Home equity loans are a great way for homeowners to borrow further money by pledging their home as consubstantial against the loan. Borrowers who need a rather large aggregate of cash or who don ' t have great credit much turn to home equity loans.
Lenders nurse to view a home equity loan as fairly safe - you can ' t hide your home if you default on your loan, so the lender stands a good chance of collecting the collateral. And with your home on the line, you ' ll likely be pretty sharpish with your payments.
Home equity loans are great for a couple reasons:
They are relatively easy to qualify for
You can get a quite large loan
They can have lower interest ratesWhy Should you use a Home Equity Loan?
People tend to use home equity loans for larger expenses, such as:
College education
Consolidate higher interest rate debts
Buy an investment property
Remodel the family homeRisks of A Home Equity Loan
Home Equity Loans can be great for a lot of purposes, but they aren ' t foolproof. The main risk is you could lose your home if you don ' t meet your payments.
Another risk is if you got your loan through a less than scrupulous lender who wants to get their hands on your house. Be careful who you do business with - if they are putting high pressure tactics on you, then walk away.
More Tips
Make sure that a home equity loan is your best fit, think about your other options. Can a simple credit card accomplish the same use as a home equity loan, but without the risk of losing your home? Also take into account your budget, and ensure that you don ' t overburden yourself. Consider taking out mortgage insurance in case something goes wrong.
