Home Equity Loan
The other types of home equity loan are much simpler to explain. You get the full loan amount in a lump sum, and then make payments until it is paid off (most often in 20 years). These other types vary primarily in terms of how much you can borrow, and how the interest is figured. A debt consolidation home equity loan is simply one where paying off other loans is figured into your qualification for the loan and the proceeds of the loan are paid directly to other lenders. You never get your hands on the money you are borrowing because part of the agreement is that the other loans will be paid off to make you eligible for the loan. No description of home equity loans would be complete without mentioning one of the primary benefits, which is that in most cases you can deduct the interest paid on the loan. Check with your tax accountant for details. In most cases it qualifies in the same way as interest for your first mortgage on your home. This can be a substantial benefit. It should be considered as a viable alternative to carrying a balance on any type of credit card, even those that have cash back or other rewards. Don't just look for a company that claims the best deal, shop around and compare the actual offers, being careful to read the fine print. You might want to compare the benefits offered by a home equity loan and a cash back card. |