What You Need To Know
About Home Equity Loans
home equity articles and tips
If you are looking to consolidate bills, pay for your child's college tuition or just want extra cash in the bank, a home equity loan may be for you. Let's take a look at what a home equity loan is and how you can use such a loan to your advantage.
1) Consolidate Debt at a Reasonable Interest Rate
If you have credit card debt that you are paying off at an interest rate of 20 percent or higher, you can save a lot of money with a home equity loan. Second mortgages have interest rates of 4 percent or less depending on your creditworthiness.
2) Get Tax-Free Cash
You won't be taxed on money that you receive from a loan. Therefore, if you are looking to reduce your tax bill without falling behind on bills, this may be the perfect way to accomplish that goal.
3) Make Improvements to Your Home
It may be possible to use the money from your home equity loan to make improvements to your house, which will increase its value. This may enable you to take out more money in the future if you need another equity loan to help with your financial situation.
4) Pay for College
If you have student loans to pay down or are paying for your child's education costs, a home equity loan can provide the funds to pay for school. A home equity loan is preferable to a 401k loan because you won't lose any of your retirement money or any future compounding.
5) Take a Break and Travel
It may be tough to find the money necessary to take a trip to visit the kids, spend time in the nice weather or simply experience another part of the world. With the money from a home equity loan, you may finally have enough cash available to take your dream trip.
6) Your Home Is Used as Collateral
Remember, your home is used as collateral to secure the loan. This means that you could lose your home if you fail to repay the loan on time or don't make your entire payment each month. Therefore, it is important to spend the money wisely and only take the loan if you can repay it.
Home equity loans allow you to access the cash value in your home whenever you need it. Instead of worrying about how to repay student loans or credit card balances, you can use your home's increasing value to pay down debt at an affordable rate.
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