Home equity loans are a great alternative if you need to borrow large sums of money or if your credit score is not that great. By putting up you home as collateral, you can borrow most of the equity you have built up over the years.
Banks like to write home equity loans because they know the value of your home and know that they can collect should you default on the loan. Of course you have a great incentive to keep your payments current because it is your home that is in risk.
The good points of home equity loans
· Usually a home equity loan is given at a lower interest rate than a new home loan or refinance loan.
· Most of the time the payments on a home equity loan are tax deductable. Consult with your CPA for more information.
· Typically a borrow can borrow up to 100% of the equity in the home.
· A home equity loan is easy to qualify for since it is your home already and the loan is for the equity only.
The bad about home equity loans
· You could lose your home if you default on the payments. Just like any other loan you will lose your home if you stop making the payments.
· There are many companies looking to offer home equity loans to people who really don’t need a loan. Sometimes the rates offered are way above what would be normal and before the home owner knows what hit them they are in financial ruinin.
How to get the best home equity loan
Make sure you shop around for the best rate and know the rules. Read the fine print and don’t get scammed. Make sure you get a fixed rate so that you know what your payments will always be. You might want to ask your friends and family if they have a home equity loan. If they do, find out if they are happy with the lender and terms. Be careful when making any financial decision concerning your home.