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Seven Reasons to Apply For a Home Equity Loan

By Michele Lerner
Mortgage Credit Problems Columnist


Homeowners looking for debt relief may want to apply for a home equity loan. While conventional lenders will not always approve borrowers with excessive debt for a home equity loan, bad credit lenders may qualify homeowners as long as they have enough equity in their homes.

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The best way to find out if you qualify for a home equity loan is to enter your information on this page.

Seven Reasons to Apply for a Home Equity Loan

1. Interest rates on home equity loans, even for people who need a bad credit mortgage, are typically lower than most credit cards and other consumer loans.

2. Consumers with some home equity (more than 20%) can often qualify for a small home equity loan even if they have credit card debt. The amount you can borrow will depend on the level of equity in the home along with your credit score and your debt-to-income ratio.

3. Interest paid on a home equity loan, unlike interest paid on credit card debt or most other loans, is usually tax deductible.

4. Using a home equity loan for debt consolidation usually results in one monthly payment, a lower interest rate, and tax benefits.

5. Even if you cannot pay all your debt with a home equity loan, you can often reduce your monthly payments on the debts you wrap into this loan and then use the savings to pay down other debt.

6. Home equity loans can be used for home improvements and home repairs that will eventually increase the value of your home, adding to your equity.

7. Unlike refinancing, taking out a home equity loan is a low-cost option.

Although home equity loans can benefit homeowners and improve their finances through debt consolidation, borrowers need to be aware that if they cannot make the payments on their home equity loans they could lose their homes. Make sure you understand the terms of your loan and have developed a budget. Find out how much you can borrow and get an estimate of your payments by entering your information on this page.

Sources

http://www.investopedia.com

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