Home equity loans are commonly used for debt consolidation, educational expenses, unplanned emergencies, vehicle purchases, home improvements and other gifts and purchases.
Home Equity Benefits
Home equity loans are a popular financing option for homeowners who need additional cash. These loans usually offer a lower interest rate than credit cards. In addition, the interest you pay may be tax deductible (consult a tax advisor).
Fixed Equity Loan vs. Line of Credit
The two most popular types of home equity loans are a home equity line of credit (HELOC) and a home equity fixed loan.
A HELOC offers you a revolving credit line with a variable rate, much like a credit card. You draw only what you need, when you need it. They normally have a lower monthly payment because your payments are interest-only.
With a home equity fixed loan you receive the entire loan amount at once. A home equity loan offers the stability of a fixed rate and fixed payments over the life of the loan.
If you do decide that a home equity loan is right for you, remember to do your homework. There are a variety of loan options available so it's important that you compare lenders and rates in order to find the best deal.
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