Thursday, October 1, 2009

Making the Most of Your Home Equity Credit Loan

A home equity credit loan can indeed be a very attractive and an extremely easy tool for you to borrow funds from.

It offers a lower interest rate than with the other loan types. It is easier to get approval on this type of loan as long as you have a real estate home property to present as collateral. Most importantly, interest payments are tax deductible. However, you should take into consideration several other significant details in order to make the most of your home equity credit loan.

Equity is computed as the difference between your home's actual value and its mortgage balance. In an equity loan, you can borrow to as much as 80% of the computed equity of your home. Knowing this fact will help you gauge how much money you can actually anticipate in this type of loan based on the status of your property.

A home equity credit loan should be taken seriously if you care about your present house and your investments. As collateral for your loan, the said property can be taken as owned by the lender in case of payment defaults. The lender can then resell your house with the intention of profiting from the resulting foreclosure.

It will also help to compare offers among different lenders and confirm details in their advertisements. Ask around for feedback and seek the service of those who have been proven trustworthy. An extra source of fund for a flexible cash flow is quite desirable. Knowing the vital facts about using a home equity credit loan is necessary to make the most of this borrowed cash and save yourself from future liabilities.

If you are thinking about getting home equity credit loan, you need to do a research about it in order to avoid any financial trap in the future. The best way is go to to find out more tips and techniques how to get the most out of your home equity credit loan.

What is a Home Equity Line of Credit - HELOC Basics

Borrowing against the value of your home generally takes one of two forms: a home equity loan or a home equity line of credit. While both terms are often tossed around interchangeably, they are distinct forms of debt and it is important to understand the differences between the two.

Equity loans give you a specific amount of money in a single lump amount. These loans are perfect when you are undertaking a large, defined project such as home improvements. With this type of debt you have a set repayment schedule, making it easier to budget for repaying the loan.

So what is a home equity line of credit? Unlike a loan, a home equity line of credit (also known by its acronym HELOC) provides a flexible amount of money over a period of time. Like a credit card, HELOCs provide a line of credit that you can access whenever you need the funds.

The main advantage of a line of credit is that you only pay interest on the funds you have withdrawn. For example, you might get a HELOC for $50,000. But if you only withdrew $10,000 from it, you would only pay interest on that amount, rather than the entire $50,000. Another advantage is that there are often no closing costs.

The downside to HELOCs is that, unlike a home equity loan's fixed rate, the interest rate is usually variable. As interest rates increase, so too do the costs of your loan, sometimes dramatically. If you think interest rates will be going up in the future, as many experts do, it may not be wise to take out a huge HELOC.

Another downside is that your credit and income will be reviewed every few years to see if you can afford to keep the line open. If your credit score drops, your bank could close out your line of credit.

At one time, HELOCs offered low teaser rates, which made them extremely attractive. However, in today's market the rates for both types of debt are fairly similar.

Visit Home Equity Loan Advisor where you'll find this and much more, including home equity loan basics.