What Are the Benefits of a House Equity Loan or Credit Line?
Home equity lines of credit and home equity loans are, despite their names, two products that are different. A home equity line of credit acts as a charge cardHomeowners get a certain amount of credit based in their home’s equity and then use this to generate purchases, much as they would with a credit card. A home equity loan gives a lump sum of cash to homeowners, based on the amount of equity in their homes. Benefits come with the two kinds of loans.
Low Interest Rates
The biggest benefit of the home equity lines of credit and home equity loans is interest rates. A $30,000 home equity line of credit came with an average interest rate of 5.1 percent, along with a home equity loan to the identical amount carried a 7.49 typical interest rate in late July, 2010, according to Bankrate.com These rates are far lower than the typical interest rates charged by credit card companies. The Index Credit Cards site reported that the average interest rate on consumer credit cards dropped in 16.85 percentage in mid-July of 2010.
A home equity line of credit offers homeowners flexibility in how they invest their money. In reality, homeowners never have to draw on their line of credit. Many homeowners use it as a kind of financial security, knowing they can draw on their home equity line in case of emergencies such as roof repairs or automobile expense. But if emergencies don’t arise, homeowners can simply leave their home equity line of credit . Homeowners need to make payments in their home equity lines of credit only when they use it, much like with a typical credit card.
Many homeowners prefer home equity loans because of their stability. A home equity loan comes with a predetermined interest rate. But a home equity line of credit comes with variable rates of interest that could change based on the performance of particular financial indicators. The money is theirs After homeowners take out a home equity loan. They just have to make their monthly payments to pay it back. But, lenders can cancel a home equity line of credit or decrease its size whenever they desire, provided that they provide proper notice to their clients.