Home Equity Loans - Are They the Best Way to Borrow Money?

The Home equity Loan or HELOC has been around for many years and in the past has been a useful tool in helping middle class families do improvements on their home, send a child to college or even help provide starter capital for a small business. The concept is based on the idea that your home is worth a set amount in the current market, for example $250,000. Your mortgage balance is a portion of that market value, for example $ 100,000 leaving you with $ 150,000 in equity.

Home Equity Loans - Are They the Best Way to Borrow Money?
By [http://ezinearticles.com/?expert=Alan_Fernandez]Alan Fernandez

The Home equity Loan or HELOC has been around for many years and in the past has been a useful tool in helping middle class families do improvements on their home, send a child to college or even help provide starter capital for a small business.

The concept is based on the idea that your home is worth a set amount in the current market, for example $250,000. Your mortgage balance is a portion of that market value, for example $ 100,000 leaving you with $ 150,000 in equity. This equity can be accessed via a loan or line of credit up to a certain percentage of that equity amount. Any debt against that equity lowers the value of the equity above total debt (mortgage and Home equity). So a $50,000 loan against the equity would lower the available equity for future loans to $100,000. Or a line of credit (more common use of HELOCs) where $20,000 was actually used would lower available equity to $130,000.

Home equity loan repayments are tax deductible to the consumer and in a stable economy where interest rates are low a family with substantial enough income to make the payments or pay off large chunks of the loan can do well.

Unfortunately, the current atmosphere for these loans is bleak. People borrowed on the equity of their homes for any number of wise or unwise reasons and saw the value of their homes shrink along with any available equity. Some saw the reduction so severe that the loans outstanding were more than the worth of the house.

Also, unfortunate is the rise of unscrupulous lenders and their agents and brokers who decieved people into loans they could not afford such as mortgage brokers who neglected to tell their client about the escrow (property taxes and homeowners insurance) that would be due on top of their regular mortgage payment thereby doubling the anticipated promised payment to something less affordable.

Or the bank who gave kickbacks to appraisers to over-appraise a home so that more equity would be available; equity often borrowed on at the closing. More business for the lender, bad for the borrower.

When looking at a home equity loan try to find a reliable lender through research, ratings and word of mouth. Next, look at rates. Some are set at the Prime Interest rate or slightly above. They vary from lender to lender as well as do the closing costs. Next, determine the length of time on the loan. Remember the loan will be structured to indicate the amount of your payments representing interest only. If you pay via that method you will be paying interest but not decrease your principal.

Most importantly, do an honest self appraisal of why you wish to use the equity in your home.
Many people use HE loans to pay back high interest credit card debt. What happens all too often is that the credit card is not destroyed as it should be, but used again later. Credit card debt thus increases and the HE loan still hasn't been paid off and so total debt has increased.

Going into debt can be useful if well planned and thought out but many times the lender is plunged into a cold, murky place where no matter what...the loan has to be paid back.

Alan S. Fernandez is president of Foundation Financial Services with a BBA in Finance and Economics from Iona College, studied under the Life Underwriters Training Council and Certified Financial Planner programs and with 15 years in the insurance industry is a well known problem solver among businesses and individuals alike. He is also an insurance instructor with Citicorp. He can be contacted at [mailto:afern109@optonline.net]afern109@optonline.net or visit the FFS website at http://www.foundationfinancialservicesny.com

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Learn How to Get a Bad Credit Homeowner's Loan

Owning a home can be expensive. Not only do you have mortgage payments to make every month, you have to consider the upkeep of the property, as well. If your home is crying out for much-needed home improvements or remodeling, or if you would like to add on another room or additional bath, yet you do not have the cash on hand to pay for it all, you are probably looking for a loan.

Learn How to Get a Bad Credit Homeowner's Loan
By [http://ezinearticles.com/?expert=Jess_Peterson]Jess Peterson

Owning a home can be expensive. Not only do you have mortgage payments to make every month, you have to consider the upkeep of the property, as well. If your home is crying out for much-needed home improvements or remodeling, or if you would like to add on another room or additional bath, yet you do not have the cash on hand to pay for it all, you are probably looking for a loan. If the loan officer at your traditional bank just slammed the door in your face because of your bad credit score, then why not apply online for a bad credit homeowner's loan?

The best servicer for your bad credit homeowner's loan waits just beyond the next click of your mouse. That's right, online lending to homeowners is becoming very popular. There is a special group of lending institutions that only finance homeowners with bad credit, filling the gap to help you get your house in tip-top shape.

Money for Remodeling, Repairs, and More

In essence, the bad credit homeowner's loan is a second mortgage on your home. This second mortgage can be used for the needed repairs or remodeling that you have dreamed of, and you can get affordable rates and terms that will make your payment easy to manage.

By visiting the lender's secure website, you can find out information about getting the bad credit homeowner's loan that you need, and get your cash deposited into your bank account in as little as 48 hours. The application process is simple and brief; there is very little red tape to cut through with your online bad credit homeowner's loan. You can be approved in a very short period of time.

Invest in Your Property

By taking out a bad credit homeowner's loan, you are borrowing against the equity you have built up in your home. Further, using your loan proceeds to make home improvements adds to the marketable value of your property. This means that when you go to resale your home in the future (if you plan to), you will be adding to its value immensely. As a matter of fact, for every dollar that you put into your home, you can expect to add double that to the value of the home. For example, investing $10,000 today can make a $280,000 home worth $300,000. That is a huge profit on a small investment.

When you receive your bad credit homeowner's loan, it is the perfect time to develop better borrowing habits. The most-handed out piece of advice that financial advisors give to those who borrow money is to make every payment, every month, before it becomes due. Just one late payment can knock your credit score down by as much as 20 points. A second late payment can deduct an additional 50. Being a responsible borrower means that you get your payment in before it is due - no exceptions. By establishing a positive payment history with your new lender, you qualify yourself for lower interest rates and higher lines of credit the next time you need to borrow.

Jessica Peterson is a [http://www.yourloanservices.com/bad-credit-loan-personal-unsecured.html]Unsecured Personal Loan Consultant with more than twenty years of experience. For more information about Guaranteed Bad Credit Personal Loans, Guaranteed Credit Cards, Unsecured Loans, Fresh Start Loans, Debt Consolidation, Student Loans and others please visit http://www.yourloanservices.com

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