Hidden Treasure in Your House - Home Equity Loans
There are probably as many reasons for borrowing money as there are trees in the forest. Some of the most common needs for extra funding are for home or automobile repairs, tuition for college or university, consolidation of accumulated high-interest debts and medical expenses that are not covered by a health insurance plan.
Depending on the status of someone's credit rating, it may be easy or difficult for them to be able to qualify for a loan. If you have a good credit history, have been regularly employed at a job for several years, and have generally established yourself as someone who is responsible with money, then obtaining a loan may not be too hard.
On the other hand, if you are new to your location, have not been employed at the same place for very long, or have a history of making late payments on credit cards or other debts, then borrowing the money you need could be a problem.
People who would like to borrow money, for whatever purpose, are usually able to get the loan they want provided they have enough equity built up in their home. Equity is defined as the value of a home less the amount of money owing on its mortgage. If, for example, a home had a market value of $100,000 and it had $60,000 left to be paid on its mortgage, then its equity would be $40,000.
If that homeowner needed to borrow money, he or she may be able to get a loan for up to $40,000 on the basis that the home would be used as collateral. This means that, if the person borrowing the money was not able to continue making regular loan payments, then the bank, or whatever lending institution granted the home equity loan, could take ownership of the property. Obviously, this is a simplified analysis of the process, but, in a nutshell, it is description of the basic principle.
The person borrowing the money is known as the debtor, and the lending institution is called the creditor. Because the creditor has a fall-back position of being able to foreclose on the property being used as collateral, the rate of interest paid for a home equity loan is usually lower than a loan granted under circumstances of higher risk. Another advantage to the homeowner is that, in the United States, interest paid on a mortgage loan may be used as an income tax deduction.
In most cases, a typical home equity loan is calculated to be paid off in as short as ten years or as long as 30 years. Because of the fact that different lenders offer different terms, such as interest rates, a wise borrower will take the time to research several different lenders before making a final choice.
Marlie Parsons writes about bad credit and debt consolidation loans for the Home Equity Loans website at http://www.loans-home-equity.com
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