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2011-12-28 17:23:05

Home Equity Loan

Home Equity Loan is a loan in which your home is pledged as collateral. These loans

tend to have fixed interest rate and fixed repayment schedule. They are vital to finance

some of your main expenses like repairs, renovation, medical bills, college education etc.

 

Estimating Home Equity

Now the next question arises as to how to estimate your home equity. It can be

calculated by subtracting all your debts from value of home.

 

Types of Loan

Home Equity Loan can be categorized into two parts

Home Equity Loan- In Home Equity Loan banks pays a Lumpsum amount as credit and

individual needs to pay a set monthly amount as repayment.

Home Equity Line of Credit- In home equity line of credit certain loan amount is

approved by financial institution. It’s like cheque book with an approved amount. You

can utilize that money from your account and then repay it with interest.

 

Advantages of Home Equity Loan

The major advantages of home equity loan are enlisted below

  • Interest Rate that you pay on your home equity loan is pretty much lower than
  • any unsecured loan.
  • Home Equity Loans, proffer tax incentives like interest paid on home equity loan
  • is tax deductible.
  • In case you have bad credit then also you can qualify for this loan.
  • The amount of loan that you can borrow is huge.
  • It can be used for various purposes like funding for education, for home
  • renovation or repair and for vacation.

 

Disadvantages of Home Equity Loan

  • The major disadvantage of Home Equity Loan is that you need to forfeit your
  • home if you are unable to pay your installment so your home is at risk.
  • Secondly, if your home value drops then you are at risk.
  • It’s quite perilous if you are gearing towards change in your career.

 

Is it right for you?

So, are you wondering whether home equity loan is right for you or not. Home Equity

Loan is viable for all those who are seeking for Lump sum amount and want to reap long

term benefits like home renovation etc.

Home Equity Lines of Credit is good for all those who are concentrating on short term

goals. It is good way to meet all your requirements for unanticipated or immediate

financial needs.

 

Henceforth, before considering any option you need to consider long term effects. Just

to pinpoint a misconception in your mind Home Equity Loans are not an immediate

solution for your woes. Make all your decisions wisely.

 

Use online calculator for calculating installments of loans.

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