Equity Loan In Your Best Interest

2007-03-08 10:33:40

( Financial )



Equity loans have become the fastest growing form of consumer loans in recent years. An equity loan in your house gets you the most economical cost of borrowing available today. Equity loans give you tax deductibility features and low interest cost, making them superior to other types of borrowing.

Equity loan rates can be low, or even zero. Where you pay interest on the loan, it is considered as mortgage interest and thus, in most cases, tax deductible. However, interest on amounts in excess of 100,000 dollars is no longer tax exempt. That part of an equity loan in excess of 100 percent of the value of your house is also not deductible.

Means of Access

There are only two financial instruments which enable you to convert equity into cash, and both are inextricably tied to your home. One way is the home equity loan (or HEL), which is an equity loan fixed for a set term with fixed principal amount at a fixed interest. The second way is the home equity line of credit (HELOC or LOC), which is a standby credit line (much like a credit card) that makes cash available to you anytime you need it and you pay interest only if you carry a balance. Your financial needs and objectives will influence what mode of credit you will take.

Uses for Home Equity Loans

There are many uses an equity loan in these times can be handy. Among these could be:

• You can use equity loans to pay off your other existing debts (like high cost credit card debt) and consolidate them into one low-cost debt. Of course, you must make sure that you don’t raise your credit card balances back up.

• Reinvest the equity loan in your home and increase its value further.

• Get an equity loan in the form of a standby credit line for unforeseen needs (particularly useful if you lose your job and need funds to tide you over until you find another).

A word of caution: you should not take out an equity loan in your house recklessly. The house becomes the collateral, so you must make sure equity loans will be paid. Pay your monthly statement when it arrives and there should be no problem.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.