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There are many reasons for choosing a home equity loan. A home equity loan allows homeowners to obtain a loan in addition to their original loan using the equity in their home. Home equity loans are generally a second mortgage, and are used for personal use.
Home equity loans are also known as equity release schemes. Home equity loans are aimed mainly at those homeowners that have paid their mortgages off. They can receive a cash lump sum or some income by unlocking that capital.
People take out a home equity loan for a variety of reasons. Some people do it in order to finance home improvements, buy a new car, consolidate their debts or go on holiday. Others may want to receive a regular income source so that they can pay for residential care, or just the cost of care.
Home equity loans have fixed rates with longer terms, over a fixed period of time. Home equity loans can be ideal for longer-term financial goals because you receive the amount of money you borrow in one lump sum. A home equity line of credit is similar to a credit card, where you may regularly use it up to your credit limit.
One of the premium features of a home equity line of credit is that the interest rate is typically lower than that of a credit card.
A Home Equity Loan will usually mean that you get better interest rates, but you should always remember that your house is at risk if you fail to repay the Home Equity Loan.
The amount you can borrow with a Home Equity Loan depends on the amount of equity in your property. Equity is the market value of your property minus any outstanding mortgage or loans you have on it.
People with poor credit ratings will find a Home Equity Loan more easily accessible to them because the lender is taking a lot less risk themselves. Home equity loans are also beneficial for people with a poor credit rating. A lot of traditional lenders categorise such people as “high-risk”. Home equity loans for such borrowers dont pose any risk as in case the borrower defaults on the repayments, the lender can sell the house to reclaim the money from the available equity.
Here are some of the benefits of a home equity loan:
A Home Equity Loan is an easy and manageable route to generating extra cash.
Using Home Equity Loan for debt consolidation means that with one single payment each month, you have more control over your monthly budget.
With a remortgage you have the same expenses you do when taking on a mortgage: surveys, valuation, mortgage indemnity and solicitors fees to pay. With Home Equity Loan you have none of this, making it easier to arrange. Repayment period on Home Equity Loan can be anything from 5 – 25 years.
You can use Home Equity Loan for any purpose – for example, debt consolidation, home improvements, buying a car or going on holiday.
Protected payment plans for Home Equity Loan can provide extra peace of mind.
Always consider your options carefully, as your home is at risk if you do not keep up repayments on a mortgage or other loans secured on it.
You may freely reprint this article provided the authors biography remains intact:
About The Author John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.
Article Source: EzineArticles.com