You may need extra money at some point in your life. Some people get loans against the value of their homes. Equity is the difference between how much you still owe on your mortgage and how much your home is worth right now on the market. As that difference grows, you build equity. When the value of your home goes up or when you pay down the principal on your mortgage, you build up equity. You can take out a home equity loan or set up a line of credit to borrow against it. The interest rates on both are much lower than those on credit cards and personal loans. Most of the time, you can get a tax break for the interest you pay on a home equity loan or line of credit.
A home equity loan gives you a lump sum of money all at once. They are easy to understand. You pay back the loan over a set amount of time and at a fixed rate of interest. The payment rate is set when the loan is made, and it doesn't change. You might be able to deduct the interest on a loan if the value of the loan is less than the value of the house.
A debt consolidation loan is another type of home equity loan that lets you combine all of your debts into one loan. You can better handle your debt if you only have to make one payment a month. Don't use your credit cards after getting a loan to pay off your credit card debt. They should be cut up and thrown away. Better yet, contact the banks that gave you the cards and ask them to close the accounts. If not, you might be tempted to spend more than you can afford, which is what got you into trouble in the first place.
A home equity line of credit is better in some ways than a loan with payments. You can use a certain amount of money as you need it for up to 10 years. You only pay for the credit you actually use. The amount you borrow determines how much you have to pay back, and the interest rate changes over time. As you pay back the loan, you'll have more money that you can use to get another loan. The interest rates on lines of credit can change over time, as can the amount you pay each month.
You can now apply online for a home equity loan or line of credit. You can borrow as little as $5,000, but some online companies have set the minimum at $10,000. How much you borrow compared to how much your home is worth determines how much you borrow. This is known as the loan-to-value (LTV) ratio. Most loans range from $100 to $500,000.
Most of the time, you can get a loan or line of credit if you meet the following requirements. You have a credit history that includes things like credit cards, car loans, and a mortgage. Most of the time, you pay your bills on time (some exceptions may apply). Only two or three late payments have been reported to a credit bureau in the last seven years. You haven't been bankrupt or had a judgement against you less than 5 years before you apply for the loan. In the last 10 years, you haven't had any bills sent to a collection agency.
Most of the time, the steps to do something online are easy and don't take long. Some basic questions will be asked about you, your income, and the mortgage property. The next step is to get an electronic copy of your credit report. You will be asked which of your loans are related to the property being mortgaged. Your home's value will also be estimated electronically. Once the online company looks at all your financial information, it only takes a few seconds or minutes for them to decide whether or not to give you a loan.
