Three Uses For Your Home Equity Loan

October 18, 2009 · Posted in Home Equity · Comments Off 

The home equity loan has become one of the most popular lending choices available to consumers. Remember that equity refers to the difference between what is owed in on the property and its value. If you’ve made a good investment, you could have a boatload of equity in your home but the question is how to wisely use that home equity loan.

Use #1 – Consolidate Debt

Probably the most common way to use a home equity loan is for debt consolidation. Most of the time, these loans have lower interest rates than other types of debt. For example, the average credit card interest rate is around 16%. If you are struggling to pay back all of those smaller examples of debt, you can use the funds from home equity loans to pay them all off and free up some cash. You’ll end up with a lower interest rate and a better debt to income ratio in some cases.

The biggest problem with taking this route is that if you’re the type of person who runs up a lot of debt, you may end up repeating the process once your credit cards are freed up thanks to the home equity loan. These actions could lead you down a financially disastrous road. Read more

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Understanding Home Equity Loans Versus Lines of Credit

October 6, 2009 · Posted in Home Equity · Comments Off 

Home equity loans and home equity lines of credit have become increasingly popular consumer financing options.

A home equity loan or line of credit can give you access to the funds you need in the event of an emergency by allowing you to borrow against the equity in your home.

Interest rates on home equity loans and lines of credit are often lower than those for credit cards, making them a more appealing option for homeowners. An added benefit is that the interest you pay may be tax deductible. Be sure to consult your tax advisor for further information about deductible interest on loans or lines of credit.

This all sounds great, right? So, how do you determine whether you need a home equity loan or a home equity line of credit?

Once you understand the major differences between these types of loans, you’ll better understand which one will best meet your needs. Read more

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