Home Equity Loan Assistance: How Do These Loans Work?
Just last year, there were 14.5 million residential properties in the United States that were considered equity-rich. If you are a part of this statistic and need a little financial help, a home equity loan may be a good idea.
What is a home equity loan? Read our loan assistance guide to find out.
What Are Home Equity Loans?
A home equity loan is based on the equity in your home. This loan is a fixed amount that you will repay every month similar to your mortgage. If you don’t pay the loan based on the agreements, a lender can foreclose the home.
Generally, you can get up to 85% of the equity in your home. The amount you receive will also depend on these factors:
- Your income
- Your credit history
- The market value of the home
How can you find the right lender for home equity loan assistance? We’ll discuss that in the next point.
How to Find a Lender
Before searching for home equity loans, find a lender through recommendations. A good place to start is with your friends and family.
Don’t take the first lender you find. Shop and compare terms and amounts.
You can also get tips from brokers. These professionals can’t lend money but they help arrange the loans. Consider your options through savings, loans, banks, credit unions, and mortgage companies.
You can interview lenders you are interested in. During this process, ask for the loan types that may be available. Always make sure you understand the loan terms and conditions before signing anything.
If you aren’t aware of the specific conditions in your terms, you may experience higher costs down the line. You’ll need to know more than the monthly payment amount and interest rate because other factors can affect the cost.
For example, always be sure to make a note of the annual percentage rate (APR). There will also be fees for the application and loan processing.
As a general rule of thumb, you should negotiate quotes with more than one business. Lenders who know that you are shopping around for a great price are more likely to cut you a better deal.
Watch Out for These Practices
There are harmful home equity loan practices that lenders may use to take advantage of someone looking for financial help. The two most common problems you may run into are loan flipping and bait and switch.
Loan flipping is when a lender persuades you to refinance your loan often so that you end up borrowing more money. This leads to additional fees and an increase in debt.
Bait and switch is when a lender offers one loan term but pressures you to apply with higher charges instead. Only accept loan terms that you are comfortable with.
Do You Need Loan Assistance?
If you are considering a home equity loan, chances are, you need loan assistance. There are different loan types out there that will require you to reach out to a professional for guidance.
The biggest thing to take from this article is that home equity loan agreements should be exactly what you want. Take the time to find the right lender.
Personal finance is difficult to handle on your own. That’s why we are here to help! Check out our other finance articles for more great tips.