Home Equity Loans–The Pros and Cons of Home Equity Loans

March 25, 2009 by  
Filed under Equity Loans, Featured

A home equity loan may be the best option when looking for a source of funds for home repairs, costly purchases, or financial emergencies. Generally, an equity loan will allow you a bigger loan at lower financing charges compared to personal loans or credit cards. For whatever purpose you may be contemplating a home equity loan on, it is important to be aware of the basics to help you make an informed decision.

Many home equity loans fall into what is generally termed as a “standard home equity loan” wherein the lender gives you a certain amount of money corresponding to the value of your property. The money is a lump sum amount which you will then have to pay in fixed amounts for a certain period of time. Often, borrowers choose this type of home equity loan because of the simple, upfront transactions. You know how much you are going to pay and you will find security in knowing that after the fixed period of repayments, the lien on your property will be removed.

Another less popular type of home equity loan is the home equity line of credit. The difference of this type of equity loan is that, rather than giving you a lump sum amount as loan value, you will get a line of credit from which you can withdraw funds for your various needs. This is relatively more complex because the interest rates are not fixed and the repayment arrangement is not fixed. This type of home equity loan requires a greater degree of monitoring on your part but will actually pay off better when managed well.

When deciding on a home equity loan, you need to be armed with the right information because there are many deceitful groups preying on hapless borrowers. There are telltale signs of a corrupt company and often these are disguised as well-meaning “help” to get you the best deal out of your home equity loan. Some of these unscrupulous acts include unbelievable high loan offerings. While this maybe very tempting, consider the risks. A big loan amount will mean bigger amortization. If you get an amount higher than the actual fair market value of your property, you cannot enjoy appropriate tax deductions.

Another scam to watch out for is stripping. Corrupt home equity loan agents may encourage you to lie about your true income and actually help you facilitate securing documents showing an inflated income to allow you a bigger loan takeout. Again, while this may be tempting, consider that taking out a home equity loan that is more than your capacity to pay will only bury you in debt sooner or later. In short, they are not helping you get a good deal out of your equity; they are setting you up for foreclosure – and then your property is theirs.

Whether you are looking for home equity loan line of credit, the lowest home equity loan, or debt consolidation home equity loan – there is a service that is available for you!


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