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A Guide to Home Equity Lines of
Credit
by: John Mussi
It seems as though you can't turn on the television or
read the
newspaper without seeing some advertisement for lenders
offering home
equity loans or lines of credit. Perhaps you aren't
really in the
market for a loan, but after seeing all of the
commercials and ads
have begun to wonder about getting a line of credit.
Maybe you want to
do some home improvements, or are looking for a way to
pay for some of
the extra expenses that come up in your life.
It's important that you understand exactly what home
equity lines of
credit are and exactly how they work before you begin
looking for one,
however... after all, you don't want to get in over your
head without
even knowing how you got there.
Defining Home Equity Lines of Credit
The first thing that you need to know when working with
home equity
lines of credit is exactly what they are. As the name
implies, a home
equity line of credit is an amount of credit granted by
a bank or
other financial institution that uses the equity that
you have built
up in your home or other real estate as security to
guarantee that
anything charged to the line of credit will be repaid.
This line of
credit acts just like any other credit card or credit
line, with the
only major exception being the nature of the security
used for the
credit line.
Common Uses of Home Equity Lines of Credit
Since home equity is usually quite high in value, the
amount of credit
that can be established in a credit line based upon it
also tends to
be quite high. This can open individuals up to credit
limits that they
have never had before, which they can use for a variety
of different
purposes. Many individuals who take out credit lines
based upon the
equity in their house or other real estate use the new
credit for
larger projects, such as home improvements or debt
repayment.
These lines of credit might also be used to pay for
college or other
educational expenses for individuals or their children,
or may simply
be used as the means for financing the vacation that a
person has
always wanted to take but has never really had the
money.
Obviously, the choice is up to the homeowner... but it's
important to
keep in mind that whatever is borrowed against a home
equity line of
credit will have to be repaid with interest.
Applying for a Home Equity Line of Credit
A home equity line of credit can be applied for at any
bank or a
variety of non-traditional or specialty lenders who deal
with home
equity. Even most online lenders are able to grant this
type of credit
line. Treat the credit line application as though it
were a mortgage
or equity loan, and take the time to shop around for the
best interest
rate and credit terms.
Compare the various quotes that you receive from various
banks and
lenders, making sure that you carefully consider the
benefits and
drawbacks of the various credit terms that you are
offered.
When you submit your final application to the bank or
lender of your
choice, it should be because you have decided that it is
the best
overall deal among all of the offers that you received
instead of
simply being the offer that had the lowest interest
rate. |
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