only the interest, although you can elect to pay principal.
During the repayment period, you can't add new debt and must repay the balance over the remaining life of the loan.
A line of credit is accessed by check, credit card or electronic transfer ordered by phone. Lenders often require you to take an initial advance when you set up the loan, withdraw a minimum amount each time you dip into it and keep a minimum amount outstanding.
With either a home equity loan or a line of credit, you have to pay off the balance when you sell the house
Basics about equity loans
"Equity laons" is one of the hot terms in today's ebanking world. But most of us is skeptical about equity loans. So let us explore some of the basic terms pertaining equity loans.
Collateral is property that you pledge as a guarantee that you will repay a debt. If you don't repay the debt, the lender can take your collateral and sell it to get its money back. With a home equity loan or line of credit, you pledge your home as collateral. You can lose the home and be forced to move out if you don't repay the debt.
Equity is the difference between how much the home is worth and how much you owe on the mortgage (or mortgages, if you have more than one on the property).
A home equity loan (or line of credit) is a second mortgage that lets you turn equity into cash, allowing you to spend it on home improvements, debt consolidation, college education or other expenses.
A home equity loan (or line of credit) is a second mortgage that lets you turn equity into cash, allowing you to spend it on home improvements, debt consolidation, college education or other expenses.
Collateral is property that you pledge as a guarantee that you will repay a debt. If you don't repay the debt, the lender can take your collateral and sell it to get its money back. With a home equity loan or line of credit, you pledge your home as collateral. You can lose the home and be forced to move out if you don't repay the debt.
Equity is the difference between how much the home is worth and how much you owe on the mortgage (or mortgages, if you have more than one on the property).
A home equity loan (or line of credit) is a second mortgage that lets you turn equity into cash, allowing you to spend it on home improvements, debt consolidation, college education or other expenses.
A home equity loan (or line of credit) is a second mortgage that lets you turn equity into cash, allowing you to spend it on home improvements, debt consolidation, college education or other expenses.
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