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
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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