Homeowners have seemingly limitless choices to tap in to the equity in their homes. Many folks choose to refinance for cash out at closing, others are looking also for the benefits of a lower interest rate on their loan and cash out for repairs, unexpected expenses and other of life’s little surprises.
A home equity loan is a secured loan where you borrow against the equity in your property. Even with poor credit, a home equity loan is not difficult to qualify for. This is because unlike a personal loan, the risk to the lender is not all that great. Your loan is secured by the equity (or owned value) in your home.
Home equity loans are most commonly used for the purpose of consolidating debt and eliminating high interest credit card loans. The biggest advantage to home equity loans is that you can pay off your debt at a low fixed rate over a set period of time. This is a major advantage over revolving lines of credit, such as credit cards.
Home equity financing is also useful for covering incidental expenses such as home repairs and maintenance. Have a child heading off to college? You can get a home equity loan to cover the cost of college. Are unexpected medical bills a problem? A home equity loan can be used to pay off medical bills at a fixed rate over a long term. As you can see, the uses for home equity financing are many.
Home equity financing is the same as taking out a second mortgage loan on your property. This also means that because the home equity loan is secured by your property, you can loose your home in the event of a default on the loan. It is for this reason that you should take home equity loans seriously and take care not to overextend yourself or strain your monthly budget.
Every situation is unique but in many cases home equity loans can be a benefit to your finances. They can also you harm if you overextend yourself. Whether or not a home equity loan is right for you is something only you can decide. If you do decide to seek a home equity loan, there are numerous resources available for you to compare offers and apply for the financing.