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Bad Credit Loans: Be Careful!
If you’ve gotten yourself over your head in debt, and suddenly have a need for cash right away, it is possible to get a loan for bad credit. Loans for bad credit will not give you a worse rating if you require a non-bad credit loan later down the...
Building Credit Ideas
There are several ways that we can build credit. If you are tired of collectors hounding you, or if you are frustrated that no one will loan you money because you never had credit, it is time to learn how to build your credit. First, and foremost...
Consolidate Your Credit Cards - Lower Your Monthly Payments
If you're like most North American people today, you go through
life carrying a fair amount of credit card debt. And if you're
like most North American people, you're okay with that. $100 per
month in repayments is fine, even if you're paying...
How Much Is Your Credit Card Really Costing You?
Most people do not give much thought to how much the use of credit cards really costs. While you may think you are aware of the costs of credit, there are many hidden fees and charges that often go unnoticed by consumers until it is too late. If you...
What Sets A College Student Credit Card Apart From Other Credit Cards
With college student credit card that today, most parents
contend that it is okay to let college students obtain their
very own credit card. Not only because they want to let their
kids manage their finances alone but also because having...
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Home Equity Loan Line of Credit Vs. Other Conventional Loans
When it comes to getting money, you have two basic options. If you are a homeowner you can choose to take out a home equity line or credit (HELOC), or you can take out a conventional loan. Both of these products will provide you with the funds needed, but the similarities end there. With varying interest rates and repayment options, you have a wide array of choices. We will discuss the differences between these two options, and then decide on which one is best for the typical homeowner. Remember, that everyone's situation is different, so use your best judgment when choosing a loan product.
You may already be familiar with a traditional loan product. These are usually based on your credit rating and your ability to repay the loan. The lender will review your past tax returns, credit score, as well as your salary. They may also factor in your income potential in the near future, if you are currently enrolled in a higher education program or up for a promotion soon. The main benefit of such a loan is that you have little at stake if you fail to repay the loan. They may have the ability to garnish your wages or hurt your credit rating, but you will be able to keep your home. The main disadvantage to this type of loan is that you can expect to pay a much higher interest rate than that of a home equity loan. You may also find yourself unable to take out as much as you would with a HELOC.
A Home Equity Line of Credit is a completely different time of loan. The bank will determine the amount of equity that you currently have in your home (value of the home- amount of liens= equity). They will then allow you a credit line that is a percentage of your equity. You will likely receive checks or a bank card that will allow you to make withdrawals
on your own schedule. You can borrow as little, or as much as you want as long as it is within your credit limit. You will then make monthly payments based on the balance of the loan. Most lines of credit will require a minimum payment to cover interest, but the actual payment amount is up to you. The process is very similar to that of a regular credit card, except that you have your home backing up your purchases. The main advantage to this type of loan is that you can usually enjoy a much lower interest rate, and pay as much or as little during the life of the loan. The main disadvantage is that if you fail to pay the balance off, you could lose your home. So it is important to only take out what you can repay.
Which one is better? It all depends on your personal situation. If you have had trouble in the past with credit cards and revolving credit, a HELOC could be a very dangerous thing. Maxing out your HELOC has a lot more at stake than maxing out a typical credit card. So it is important that you have your finances and budget in place, prior to taking out such a loan. If your credit is poor, a HELOC may give you options where a traditional loan would not. Bottom line; understand your situation and you should have no trouble deciding the right loan product for your needs.
John Ross is a freelance author, providing tips and ideas relating to home equity loans. You can find more of his articles at: home equity loan company, online home equity loans, and fixed rate home equity loan. The Loanchbox is a user friendly website designed to teach the basics behind home equity loans.
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