Here in Florida home equity loans are advertised everywhere that you go and by all accounts these loans are giving many people the opportunity to have a better financial situation. Home equity loans allow people to borrow against the value of your home and they can be used to free up some cash within the home and allow you a lump sum to help out with your monthly costs or perhaps even for a holiday or another expensive event. If you are considering taking on a loan such as this there are of course pros and cons to consider and here are a few of each which you need to consider.
Let’s get started with the benefits that a loan like this can provide you with.
Fixed Rates – This means that if interest rates rise, your payments will not be affected by the change
Low Borrowing Cost – The interest rates which you will find on home equity loans are generally lower than the rates which you may get on personal loans or even on credit cards, because the home acts as collateral.
Cash in Hand – Of course through getting a home equity loan you will have that lump sum that you wanted in your hand which you can then use on a large event or to help wit your current financial situation.
Freedom of Choice – There is nothing to tell you what you should spend the money on and the loan is entirely yours to spend how you wish.
Now let’s have a look at some of the drawbacks of this kind of loan.
Interest Rates – These are usually higher for a home equity loan than they would be for a HELOC which is a credit line that you can use based on the equity in your home.
Risk – Using your home as collateral means that you will be risking the property if you don’t manage your repayments. Using the home can of course give you lower interest rates but with that comes the risk of repossession if you aren’t able to continue your repayment on the loan.
Costs – When you take out a home equity loan it usually comes with costs and fees, whilst you can usually combine these with the overall amount it does still mean that you are borrowing more. When you are weighing up your options as to where to obtain the credit that you need, this is something which you have to factor into your decision.
The choice as to how you get finance is yours of course and there is a great deal more positive information coming form a home equity loan for example than a personal loan or credit card borrowing. Before you borrow any money at all make sure that you have weighed up all options and calculated how much each type of loan will cost you .