Home Equity Loan
We talk about home equity loan , A home equity loan is a loan that is available to you against the equity you have in a property. It can be availed for any purpose and is available on both residential and non-residential properties. The loan amount is calculated based on the current market value of the property. A type of consumer loan, home equity loans are also known as equity loans, second mortgages or home-equity installment loans.
Types of Home Equity Loans :-
Talking about the types of home equity loans, there are two types.
(1) fixed rate loan
(2) Home Equity Lines of Credit (HELOC)
(1) fixed rate loan :-
If we talk about fixed rate loan then this loan offer a lump sum payment to the individual. The amount can be repaid over a stipulated period at the agreed interest rate. The interest rate does not fluctuate depending on market conditions and remains the same throughout the life of the loan.
Home Equity Line of Credit :-
A home equity line of credit (HELOC) is a variable rate loan that works similar to the way a credit card works. Loans may be offered as a bundled package with a credit card, allowing you to make withdrawals on loan or through cheque. Known as a HELOC, this type of home equity loan allows you to borrow a portion of a pre-approved amount given by the bank.
How does a home equity loan work?
A home equity loan works similarly to a home loan. In both cases, the house acts as collateral. However, for home loans, the eligible loan amount is up to 90% of the market value of the home. Whereas, with a home equity loan, you convert your home equity into cash. Repayment will include principal and interest payments.
Now we give some information about home equity loan. So that you will know about all the benefits of home equity loan.
Benefits of Home Equity Loan :-
(1) Helps utilize the otherwise unused monetary value of your property.
(2) These are easy to qualify for because they are collateral-based loans. You can get approval on the loan even with a bad credit score because it is a secured loan.
(3) It helps cover any major expenses you may have as the loan amount given to you is a lump sum.
For what purposes can I use a home equity loan? :-
You can use a home equity loan for any personal reason, from taking a vacation to paying your medical bills, covering your child’s tuition expenses, planning your wedding, etc. This doesn’t have to be related to covering your household expenses.