The Dos And Donts Of Home Equity Loans

By 9Fs5Ym On February 3rd, 2017

By Sean A. Kelly

Home equity loans are the kind of loans you take to obtain funds for other purposes by putting up your home as collateral. You might need the money to refurbish your home in order to increase its market value or perhaps for college education. Whatever the reason, it is always advisable for you to fully understand all that a home equity loan entails. The allure of getting a second mortgage on your home at a lower interest rate might even be so irresistible that you jump into it without knowing the full extent of the loan that you are taking. So although home equity loans may be designed to help you gain the funds that you need for other purposes, you might want to keep a level head in order to be able to make a sound judgment based on facts and information rather than the flimsy temptations of catchy offers and deals.

One of the things that you may like to do is to read all the fine print and clauses of the terms and agreement of the loan in order to watch out for terms such as pre-payment penalty, credit insurance or interest rate increase in cases of default. Many lenders will probably not reveal this home equity loans information unless you ask specifically about the clause from which the phrase was found. So it may be wiser for you to read every single word there is on the terms and agreement document and ask as many questions as you want until you fully understand what you are about to get yourself into before you sign any agreement. If you find yourself disagreeable to anything at all, you might want to negotiate with your creditor so that you will not end up being in a bigger debt than you originally were.

Abusive lenders and unscrupulous creditors are always on the predatory lookout for potential victims so you might want to be extra wary and alert in case you should bump into such characters on your hunt for the best home equity loan provider. There are tell-tale signs that can help you be more vigilant and aware that you are probably about to be conned into agreeing to something you are not there for in the first place. Some of the signs could be if they tell you to falsify your personal information in order to look good on paper, if they make you sign a blank document which they will fill in for you later, if they are unwilling to fully disclose all pertinent information of the loan you are applying for even when you have asked them for it or if they refuse to give you a copy of the deal they are offering you. It is probably a good idea for you to make a run for it should you find yourself in this kind of situation.

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While on the hunt for the best home equity loan provider, it might probably be a good idea for you to compare home equity loans interest rates in order to land yourself a very good deal. It might not be enough to simply base your decision on the introductory low figure on the advertisement banner. It is advisable that you compare the annual percentage rates (APR) of different home equity loan providers instead of the monthly interest rate alone. You will probably get a clearer picture as APRs will include all the fees and point charges that you will have to pay in the long run.

Some home equity loan providers offer a balloon payment scheme where the life of your loan is considerably shorter than a conventional loan but at the end of the loan term you will be forced to pay the remaining balance in one lump sum. Considering that you are putting a second mortgage on your home, you are probably in need of a large sum of money and you are probably less likely to be able to cough up even half of the amount of money in a few short years to pay your creditors back at all once. So unless you are really sure that you can make the final lump sum payment at the end of the loan term, it is advisable that you avoid agreeing to such arrangement.

Once you have gathered all the relevant and pertinent information regarding several home equity loan providers, you would at least know that you will be making an informed decision. By considering every single factor of the loan you are planning to take, you may be able to reduce the risk of ending up paying a higher figure than you originally planned to.

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