Home Equity Loans – second mortgage

Cornie Herring asked:


Have you ever wondered how can you consolidation your debts and help you to save money which is used to pay for those high interest rate debts? You can reduce your interest rate charges by using your home equity loan to consolidate all of your outstanding debts. Your home equity loan can be used to consolidate debt and pay off the following accounts:



Credit card balances

Gas card balances

Department store balances

Installment loans

Auto loans

Any account balance that is outstanding.



Home equity loans allow a homeowner to borrow money by pledging the house as collateral. Normally this loan is easier to be approved by the lender even if you have bad credit because the lender view home equity loan as relatively safe. And you can borrow a relatively large amount of money to pay off all or most of your other high interest rate debts.

Home equity loans generally have a much lower interest rate than most credit cards and other unsecured loans. You can also set the repayment terms at a fixed rate so that you can plan exactly how much to budget each month. Also save time and hassle by writing just one monthly check.

Most home equity loans have the following repayment terms:



up to 5 years

up to 10 years

up to 15 years

up to 20 years



Thus, you have the flexibility of tailor a debt consolidation plan that fit your budget. If your debt consolidation balance is high, you may go plan with a long repayment period. With the longer repayment period, you will pay lower monthly repayment and budget for other living expenses needs.

What are the things save in debt consolidation?

By consolidation your debt with a home equity loan let you have the flexibility to plan ahead for your other living expenses needs. Home equity loan carries a much lower interest rate than most credit cards and other loans. And any interest you pay may be tax deductible. Hence, using home equity loan to write off your high interest rate debts such as credit card (more than 12% of interest rate) will leave you a high income balance (after deduce the month repayment for home equity loan) to budget for other needs such as send your kids to college, finance a new car & etc.

How much can you save?

That depends on your income bracket and annual percentage rate. But after deducting all the qualifying interest payments from your taxes, your effective APR will be significantly lowered. By comparing this lower interest rate to your car loan, credit cards and other installment loan’s interest rates which do not qualify for tax deductible, you can see why is a smart way of doing debt consolidation with a home equity loan.

Summary

Home equity loan is the best method to consolidate your high interest debts; it carries low interest rate, tax deductible and love by the lenders as the secured loan to their borrowers. Debt consolidation with home equity loan gives you the maximum flexibility to plan ahead.

Cornie Herring is the Author from “StudyKiosk-Credit Basics”- http://www.studykiosk.com/creditbasics. “StudyKiosk-Credit Basics” is an informational website on credit basics, debt consolidation and bankruptcy.



ALFREDO

Albert Alexander asked:


Home equity loans are sometimes used for consolidating consumer debt or covering a large expense such as a wedding, college expenses, or home repairs to your existing home. Home equity loans are great in that they use the collateral already invested in your home to secure the loan, allowing you to get a better rate out of the deal and make smaller payments than you would to a credit card or even on a personal loan. Home equity loans are desirable to borrowers because they oftentimes have a lower interest rate, they are easier to qualify for even if you have bad credit and your monthly payments on a home equity loan may be tax deductible.

In the past, home equity loans were more often than not used for home upgrades that would raise the value of your home. Nevertheless, these loans have become a feasible option for large, non-home improvement related purchases or even for consolidating outstanding debts into one monthly payment at an affordable interest rate. Even as home equity loans are a great means to release extra cash which is tied up in your home, borrowers must be fully aware that they are using their home as collateral. If a situation arises and their loan requirements aren’t met, they could lose their house.

Lenders consider several factors such as your credit history, ability to repay the loan, and your homes equity (noted above) when deciding how much money to lend. Although the chances of your approving for an equity loan may increase, you’re not going to get a complete pass on the “process”. Lenders will still have to review the credit history of potential borrowers to settle on their credit worthiness. Lenders will still have to review the credit history of potential borrowers to settle on their credit worthiness. Lenders will still have to review the credit history of potential borrowers to settle on their credit worthiness.

So how much can you get? The amount of your loan is tied to the equity in your home with is simply determined by subtracting the amount owed on the home from the current market value. Equity loans enable homeowners to borrow money against their home’s calculated value. The “equity” merely refers to the cash value that has grown in your house because you have been making your monthly payments over time.

Equity loans, secured by real estate, are normally deemed safer by lenders. Because of this your interest rates are likely lower than credit card rates or even consumer loans. Additionally, regardless of the rate, the interest on debt secured by the mortgage or lien on your personal residence is commonly tax-deductible. Please consult your accountant for more detailed information. Home equity loans are, essentially, fixed rate home loans that enable you to take advantage of the money you’ve already invested in your home to finance larger debts at a lower interest rate than most revolving credit options. Home equity lending, often referred to as a second mortgage or borrowing against your existing home, can open up a lot of avenues as a funding source for a current homeowner..

When all is said and done, home equity loans are a great option if you are confident in your ability to pay them off. Because they normally have a lower interest rate, are less difficult to qualify for (even with poor credit) and the interest may be tax deductible, home equity loans are a great alternative for homeowners. Like anything else however, buyer beware. Less reputable lenders frequently target people in vulnerable circumstances with troubled credit by suggesting what appears to be an easy solution. Hidden fees and confusing rate calculations can make a bad situation get worse.



RUBEN