We all dream about having our own house. The mere idea of having a house which you can paint, repaint, fix the way you want itself makes us feel so happy. Imagine how happy you will feel when you own your dream house. A lot of us feel discouraged just by thinking about buying a house because of insufficient funds. You will be happy to know that a new type of loan has been trending in the world of finance and it is the home equity loan.
What is home equity loan?
This loan is also known as term loan. It is a loan, which is secured by your home. Let us look into it a little deeper. Home equity is simply the current value of your house minus the outstanding loans. These outstanding loans could be your mortgage as well. In another words, home equity is the amount you truly possess of your home. The rest of it is the amount or value that the bank owns.
The best part is that in case of home equity loan, your equity in your home increases as you payoff the mortgage. This loan works very much similar to a credit card. You can borrow the amount up to a certain level for the life of the loan. Your lender sets a time limit for that. You can withdraw the required amount of money during this defined period of time.
Why do you need to take this loan in place of applying for a credit card?
The concept of home equity loan is indeed similar to that of credit card. There is only and the bug thing that differentiates the equity loan from the credit card. You can borrow big amount in terms of equity loan but not in the case of credit card. Your credit history, income source, equity etc. all decides the amount you can receive in this type of loan.
Benefits of taking home equity loan
There are many other benefits of this loan other than the one mentioned above. A few of these are:
- Equity loans have longer borrowing durations and also fixed interest rate. This means you will get to do the payment in a more structured manner.
- You can borrow small or big amount. This means, even when you want to spend money in making improvement to your home, this loan is best. You can invest the money back into fixing your home and like that, you could continue to borrow the funds when you require it.
Now that you have a fair knowledge about how does a home equity loan work, look for a company or private lender that can lend you money as home equity loan. You will be surprised to see there are many such lenders in the city. There won’t be much of documentation work and availing such loans would not at all feel difficult. Give it a try today and make your house a beautiful home.