Tip & How-To about Finance

Pros and cons of home equity loans

There are some really great benefits to taking out a home equity loan. First because the loan has a fixed interest rate there will be no fluctuation as the economy changes. The money that you borrow in a home equity loan can be used to pay off credit cards and will help you to consolidate all your debt into a single payment that you make monthly. Even though the interest rate on a home equity loan may be higher than that of your mortgage it will still be lower than if you were to use credit cards to pay off your mortgage. And finally the interest on the loan may be tax deductible and depending on the use of the loan you may be eligible for leeway in deducting the interest.

At the same time there are a few things that you have to keep in mind before you take out the loan. When you take out a home equity loan you are borrowing a whole lump sum unlike home equity line of credit in which you only borrow as much as you need. You will want to be careful what you spend the money on, if you were to spend the money on remodeling your house then you have a greater chance of the value of your house appreciating as opposed to buying a car that as soon as you drive it off the lot beings to depreciate in value. Probably the most important thing to keep in mind is that when you take out a home equity loan your house is held as collateral so in the case that you are unable to make payments then you will lose your house.

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3 Answers

Is it advisable to take a home loan for your new house?


Yes, it is always good to finance your home purchase with the help of a home loan.
Below mentioned are the following reasons to support my comment.
  • It is easy to apply for a home loan and get quick approval (if you apply in any renowned NBFC).
  • The rate of interest of a home loan is usually the lowest among any other type of loan.
  • You can repay the loan slowly and steadily for a long period of time. The tenure of a home loan is generally between 20-30 years.
  • You can avail tax benefits from your home loan. You will get tax deduction upto Rs.2 lakhs (Rs.1.5 lakhs on principal amount and Rs.50K on the interest).
  • You can apply for a home loan along with another partner, that means, you can apply for a joint home loan.
  • You can get top up loan above a home loan, in case you have some scarcity of money to finance your home purchase.

Jan 09, 2017 | The Computers & Internet

5 Answers

Which home loan is better: Long term or Short term?


A home loan is always considered to be a good debt. So, longer home loan tenure is going to benefit the applicants more. An applicant who is apply for a home loan online, you enjoy the benefit of tax deduction for the entire tenure of the loan.
In case of short term home loans, your house loan EMI amount will be pretty high, so you may not be able to afford it. But you have to repay less to the lender. But in case of long run, your per month repayment will be less and affordable, but you will end up paying much more than what you have actually taken as loan. Your principal amount and your repayment amount will have a huge difference.

Jul 25, 2016 | The Computers & Internet

1 Answer

Do I have to have good credit to take out a home equity loan?


Because your house is held as collateral for a home equity loan your credit score isn't a huge factor. But that doesn't mean that it has no effect, having a low credit score will make your interest rates higher. You can find a comprehensive chart here: http://www.myfico.com/loancenter/homeequity/step4/fairloan.aspx

Aug 26, 2013 | Finance

1 Answer

where can I find rates for home equity loans?


bankrate.com has a really good home equity loan rates calculator. You can find it here http://www.bankrate.com/compare-rates.aspx

Aug 26, 2013 | Finance

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