Debt Management > Reduce Fixed Expenses > Home Equity Loans |
Debt Kit -- Settle unsecured debts for less than half of amount owed Credit Kit -- Improve credit rating and reduce monthly bills by $200+ |
What to Look for in a Home Equity Plan If you decide to apply for a home equity line, look for the plan that best meets your particular needs. Look carefully at the credit agreement and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs you will pay to establish the plan. The disclosed APR will not reflect the closing costs and other fees and charges, so you'll need to compare these costs, as well as the APR's, among different lenders. There are two types of home equity loans -- the traditional home equity second mortgage type of loan and the home equity line of credit. Which one is best for you? Financial experts advise you to choose a home equity line of credit rather than a traditional home equity loan (second mortgage) when you plan to use the loan for the following purposes: (1) Costs that are recurring, such as medical bills, tuition costs or an extended home improvement project. The key words are "extended" or "recurring" -- when you plan to use the funds to pay extended, or recurring costs -- a home equity line of credit is the best choice in most circumstances. A traditional home equity loan, or second mortgage is advisable when you require a one time payment, rather than a series of recurring payments. Therefore, second mortgages are good choices for debt consolidation, home improvements or capital for starting a new business. A home equity line of credit vs. a second mortgage In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at the APR and other charges. You cannot, however, simply compare the APR for a traditional mortgage loan with the APR for a home equity line because the APRs are figured differently. --The APR for a traditional mortgage takes into account the interest rate charged plus points and other finance charges. --The APR for a home equity line is based on the periodic interest rate alone. It does not include points or other charges. |
Debt Kit -- Settle unsecured debts for less than half of amount owed Credit Kit -- Improve credit rating and reduce monthly bills by $200+ |
Debt Management > Reduce Fixed Expenses > Home Equity Loans |
