A home equity line of credit, or home equity loan, is a very common type of loan that many homeowners use for all types of reasons. A home equity line of credit is when you put your house up as collateral on a loan. The money can be used for almost anything but some of the most common uses are for home repairs, outstanding bills, college tuition. A home equity line of credit can either be open ended or closed ended and is more commonly known as a second mortgage. You will need to have very good credit if you want to receive a home equity loan.
A closed end home equity loan is when you would like to receive a large lump sum of money right away and not borrow any in the future until you pay it off completely. The amount of money you are eligible for depends on many things such as the worth of your home, your yearly income, your credit history, and other factors. Usually, closed end home equity loans have fixed rates and can be paid off over a 15 year period.
An open end home equity loan differs from the closed end home equity loan as it allows you to borrow as much money as you need whenever you need it. The lender will establish a line of credit for you based on your income, the worth of your property, your credit history, and some other factors. The open end home equity loan can be very beneficial for you. These loans are usually at an interest rate that varies and you can spread the payments out for as long as 30 years or more. You can also just pay the interest if money is tight and receive no penalties though paying more than just the interest is recommended.
By allowing you to borrow money when it is needed the most, a home equity line of credit can be used for all kinds of important things. Home repairs and improvement is a very common use. Whether you want to improve your home or repair something, you can get estimates and borrow the exact amount that you need without having to pay in cash or use a credit card.
You never know when an emergency may arise and it is a wonderful feeling of security knowing you have a home equity line of credit. Medical emergencies especially can be very expensive and you probably don't want to empty your bank account and max all of your credit cards if something does happen. A home equity line of credit is a wonderful and easy backup plan that can be extremely helpful and offer you peace of mind.