Have you ever felt the need of extra money for home improvements or repairs? Or are you in search for consolidation of your credit card debts because you are retrenched from work? Or are you in need of money for the college education of your children but you can't afford to? Well then, applying for a loan is the best move you can do. A loan is identified as squeezing money with collateral conditions. Collaterals may be in form of any property that you own. Those properties serve as a surety for the loan you will acquire later on. They will serve as guarantee that you will pay for the loan you have applied for.
If in the future you will not be able to pay for the loan, its principal and interest, you will have to surrender those collaterals or properties to the lending investors as a payment for the loan you haven't paid for. Home equity loans (HEL) and home equity line of credit (HELOC) are the best types of loan to apply for and it's a matter of sacrificing your homes as collaterals. Home equity loans and home equity line of credit, are of course have differences in terms of usage, terms of payment and interest rates. Home equity loan rates have fixed interest paces. This means that you will have to pay for the principal and interest of your loan at a steadfast manner or the so- called "all-out" mode of payment.
Home equity loan rates are relatively higher than that of home equity line of credit but it is immobile. The rates are not subject to change, while home equity line of credits have a lower interest rates compared to home equity loan rates and you can pay for the interest and principal at given times or in installment basis. HELOC rates are variable in rates and change every time the federal fund rates rise or lower. It is for short- term usage of money.
If you ever be bothered of the interest rates you will have to pay in the future, then it is best that you decide first of the type of loan you will have to apply for. For long term benefits of the money you have borrowed such as home repairs and debt consolidation, it is recommended that you apply for home equity loan rates. On the other way around, if you will have to spend the money on a short- term basis, like payment for a semester's tuition or having to pay for your wedding, it is advised that you have to apply for home equity line of credit. Since its payment mode is in installment basis, you are obliged to pay only when you need the money. For easier understanding, HEL is for lump- sum payments, while HELOC is for several installments.
You would also be advised to consider the fact on how you can handle the monthly payments. Home equity loan rates compel you to pay the principal and interest every month but in a fixed rate until you have fully paid for it. Home equity line of credit can accredit you to pay only for the interest for several years but the interest rates are changeable. You might find yourself more confused especially when your home value appreciates in years. You will have the advantage of paying the principal and interest for longer periods of time.
Now, compare them and decide on what would be the best loan you can apply for considering your financial situation at the moment and your ability to pay for the necessary fees and interests.
What Everybody Ought to Know about Home Equity Loans Rates: The tips, the benefits all the "how to" guides.
No comments:
Post a Comment