Can you answer curiousgirl’s question about Equity?:

I need a loan & some people had suggested I look into this because of the lower interest rates, instead of using high interest (not to mention EVIL) credit cards. But it’s not for a home & I don’t have enough collateral for the amount I’d like to borrow. I have a great credit score over 700, but also have student loans & other credit card debt, which I am very good at paying at, & make enough to make the payments comfortably. If I can’t get a home equity loan, what kind of loan can I get, & at what amount & rate should I expect? I’ve looked around online, but all the bank terminology does nothing but confuse me, so anyone who could explain this a little more “user friendly” would be helpful!
It’s not for home improvement. Actually, it’s basically a business expense, but I’m not sure if a bank would consider this a business type of loan.
Oh, & one *minor* detail… I don’t own a home

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Can you answer happydawg’s question about Equity?:

I requested $10,000 dollar home equity loan to roof my house.
My FICO score was 780 until approx March when I applied for a home equity loan at a fixed rate. Now my FICO score is 740. What happened? I am never late on any payments. I pay over the minimum amount do on my card every time.

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If you are in desperately need of cash and you can not get approved for unsecured loans due to your bad credit history, you needn’t get depressed or despair. Home equity loans can provide you with all the financing you need at very reasonable rates and with loan installments you will be able to afford with ease.

Home equity loans have so advantageous terms that more and more people are requesting them everyday. It is such a simple finance solution that homeowners have nothing to worry about if something unexpected happened and they need extra cash to cope with it. They just need to request a home equity loan, sit down and relax.

Equity Provides Larger Loan Amounts

When requesting a home equity loan, you can be confident to get larger loan amounts than with unsecured loans. Provided that you have sufficient equity on your home, you will be able to get up to 85% or 90% financing on your home value. Only those with perfect credit can aspire to obtain 100% financing or even more.

If you have $40,000 of equity left on your home, you will not be able to get that total amount unless you have perfect credit. The amount of your home loan and the amount of you home equity loan added up usually can reach up to 85% of the home value. Thus, if you have an outstanding mortgage of $60,000, you will be able to get only $25,000 on your home equity loan.

Equity Provides Lower Interest Rates

Home equity loans carry lower interest rates than any other kind of loans. The only loans that may carry a slightly lower rate are home loans and certain subsidized student loans, business loans and home loans. Moreover, compared with cash advance loans, credit cards, pay day loans and other unsecured loans, the interest rate charged by home equity loans is drastically lower.

Though your credit score may modify the interest rate you will have to pay upon loan approval, given that home equity loans are secured loans, the interest rate will not vary that much. Moreover, home equity loans are the only way for bad credit applicants to get competitive rates. With unsecured loans bad credit applicants usually get nothing but abusive interest rates.

Equity Provides Longer Repayment Programs

Another benefit that home equity loans provide is the fact that these loans come with longer repayment programs. Thus, by extending the loan’s term, you can easily obtain low and affordable monthly payments so as to fit any budget. Compared to unsecured loans, these loans provide very flexible repayment programs.

While unsecured loans can generally be repaid in up to 48 months, home equity loans can last as much as 10 years and sometimes even more. This is particularly useful when you need to request high loan amounts because otherwise, the loan installments would be completely unaffordable.

Equity Provides Easy Approval

Finally, as regards to loan approval, since home equity loans reduce considerably the risk involved for the lender in the financial transaction, the approval process is fast and without hassles. There are not many credit requirements for loan approval. Moreover, there are some lenders that will approve home equity loans for people who have had recent bankruptcies or defaults.



Thanks to Melissa Kellett for contributing this article to our Equity blog:

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Ever feel lost when people talk about subjects like a home equity loan? It certainly does sound something like what you would hear on a business news show. But for every homeowner or someone considering property purchase, home equity is an important concept to grasp. It really isn’t very complicated either. Therefore, piror to understanding a home equity loan, let’s first talk about home equity.

What is home equity?

Equity can simply be understood as the monetary value of something you own after you deduct the amount of outstanding loan you have on it. For example, if your house is worth $200,000 and you owe your finance company $50,000, then the equity of your home would be $150,000. So basically, the more loans you clear on your home the greater equity it will have. A surge in the real estate market and prices of property also helps in adding on to your home equity.

What is a home equity loan?

Now that you have an idea of what a home equity is, let’s get into a home equity loan. Simply put, it is the process of taking a second mortgage on your home. For example, if your have recently bought a house for $200,000 on mortgage, a home equity loan will allow you to secure a second mortgage of 25% of your first mortgage, which would be $25,000 in this case. Depending on the lender, one may even be given as much as 80% of the original mortgage for their second mortgage.

Six key aspects to consider

1. First of all, issue a home equity loan only if you must. It is always better to not have any additional loans than the one you already posses.

2. If you do feel you need to secure a home equity loan, then you will generally need to have a great credit score since this loan is mostly given to those who are considered “qualified borrowers,” i.e. those who have a good track record of paying back on time what they have borrowed.

3. Keep in mind that apart from the credit score, your home itself will also be on the line as collateral with the lender. So defaulting on your loan could result in losing your home.

4. One good advantage of a home equity loan is the fact that the interest rate is generally lower than those of credit cards. So if you do need to borrow money through a credit card for something large, then this would be a less expensive option. But make sure you do a proper comparison of the cost of borrowing money with other options that you might have.

5. The interest you pay on your home equity loan is also tax deductible, which can be a huge benefit when you are cash strapped. But there are limitations to this, so look into it carefully.

6. Shop around. Don’t jump into the first option you see on being issued a home equity loan. Find out how you can get the best interest rate (fixed or adjustable) and read the fine print on your withdrawal limit.



Thanks to Alan Lim for contributing this article to our Equity blog:

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