Home Equity Loans Vs Home Equity Credit–a Side By Side Comparison
15 Nov 2010If you need fast cash you can tap the equity in your home as a source of funding.
There are two main types of home equity loans. The standard home equity loan and the home equity line of credit.
A home equity is the portion of the mortgage that you actually paid-for which can be used as collateral for loans to finance other things.
A portion of the payments you make on the mortgage goes to interest rates or the money a lender earns off you, while the rest is the part of the home you actually own!
A home equity line of credit is not a loan per se. It’s a promise from a bank that they will loan you money up to a certain amount with the agreed upon interest rates. A home equity line credit is just a line of credit you can use anytime, it is an agreement with you and the lending institution that you can borrow money from it any time. You don’t owe anything yet until that time you borrow your first funds. Same way a credit card charges only start accumulating with your first purchases.
Home equity loans on the other hand are like any ordinary loan borrowed against your ownership of the house.
There are advantages and disadvantages to choosing the home equity loan option. Say if you need to borrow on the spot and you can pay for it right away, a home equity loan is a better source of funding because it carries lower interest rates as compared to a home equity line of credit. But say you needed funds in smaller increments, gradually over the course of several months or years? Then a home equity line of credit in this case makes more practical sense because you don’t have to pay the interest off the entire lump-sum right away.
Article Source: http://www.articledashboard.com/Article/Home-Equity-Loans-VS-Home-Equity-Credit–A-side-by-side-comparison/537791
About Author:
KyleB-is a writer and researcher in many fields including the financial markets. Save thousands of dollars today and avoid unnecessary interest rates and bad financial decisions. Free informative,crucial, and objective resources, tips and guide (nothing sold here) in the areas of Banking, Loans, Credit-repair, Debt Consolidation,Credit Repair and related areas. Click here (www.BankingandLoans.info) .