Home Equity Loans

Home equity loans allow a homeowner to borrow money by putting up your home as collateral.  Borrowers who want to borrow a relatively large amount of money, or who don’t have good credit, often find this kind of loan to be very appealing.

Lenders may be more liberal because they view home equity loans as relatively safe.  You can’t disappear with your house or hide it if you default on your loan, so the lender has a good chance of collecting the collateral. Also, you are likely to make your payments an absolute priority if your home is on the line.

These loans are attractive to borrowers for a few reasons:

• They usually have a lower interest rate
• They are easier to qualify for if you have bad credit
• Payments on a home equity loan may be tax deductible
• Borrowers can get larger loans with this type of loan

What's a Home Equity Loan Used For ?

Often borrowers use these for some of life’s larger expenses, because homes tend to have a lot of value to borrow against.

 For example, you find that a lot of people want to:

• Remodel or renovate the house
• Pay for a family member’s college education
• Finance the purchase of a second home
• Consolidate high-interest debts

Problems to Watch Out For ...

Before using this source of cash for any purpose, you should be aware of the potential pitfalls of these loans. The main thing is that you can lose your home if you fail to meet the payment schedule required by the loan.

In addition, scammers have found plenty of ways to cheat homeowners out of their most valuable asset.  Be sure that you know who you’re doing business with. If something doesn't sound right (like a high-pressure sales pitch or an inability to put things in writing), then stop, take a step back, and make sure the deal is legitimate.

How to Find the Best Deal 

Finding the best offer can save you thousands of dollars – at least.  In order to increase your odds of success :

-Shop around. Try a variety of sources (banks, brokers, and credit unions).
-Manage your credit score and make sure your credit reports are accurate.
-Ask your network of friends and family who they might recommend.
-Compare your offers to those found on websites and advertisements.

Additional Notes ...

To make the deal work out in your best interest, make sure that it is the right deal in the first place. Is an equity home loan a better fit for your needs than a simple credit card account?  If you’re not sure, figure it out before you put your home at risk.

Plan out your budget ahead of time.  Make sure that this will not put financial pressure on you.

Review and consider insurance to cover the payments if something happens. You may or may not need it, but it could be worth looking into.  If you’re going to include it in your program, try to pay the premiums monthly – not up front.

America's Lending Partners can get you a great deal on your Refinance loan. This free service is available to all homeowners.