Consolidating debt home equity

Posted by / 25-Aug-2016 12:30

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So, for example, if you owe 0,000 on a home valued at 0,000, a home equity loan enables you to borrow against that 0,000 in equity.

Home equity loans are fixed-rate installment loans, meaning they’re repaid in equal monthly payments over a fixed period of time – usually in the neighborhood of 15 years.

Often referred to as unsecured loans, personal loans are typically fixed-rate loans, and, like home equity loans, involve borrowing a lump sum of money to be used at the borrower’s discretion and repaid in equal installments over a defined period of time.

Interest rates on personal loans are typically determined by a borrower’s credit score and history.

If you have significant equity in your home, have the cash needed to pay upfront fees, and are willing to navigate a longer and more tedious loan process, a home equity loan is likely your best choice, as it will usually yield a lower interest rate, longer loan term, and lower monthly payment.

By comparison, some personal loans process in days or less.Many apply for a home equity loan from the same lender that provided their mortgage, but you’re free to shop around for the best offer.Remember, too, that a home equity loan is not to be confused with a home equity line of credit, or HELOC.Though a HELOC is likewise money borrowed against the equity in your home, it functions as a revolving line of credit, much the way a credit card does.Your lender sets a credit limit based on the equity in your home, and you can borrow against that limit at any point while the line of credit it still open.

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So, to recap, the typical advantages of a home equity loan include lower interest rates, longer loan terms, lower monthly payments, and, provided you have necessary equity, the ability to borrow larger amounts of money.

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