Introduction To Home Equity Loans

Home equity can be a difficult concept to understand if you have
never dealt with home ownership before. Equity is defined as the
monetary value of a property or business beyond any amounts owed
on it in mortgages, claims, liens, etc. In simpler terms, home
equity is how much house you have earned.

Equity is the difference between what your house is worth and
what you owe on it. For example, if your house is worth $120,000
and you owe $100,000, your equity is $20,000. You can get a home
equity loan, depending on your credit rating and a number of
other factors, for the $20,000 that you have built up in equity.

Each lender will have their own set of rules on how much they are
willing to give you for a home equity loan. Regardless of which
lender, you think you would like to take a home equity loan with,
it is imperative that you closely read all of the fine print of
the loan. Some lenders will require a large balloon payment
towards the end of the life of the loan. Other lenders may
include a number of service fees on the loan, which will cause
the overall cost of your loan to be quite high.

It is also very important to review all the terms to see what
kind of charges would be incurred if you are late on a payment.
It is best to have your home equity loan paperwork reviewed by a
trusted friend or financial advisor that deals with these type of
financial transactions on a regular basis, to make sure that you
are getting what you expect in the loan terms.

A home equity loan is a closed-end loan that can have a fixed
term, a fixed rate, and fixed monthly payments or it can carry an
adjustable finance charge rate that fluctuates with a federal
interest rate. The amount of the loan is usually made available
in a lump sum. This is quite different from a home equity line of
credit (HELOC).

A home equity line of credit is a good option if you need a
smaller amount of money available for a shorter period of time. A
HELOC gives you the option to withdraw funds from an equity
account when you need them. If you repay the amounts that you are
borrowing in a reasonable period of time you will pay lower
interest and fewer fees than you would with a home equity loan.
You can use this revolving credit at any time and make payments
only when there is a balance due. You will have a lower finance
rate and a great emergency source of funds. Your house serves as
security collateral for both a home equity loan and a HELOC.

If you need a very large amount of money to pay a big expense, as
in the examples below, then a home equity loan is probably the
best choice. If you simply need some extra funds each month, or
an emergency source of money, then a HELOC might be your best
choice.

Once you have found a good home equity loan there are a number of
items for which you can use this loan. Many people these days are
finding themselves in credit card debt, due to credit card
companies offering more credit than people can really afford. It
is very easy for someone to get credit cards and to charge things
on them; it is much harder to pay them off. Credit cards also
charge a large amount of interest and high fees for late
payments. If you find yourself with credit card debt and never
seem to get ahead on paying off the balance then a home equity
loan might be the solution that you have been looking for. With a
home equity loan you will know what your monthly expenses are and
have a plan to pay down your debt at a fixed interest rate.

A home equity loan can also be used for paying for college
expenses. College is very expensive these days and a home equity
loan can help people that are on tight budgets be able to afford
the expenses of college. Many people find themselves in the trap
of making just enough so that their children do not qualify for
financial aid, but they really do not have the extra income to
pay for tuition.

A home equity loan can also be used for paying for needed home
improvement projects. Home improvement projects can be quite
costly and paying for them can be quite difficult. A home equity
loan that offers good interest rates can help to pay for a new
roof or a room addition.

No matter what you decide to use your homes' equity for, make
sure that you go with a trusted lender that has a good
reputation. Be sure to check the credentials and history of the
company that you are getting your loans with to make sure you are
dealing with a quality organization.

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Ethan Deville is a finance writer.
He writes for Pen Circles.com and PersonalHomeLoanMortgages.com,
who offers services to help customers find leading national and
(http://www.personalhomeloanmortgages.com/mortgage_brokers.asp)
local mortgage brokers, calculate monthly home loan payments
(http://www.personalhomeloanmortgages.com/mortgage_rates.asp),
view local mortgage rates and understand the various lending
products and services available in the market. Ask our Home Loan
Mortgage Specialists: http://www.PersonalHomeLoanMortgages.com