A family’s most valuable asset is their home. Many homeowners use a Home Equity Loans or a Home Equity Line of Credit (HELOC) to finance big ticket items like a child’s college education, home improvements and even medical bills. If you are considering a HELOC, you’ll want to take advantage of the best credit terms without subjecting yourself to any undue financial risks since inability to repay the borrowed amount plus interest could cost you your home. Here are some things to consider.
It’s important to understand the difference between a home equity loan and a Home Equity Line of Credit. With a home equity loan a lender agrees to loan a maximum amount for an agreed upon time period (a term) with the borrower’s equity in his or her home as collateral. Equity is the amount of money you would receive after selling your home and paying off the mortgage. Home equity loans provide homeowners a one-time advance with specific monthly payments and a specified time frame for repayment. Home equity loans are a convenient way to borrow money because of flexible terms and competitive rates.