Understanding Home Equity Lines Of Credit
When home owners find themselves in a cash crunch, and needing money for repairs, tuition, or medical expenses, most will turn to their lending institution to inquire about the possibility of getting a home equity loan. There is a new option available for home owners though, and those are home equity lines of credit which are taken out in much the same way as the loan.
Home equity lines of credit are exactly what they sound like. In essence, you will be using the equity in your home in much the same way as an unsecured credit card; drawing only what you need, as you need it. As with any type of financing available, there are advantages and disadvantages to home equity lines of credit. In this article, we will attempt to show you both the pros and the cons, so that you can make an educated decision as to whether home equity lines of credit may be the answer for you.
The Benefits
The advantages of home equity lines of credit greatly outnumber the disadvantages, especially if you only need a small amount of money to pay off a debt, or to pay for repairs to your vehicle or your home. The greatest advantage is that you are able to only draw money out of your equity in small increments, as they are needed. This is preferable to those who only need a few thousand dollars, as they do not have to worry about paying back a huge sum of money.
The other nice thing about home equity lines of credit, is that they can be much simpler to repay, as it is possible to take out a home equity line of credit at a much lower initial interest rate, than you would if you took out a full fledged loan.
The Disadvantages
Of course, the reverse is true as well. When you take out home equity lines of credit, you are generally going to be stuck with a variable interest rate. This means that as the interest rate changes, so will your monthly payment.
If you need to borrow a large sum of money, or do not think you will be able to pay back the money you borrow from your home equity lines of credit in a relatively short amount of time, then you may want to consider a loan instead. However you look at it, home equity lines of credit have helped many people get the money they need, when they need it. And they might for you, as well!
