Equity Loan
A very desirable choice for those even with poor credit is to secure a Home Equity Loan. Generally speaking it is quite different from other personal loans and is preferred by both borrowers, for its easy availability, as well as by lenders because it is easy for them to recover their money if the borrower defaults.
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The basic concept behind the Home Equity Loan is to borrow the equity present in one?s home, that is, the amount left after subtracting the amount of mortgage loans (first and second) and any liens from the present value of the property. Talking about the amount that can be borrowed with the Home Equity Loan generally ranges from 75 to 125% of the appraised value of your home. Whereas the time period of the loan varies according to the amount borrowed. On the other hand the rate of interest on Home equity Loan can be fixed in nature as well as floating. Analyzing the fixed rate loan it provides a fixed amount of money at a fixed rate of interest, repayable in equal monthly installments over the life of the loan. Furthermore adjustable or floating rate Home Equity Loan is subjected to the fluctuations in the index upon which it is based. As a general rule of thumb the fixed rate loans carry a higher rate of interest than the floating rate loans. This happens because they are very secure and don?t carry the risk element that the floating rate loans do. Because of this simple point, although the fixed rate Home Equity Loans can seem to be costly in the beginning, they prove to be beneficial in the long run.
The Home Equity Loans can be utilized with utmost ease for a variety of purposes such as, for vacation, medical expenses, business expenses, household expenditure, investments, some major purchases, educational expenditure, purchasing a new automobile, renovation of home, debt consolidation etc. Taking the help of Home Equity Loan for purchasing a new car instead of using a car loan makes good financial sense as it carries a very low rate of interest as compared to the car loans. The most common objective for which people take Home Equity Loan is for debt consolidation. This is basically because of its low interest rates as compared to other types of loans can significantly reduce the overall pressure on anybody who is perturbed by his multiple loans. Moreover by consolidating his debts with the help of a Home Equity Loan, one can also improve his credit rating because it is easily available to anybody who possesses a house even if he has got a bad credit rating or who have filed for bankruptcy. All in all, it can be a good way for the people who are in financial trouble to make a new beginning.
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However, it is worthwhile depicting that as a home owner you should be extremely cautious before opting for any loan that demands your house as the collateral, as not paying it back can make you lose your most prized possession, i.e., your house. Thus, in case if used judiciously a Home Equity Loan can be of great help to anybody who is in any sort of financial trouble.
The real power of home equity and interest-only payments, provided from most home equity loans is amazing. Believe it or not you can get a home equity loan, with no closing costs and pay as little as $30.00 to $40.00 per month for up to $10,000 in equity cash. Generally speaking these loans are surprisingly easy to get for both residential and investment real estate.
The terms on these mind-blowing loans vary, but are quite nice. In an ideal scenario you can get them for up to 30 years, but they are usually completed in terms of 10 to 15 years. Apart from that you can always pay just the interest on the loan - a very low payment, or you can pay on the principal loan, if you desire. You have all the power you require. Another excellent part of home equity loans is that in many cases you can take out 100 percent of the equity. So, in case if you owe around $130,000 and your house is valued at $140,000, you can get $10,000. From now onward you'll need good credit to do this. Not to worry, however, if your credit has some deficiencies as you can still get at your equity.
Fact is you'll just get a little less, and you'll probably pay a little more. Whereas if you are told you don't qualify, don't despair; there is another way -- a cash out refinance loan. Quite a number of times a cash out refinance home loan gets at the equity you desire, but it puts a new first mortgage on your house for the entire amount, and you get the money that is left over. It may sound convoluted at first, but it really is not.
Now are you aware of what it takes to qualify for mortgage and refinance loans? There are number of factors involved with qualifying for a purchase, refinance or equity line of credit, and having an in-depth understanding of these could make the difference in you being accepted or turned down by a bank loan officer.
Below are few things loan underwriters use in seeing if you qualify for a loan: your credit rating; your income; the amount you wish to borrow in comparison to the value of the property, this is known as loan to value or LTV; your assets; cash on reserve to cover down payments and reserve funds to cover a few months worth of mortgage payments, in the course of event you can't pay for an indefinite period of time; your employment history.
Lots and lots of people worry about credit, even people who have excellent credit. Credit is such an unknown, that it is quite crucial that put your mind at ease. You can buy a house with poor or no credit at all. As a matter of fact, with a poor credit rating and only 3 percent for a down payment, you can get an FHA loan. Remember that FHA is not a credit score driven program, so you can qualify this way if you have to do so.
