Home equity loan and lines of credit are secured against the value of your home equity, so lenders may be willing to offer rates that are lower than they do for most other types of personal loans. Though you’ll pay back this type of loan as you would any other personal loan, there are some major benefits to considering a home equity loan, including the following 10 reasons that show why it might be time to take out one yourself.
Home equity loans and lines of credit are secured against the value of your home equity, so lenders may be willing to offer rates that are lower than they do for most other types of personal loans. If you’re trying to decide between getting a home equity loan or line of credit, the following 10 reasons might help you decide which one is right for you.
Home equity loans and lines of credit are secured against the value of your home equity, so lenders may be willing to offer rates that are lower than they do for most other types of personal loans. There are some things you should know before applying, however, including how much you can borrow and how to make sure that you get the best possible deal on one of these loans (or lines of credit). Here are 10 reasons why you might want to consider getting a home equity loan or line of credit
He are the top ten Reasons You Should Consider A Home Equity Loan
1) Low interest rate
Home equity loans have lower interest rates than credit cards, and home equity lines of credit have even lower rates. Because home equity loans and lines of credit are secured against your home’s value, lenders may be willing to offer you a lower rate than for other types of personal loans. These low interest rates make them particularly attractive when compared with high-interest-rate alternatives like payday loans or title loans.
2) Down payment required
Home equity loans and lines of credit are secured against the value of your home equity, so lenders may be willing to offer rates that are lower than they do for most other types of personal loans. Even if you can’t afford a 20% down payment, you may qualify for an FHA loan with just 3.5% down. And unlike conventional loans, FHA loan fees and mortgage insurance aren’t added onto your balance; these costs are built into your monthly payments.
3) Simple application process
If you have home equity, you can take out a home equity loan or line of credit (HELOC) to consolidate your debts. Secured against your home’s value, these loans come with lower interest rates than those offered for most other types of personal loans. So they can be an affordable option if you want to pay off high-interest debt like credit cards and get some extra cash flow in your life.
5) Tax-deductible interest payments
Interest paid on a home equity loan is generally tax-deductible. Whether you’re considering a home equity loan or a home equity line of credit, remember that paying interest means that you’ll pay less in taxes over time—which could make it even more attractive than paying off other types of debt with high interest rates.
6) No prepayment penalty
Typically, home equity loans and lines of credit don’t come with prepayment penalties. This means you can pay off your loan early without incurring additional costs.
7) Quick funding
Because your home is being used as collateral, you can sometimes get access to a loan fairly quickly—in a matter of days or weeks, rather than months. This means you can get cash flow immediately, which may be particularly helpful if you need money for an emergency expense like medical bills or a car repair. Even better, home equity loans don’t require a credit check and don’t have to be paid back until your home is sold, making them easier to qualify for than many other types of loans.
8) Fixed repayment terms
When you get a home equity loan, it is usually going to come with fixed repayment terms. Fixed repayment terms mean that regardless of your financial situation, you will make equal monthly payments until your debt is paid off. This may be beneficial for borrowers because they know exactly how much money they are going to have to pay each month until their debt is fully paid off.
9) Home is collateral
Most lenders will require that you put up your home as collateral, but that also means your loan is secured against something worth a lot of money—which means you may be able to get an interest rate lower than what’s available for other types of loans. If you take out a home equity loan or line of credit, you’ll need to pay off any remaining balance when you sell your home.
ALSO READ The Top 5 Cheapest Homeowner Loans
10) Lines of credit also available
Many homeowners with a credit score of at least 680 have access to home equity lines of credit (HELOCs), which allow you to draw funds at any time and repay them over a specific period of time, often 10 years. Unlike traditional loans, HELOCs don’t require fixed monthly payments—you simply make a set payment each month equal to interest only.
11) Unsecured borrowing options also available
If you don’t have home equity to secure a loan, or if your credit isn’t in great shape, consider applying for an unsecured personal loan instead. Although these types of loans tend to have higher interest rates and other costs than home equity loans and lines of credit, they are available from more lenders and may be easier to qualify for.