Should you get Home Equity Loan?

 

 

 

 

 

At difficult times when there is a need for money to run the family or to pay of a huge debt or any other financial needs, it is always tempting to borrow money by pledging your valuable asset, house as collateral, mostly people with bad credit line or those you want huge amount of money would go for Home Equity Loan. Home Equity Loan is second type of mortgage, money lenders are more attracted towards this type of mortgage as safe as home can’t disappear anywhere and the lenders consider this as collateral to get their money back.  You also get lump sum money with fixed interest rate over a limited period of time usually 10 to 15 years.

Home Equity Loan Line Of Credit

Home equity lines of credits or HELOC, are revolving credit accounts that are protected by a home’s equity. Home Equity Loan line of credit on the other hand works like a credit card, the borrower is assigned a credit line, you pay back only what you use plus interest, when you get your loan you usually get a check book or credit card and you pay estimated monthly payments on you outstanding balance.

Drawbacks of Home Equity Loans

Getting home equity loans as it is more appealing it also comes with drawbacks, first thing is that if you are not able to pay the debt you are going to lose your most valuable asset your home for fore-closure.

Next thing is be sure that the parties you are working with are legitimate otherwise you can be cheated.

Drawbacks of Home Equity Loan Line of credit

The Primary drawback of Home Equity line of credit is the increased risk from rising interest rates, all the home equity line of credit has adjustable interest rates not like the ARM’s, Market plays an important role in the rate changes.

Home Equity Loan – Additional TIPS

Before making a deal be sure that which one suits your needs either going for Home Equity loans or Home Equity Loan Line of credit. Plan budget accordingly, and the loan amount should not be overburden to you. Most importantly think of taking a insurance or include it in the program.

if your reason for taking out a loan or line of credit is to help pay for years of living above your limit and you haven’t taken steps to control your spending, you are putting your home at risk.

Also if you consider taking a loan or HELOC for tax break reasons, bare in mind that the tax interest deduction is not calculated for dollar to dollar but just a percentage.