If you own a home, your options for tapping into your equity are
numerous. Some homeowners choose to refinance their home and cash-out at
closing. This may serve a two-fold purpose. You are able to lower your
interest rate, while acquiring a lump sum of money. Those who want access
to emergency cash may opt for an equity line of credit. However, if you
are not interested in refinancing, but need extra cash, a home equity
loan may be the perfect choice.What is a Home Equity Loan?A home equity loan is very similar to personal bank loans. However,
unlike personal bank loans which are difficult to qualify for, you may get
an equity loan with good or bad credit. Lenders are more eager to
approve a home equity loan because the funds are secured by the property.
Thus, if you have a low credit score, you may obtain a loan. Of course, a
low credit score may result in a higher mortgage rate.When to Get a Fixed Rate Home Equity Loan?Before applying for a home equity loan, carefully consider the
advantages and disadvantages. A home equity loan is a second mortgage. Instead
of paying one monthly mortgage, you are now responsible for two
mortgage payments. The second mortgage is generally cheaper, thus easier to
payoff.Home equity loans are ideal for consolidating or eliminating high
interest credit card debts. This way, you are able to pay off your consumer
debt at a low fixed rate, and within a specified time frame. Home
equity loans are also useful when you have a large expense.When to Avoid Home Equity Loans?While home equity loans are very tempting, avoid applying for a loan if
you cannot afford another bill. In some cases, a second mortgage may
improve your finances. By consolidating credit card debt, you may save
money each month. However, if you are having a difficult time paying
creditors on time, do not get a home equity loan. More than likely, you
will also struggle to pay back the second mortgage. Thus, you are placing
yourself at risk for losing your home.