home equity loan bayou houseA Home Equity Loan is secured by your house which means lower interest rates and additional tax advantages. Consolidating debts into one loan can provide substantial savings in monthly payments. A home equity loan will generally allow you to borrow more money than with any other form of credit, and offer better terms than with other types of loans.

The days of having a home mortgage loan, a personal loan, a car loan, a savings account, a checking account and outstanding balances on credit cards are becoming a thing of the past. Financially, it makes sense to consolidate your various personal loans into one. The interest savings can then be used to pay down your debt principal.

Home equity loan companies will offer either a revolving line of credit or a one-time, closed-end loan. An online home equity loan revolving credit lets you choose when and how often to borrow against the equity in your home. In a closed-end loan, you receive a lump sum for a particular purpose, such as remodeling or tuition.

Consider carefully before taking out a home equity loan. Although this type of loan might let you take tax deductions you could not take with other types of loans, they reduce the equity that you have built up in your house. And if you are unable to make payments, you could lose your home.

Apply for a home equity loan through a bank first. Bank loans are likely to cost less than loans offered by finance companies. When comparing loan offers, make sure you understand the details. Read all materials and ask the following questions before you sign.

* What is the minimum monthly payment?
* What is the annual percentage rate?
* How much can an adjustable interest rate increase at one time?
* What is the maximum interest rate?
* What are the annual and transaction fees?
* If the loan is for revolving credit, how large a credit line is available?
* What are the initiation fees for a closed end loan?

A home equity line of credit (HELOC) often comes with variable interest rates (a few offer fixed rates). A credit line may come with attractive low introductory rates. You may find that some home equity credit lines have large one-time upfront fees, others have closing costs and some have continuing costs, such as annual fees.

Those loans with a large final (balloon) payment may lead you to borrow more money to pay off this debt, or they may put your home in jeopardy if you cannot qualify for refinancing. And, if you sell your home, most plans require you to pay off your credit line at that time. Because home equity loans give you quite easy access to cash, you might find yourself borrowing money more freely. Home equity lines of credit require that you use your home as collateral. This can put your home at risk if you are late or cannot make your monthly payments.

Remember too, there are other ways to borrow money from a lending institution. For example, you may want to explore 2nd mortgage installment loans. These plans also put an additional mortgage on your home, second mortgage money usually is loaned in a lump sum, rather than in a series of advances made available by writing checks on an account. Also, 2nd mortgages normally have fixed interest rates and fixed payment amounts.

Once approved for an equity line of credit, you will most likely be able to borrow up to your credit limit whenever you want. Typically, you will use special checks to draw on your line. Under some plans, borrowers can use a credit card or other means to draw on the line.

The federal Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable-rate feature. And in general, neither the lender nor anyone else may charge a fee until after you have received this information. You generally get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened. If any of the terms (other than a variable interest rate feature) change before you draw on the account, the lender must return all fees if you decide not to enter into the plan because of the change.

A home equity debt consolidation loan only works if you’re financially disciplined. This means you don’t run up debts again such as credit cards. If you do, you could end up with more debt than you can manage. Since your home is used to secure the home equity loan, failure to make payments could lead to foreclosure of your home.

You generally have the right to cancel the deal for any reason — and without penalty — within three days after signing the loan papers. The lender must return any money you’ve paid to date.

Negotiate with more than one lender. Make lenders compete for your home equity loan business by letting them know that you’re shopping for the best deal. Ask each lender to lower the points, fees or the interest rate, and to meet — or beat — the terms of the other lenders.

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