Home Equity Loan
A home equity loan is one of two ways that you can use your home's value to help you get ahead in situations where you need money. This is the easier and more practical option, since it is actually a loan. The other is a line of credit (HELOC) that can be harder to obtain but can give you access to more funds if you have good credit. The home equity loan itself is based on how much equity, or value you have in your home. For example, if you own your home outright and it has a value of $135,000, that's how much equity you have.
Key tips for when you want to get a home equity loan:
- Make sure that you shop around and get at least 2-3 quotes so that you can compare your options for home equity loans.
- Always be aware that this loan is basically like a second mortgage, and that your house will serve as collateral. If you don't pay, they can take it.
- Make sure that you lock in the lowest interest rates possible and get a fixed term loan to be safe. Variable APRs might benefit you in the future, but it's better not to take the chance.
- Know what you are using the loan for and exactly how much you need. Lenders will need to know these things to determine whether you have a valid reason for taking the loan.
Advice on finding the best home equity loans:
It is rare that you will ever be able to borrow 100% of the value with a home equity loan. In most cases, you will be limited to borrowing between 75-90% of the value. You should check with different lenders to see what they have to offer, however, so that you can get the best loans for your needs. You should never borrow more than you need with a home equity loan, either. Not only does that make it harder to get approved, but it makes it more difficult to repay the loan. Use the money that you need and leave the rest there.
If you can find a company that knows their way around home equity loans, it should be easy for you to get the financing that you need. A home equity loan is going to make it easy for you to remodel, make repairs, take care of emergency expenses or debts, and handle other financial situations that arise when you have no other lending options.
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