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Home Equity Loans: Access To Cash When You Need It

Apr 8, 2008
The home equity loan is perhaps more popular than ever as more and more homeowners are realizing that they have the money that they need on hand if they really need it.

There are many times when it may be appropriate to use the cash that you have in your house, but people must decide for themselves when and why they take out such a loan.

Depending on how long you have owned your home and the type of mortgage you have, you may have a lot of equity built in that you can borrow from. These programs simply come in really handy for a lot of people.

The Basics

One thing that you should understand if you are considering this source of funding is that there are actually two forms. The first is a fixed rate loan, which is basically one lump sum payment that is given to the homeowner. This money is then repaid over time with an agreed up on interest rate, which stays the same over the entire loan period.

Then there is the home equity line of credit, also referred to as a HELOC. This is a variable rate program that sort of works like a credit card and may even come with one!

The homeowner is pre approved for a specific amount and can choose how much and when to withdraw the funds that they need.

The payments for this type of program vary depending on the market. The homeowner can keep borrowing for the entire period but when it comes to an end they must repay the amount in full.

Many homeowners like these financing programs because it gives them a simple source of cash. The great thing for the homeowner is that they can borrow the cash, they usually have a reasonable amount of time to pay it back, and the interest rates are much lower than credit cards.

Many people use the cash to improve their home, pay medical bills, pay off credit cards, or even send a child to school.

These loans really can be a lifesaver but should only be considered by responsible homeowners. It's important to remember that you are putting your house on line when you take out this sort of advance, and if you aren't able to pay it could be detrimental to your way of life.

This type of financing shouldn't be considered for funding day-to-day life or for fun, instead it should be used to replace the roof on the home or something like that. You should only seek this sort of financing if you are sure you will be able to pay it back on time.

These programs are appealing and very appropriate in a wide variety of situations. The homeowners needs to decide for themselves if this is the way to go or if there are other funding opportunities that are better suited to their specific needs.

There are pros and cons and one should take the time to educate themselves all around before signing on the dotted line.
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