It really feels great to have a house of your own. It not only gets added up in your assets but can also become an excellent source of credit when you need it the most. In other words, your home can turn out to be a great source of money when you fall in urgent need of funds. This has been made possible with the help of a home equity loan.
Home equity is the ownership value tied up in a home or a property which estimates the current market value of the house. This amount does not include any remaining mortgage payments. Thus, home equity is calculated by deducting the unpaid balance of the mortgage and any outstanding debt over the home from the home’s actual market value.
The home loans are categorized in two segments- the standard Home Equity Loans and the home equity line of credit. The standard home equity loan offers a debtor with a particular amount of money that has a fixed interest rate and payments. These loans have to be paid in a fixed time period. These loans offer a larger loan amount as its borrowers are allowed to re-borrow the loan amount that they had already paid in the past.
A home equity loan is always secured in nature as it requires you to pledge your homes’ equity as collateral. These loans offer low interest rate, help you become debt free, allow you to borrow up to 100% of your home’s value and the loan payments usually come with certain tax advantages.
The value of equity can be used for various purposes. These include availing loan and to invest for getting a high interest rate. Borrowers may use this loan amount for making home improvements, for college tuition or for things like investing in business ventures like purchasing additional property. Thus, a home equity loan is an alluring option for all those homeowners who require quick cash for any of their urgent needs.
By: George Kane
Posts Tagged ‘High Interest Rate’
Home Equity Loans: a Flexible Option to Cater All Your Needs
November 5th, 2009Bad Credit Home Equity Loans
October 14th, 2009Bad credit home equity loans are special home equity loans available to people with a low credit score. If you have been eyeing a new home or wish to take a new loan to pay off high interest debts, then bad credit home equity loans are something you should consider applying for.
Fixing Of Interest Rates
Your credit score or FICO score is used to determine the interest rate you will have to pay. You gain FICO points depending on your ability to repay loans, your salary and assets. You lose points when you default, make late payments or file for bankruptcy. Scores range from 350 to 850 points.
Those who have a high credit score pay low interest rates. People who have a score of less than 600 are usually asked to pay a high rate of interest or denied loans. However, they can always avail of bad credit home equity loans.
What Is A Bad Credit Home Equity Loan?
Originally, home equity loans were designed to pay for renovations and add on structures to your home. However, as lenders never check where the money is going, you can use it for almost any purpose. People with low credit scores usually go in for bad credit home equity loans to pay off their debts. The only difference between bad credit home equity loans and regular home equity loans is the slightly higher rate of interest.
Lending companies and banks are always ready to dole out cash as bad credit home equity loans. As the loan is secured by a mortgage on your house, the lender faces very little risk. If you are unable to pay the loan in the future, they simple repossess your house to recover their dues. Plus the high interest rates and loan charges make it quite profitable for them.
Advantages To People With Bad Credit
Bad credit home equity loans are extremely useful to people who are stuck in a cycle of debt or in a debt crisis. If you have multiple high interest rate arrears like credit card debts, then it makes sense to use a low interest home equity loan to pay it off. The advantages are -
You will have to deal with just one creditor – the home equity loan company.
You will make smaller monthly payments
As you pay off the previous loans, your credit rating will increase. This debt consolidation function of bad credit home equity loans is the reason why it is become so popular today.
By: Thomas Lonsdale
Debt Consolidation With Home Equity Loan Give you the Most Flexibility
September 6th, 2009Have you ever wondered how can you consolidation your debts and help you to save money which is used to pay for those high interest rate debts? You can reduce your interest rate charges by using your home equity loan to consolidate all of your outstanding debts. Your home equity loan can be used to consolidate debt and pay off the following accounts:
Credit card balances
Gas card balances
Department store balances
Installment loans
Auto loans
Any account balance that is outstanding.
Home equity loans allow a homeowner to borrow money by pledging the house as collateral. Normally this loan is easier to be approved by the lender even if you have bad credit because the lender view home equity loan as relatively safe. And you can borrow a relatively large amount of money to pay off all or most of your other high interest rate debts.
Home equity loans generally have a much lower interest rate than most credit cards and other unsecured loans. You can also set the repayment terms at a fixed rate so that you can plan exactly how much to budget each month. Also save time and hassle by writing just one monthly check.
Most home equity loans have the following repayment terms:
up to 5 years
up to 10 years
up to 15 years
up to 20 years
Thus, you have the flexibility of tailor a debt consolidation plan that fit your budget. If your debt consolidation balance is high, you may go plan with a long repayment period. With the longer repayment period, you will pay lower monthly repayment and budget for other living expenses needs.
What are the things save in debt consolidation?
By consolidation your debt with a home equity loan let you have the flexibility to plan ahead for your other living expenses needs. Home equity loan carries a much lower interest rate than most credit cards and other loans. And any interest you pay may be tax deductible. Hence, using home equity loan to write off your high interest rate debts such as credit card (more than 12% of interest rate) will leave you a high income balance (after deduce the month repayment for home equity loan) to budget for other needs such as send your kids to college, finance a new car & etc.
How much can you save?
That depends on your income bracket and annual percentage rate. But after deducting all the qualifying interest payments from your taxes, your effective APR will be significantly lowered. By comparing this lower interest rate to your car loan, credit cards and other installment loan’s interest rates which do not qualify for tax deductible, you can see why is a smart way of doing debt consolidation with a home equity loan.
Summary
Home equity loan is the best method to consolidate your high interest debts; it carries low interest rate, tax deductible and love by the lenders as the secured loan to their borrowers. Debt consolidation with home equity loan gives you the maximum flexibility to plan ahead.
Cornie Herring is the Author from “StudyKiosk-Credit Basics”- http://www.studykiosk.com/creditbasics. “StudyKiosk-Credit Basics” is an informational website on credit basics, debt consolidation and bankruptcy.
By: Cornie Herring
