After completing the schooling and College studies people go and find the job for them. After getting the right job they pay the student loans which they have taken for their studies. On the same time you realize that your home also needs maintenance and you need money for that. In Addition with all if you are going for marriage or have married and baby too then it looks like impossible to meet all the financial needs and expenses. In this situation you have a very simple option to go through. It is known as Home Equity Loan .
A Home Equity Loan or home equity line is a loan program which allows the home owner to borrow money using equity in the home as collateral. Other definitions are “a loan which is guaranteed by your home or secured by the equity in the home is known as Home equity Loan”. It is set up as revolving line of the credit with a variable interest rate. On the basis of your home value, you get the loan amount. You can get up to 85% of the appraised value of your home. The interests paid on home equity loan are tax deductible. Home loans are having lower risks for the lender because they are secured loans.
There are two types of Home Equity Loans,
Standard Home Equity Loan
Home Equity Line of Credit
The benefits of the home equity Loans are:
These are the best option if you need repair or rebuild your home for debt consolidation or for other expenses.
It can be use for home improvement.
You can use it as the investment in other real state.
You can refinance your other debts.
You can use it for other loans.
You can use it as debt consolidation.
You can pay any previous unpaid bills.
You can use it to pay your credit card debts.
You can use it to pay off your educational loan amounts.
You can use it as wedding or vocational expenses.
Pros and Cons of Home Equity Loans are:
Pros
Single Payments - The home equity loan as a single unit is probably easier to get for several other smaller loans at same time. You also need to remember only one due date so management of one loan will be easier.
Available Cash – When you get the home equity loan, you get a very large amount of cash all at once. Using that large amount you can clear all your previous or current financial problems and get the financial problems.
Cons
Increased Debt – It is true that when you get the home equity loan, you take it to clear your financial problems but on the other hand you are increasing the debts which you owe. You need to careful about increased debts which is offset as a single payment or you are paying more in it. Some times it may occurs that after taking the home equity loans, people realize that they have not needed that much amount and they have to pay a large amount with interest amount for the home equity loan. So first check your requirements and then go for this loan program.
Current Economy of your Country – If you are getting the loan when the home’s value is lower than normal then you will get a lower loan amount. It is clearly mentioned above that high home’s value can provide you more loan amount. So if the market value of your home is low then it is not a wise decision to go for the home equity loan.
If you have a bad credit history then you will go to face problems of higher interest rates. Be careful because home equity loans can make you as well as break you. So clearly see your requirements and capacities of repayments and then go for this way.