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Home Equity Loans - The Essential 5 Questions Before Deciding On A Home Equity Loan Or A HELOC
By Steven Turner
When applying for a Home Equity Loan there is a little more to it than just needing some extra cash for paying off some debts, some home improvements or a new car. There are several questions that you need to consider before going ahead with the loan. Answering these questions will help you decide if you need a Home Equity Loan or a HELOC (Home Equity Line of Credit)
How do I need the money, in a lump sum or in several smaller installments? If your need is for smaller installments then a HELOC is more beneficial to you, this would be for college fee's as HELOC allows you to take the sums in smaller, periodical sums. Where as a Home Equity Loan means that you get the sum in one bulk.
Am I using this for something long term or short term? If you are buying a new car or refitting your kitchen or bathroom then this is longer term and a Home Equity Loan is probably the best option for you. Where if you are using the money on a wedding or over for putting a child through college for a semester then a HELOC would be more beneficial to you.
How much can I afford to pay back each month? Home Equity loans require that the monthly payment is made up of both an interest payment and principal payment each month for the life of the loan. A HELOC on the other hand allows you to just pay the interest for a period of several years if this is more comfortable for your financial situation. It is your choice if you want to pay off interest or get into paying off the loan straight away.
Is the temptation of a HELOC just too much? This question is very important, if you feel that you would use a HELOC as a credit account rather than as an essential line of credit then you should opt for a Home Equity Loan. It is very easy to get into the habit of borrowing against your home when you have a line of credit available.
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Will a fluctuating rate of interest be a problem to me? With HELOC the interest rate is one that will more than likely change when the Federal Reserve rate goes up and down. If the posibility of paying more one month than you did the last worries you or your financial situation doesn't allow for this then you should consider a Home Equity Loan as this is a fixed rate for the term of the loan.
Once you have answered these questions you should be more comfortable in choosing which loan is best for you and you can now move forward with your choice of Home Equity Loan or HELOC.
For more valuable debt relief and free financial planning advice try visiting Online Money Advice located at http://www.onlinemoneyadvice.net where you will quickly and easily find a wealth of information on debt consolidation, credit repair and Home Equity Loans advice that will help you financially and give you peace of mind for the future.
Article Source: http://EzineArticles.com/?expert=Steven_Turner
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