home equity loans may be considered. This is one of the most inexpensive ways of borrowing money and using it for various financial purposes. In the present market conditions, taking out a fixed rate home equity loan is perhaps the best way to guard you from sudden rise in the interest rates of personal loans. Since the credit downgrade, there have been predictions that the interest rate will rise on all personal loans and therefore, if you’ve accumulated enough equity in your home, you’re lucky enough in this market situation. Read on to know more on such loans.
What are fixed rate home equity loans?
This particular lending option is for the cash-strapped but house-rich people who want to repay their debt obligations without having to take out any unsecured loan. When you take out a mortgage loan and start repaying the loan, the amount that you pay back is the equity in your home, which is rather the amount that you owe on your home. There are two types of home equity loans, fixed rate loans and home equity lines of credit. The fixed rate loan is a single lump sum payment that is made to the borrower and repaid over a fixed period of time with an interest rate that is agreed-upon. The monthly payments and the interest rates will remain same throughout the term of the loan.
What are the benefits that the consumers may get by taking out home equity loans?
Home equity loans are an effortless way of getting access to immediate cash. You must be aware of the fact that the interest rates on the home equity loan are much higher than that of a first mortgage loan but when compared to that of the credit cards, they are much lower. If you have accrued a huge amount of debt on your credit cards, you can take out a home equity loan and consolidate all your high interest debts within the loan. The repayment term will be longer and you can also get tax-breaks on the interest rate that you pay on a home equity loan.
Are there any pitfalls of taking out home equity loans?
Well, as such there are no such pitfalls of using home equity loans for repaying your high interest debt or renovating your house, but the only important thing that you need to remember is to make timely payments on your loan. As your house will be used as collateral, you will require remaining very careful about defaulting on the loans as slight carelessness may lead to a foreclosure.
Therefore, if you’re someone who is in need of immediate cash and you’ve accumulated enough equity in your home, you can take out a fixed rate home equity loan. Make timely payments on the loans so that you forestall losing your home to a foreclosure.