Home equity loans and lines of credit are used by more and more Americans to fund major expenses such as medical costs, tuition, debt consolidation, home improvement and repair and other expenditures. Home equity lending is one of the most profitable and fastest growing consumer loan products. A home equity line of credit is a type of revolving credit where the borrower’s home is used as collateral. Through a home equity credit line, homeowners are able to access cash within a specified amount of credit or credit limit.
A home equity line of credit works just like a credit card in the sense that you are granted a credit limit that you can borrow against whenever you need the money. By paying your debt, you can free up more credit that can be spent later. The lenders determine your credit limit by subtracting the balance owed on your existing mortgage from a percentage of your home’s assessed value.
A home equity line of credit has variable interest rates instead of fixed rates. This variable rate is based on a publicly available index including a prime rate or the rate of a US treasury bill. If you are planning to apply for a home equity credit line, the interest rates offered are one of the most important factors you should consider.
Before you decide, do research on all home equity line of credit offers available to you. Since a home equity line of credit is one of the most popular consumer loans, there are a large number of lenders offering them. Examine the terms and conditions, as well as the credit agreements of the different plans carefully and pay special attention to the annual percentage rate and the costs of setting up the plan. Compare the various offers and pick the best deal available to you.
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