HOME EQUITY BASICS   Why They're Popular Term Vs. Line Of Credit What You Can Do With The Money Interest Rates For A Home Equity Loan Beware Of The 'Balloon' Payment Other Fees And Closing Costs What Lenders Look For Risks Of High LTV Loans The Good And Bad Aspects Refinancing A Home Equity Loan Beware Of Scams How To Cancel The Deal Final Words Of Wisdom Equal Credit Opportunity Act The Truth-In-Lending Act (TILA)

Here are several advantages and disadvantages for home equity loans:

Advantages:

• Interest on home equity loans are generally tax deductible up to $100,000
• Banks love this type of loan because it is secured by the borrower's home
• Home equity loans can have much lower interest rates than credit cards or unsecured personal loans
• The money from this type of loan can be used for a variety of uses such as, paying off debts, buying a new car, medical costs, college education, etc.
• Home equity loans stimulate the economy because the money is circulated back into the market
• Can be used to improve your credit rating by paying off other debts
• Usually takes less time to obtain than your original mortgage (2 weeks versus a month or more)

Disadvantages:

• You can lose your home if you default on your payments
• Home equity loans can be risky for young homeowners whose jobs are not as secure or established as older borrowers, and who have less experience owning a home and managing money
• They can also be risky for older borrowers who may be tapping into their retirement fund
• The interest rate on an adjustable-rate home equity loan can increase dramatically during an adjustment period
• 125 percent home equity loans are not totally tax deductible
• Under certain circumstances, lenders can freeze a borrower's line of credit, or demand full payment of the loan
• You may not be able to lease your home during the term of the loan

 

Correcting Your Credit

Credit Advice

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Home Equity Loans

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Miscellaneous

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