Home Equity Loan: A Smarter Way to FinanceDebbie Wilson
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If you have a need or desire to finance a large expense, a home equity loan might be the perfect solution. With its fixed payment schedule, low interest rate, and potential tax advantages, it is a flexible mortgage option that can help you get the cash you need from your current home.
Home Equity PerksAccording to the U.S. Census Bureau, approximately 7.2 million Americans obtained home equity loans in the past year. Home equity loans are a potentially money-saving option for consolidating debt, improving your credit score, or financing home improvement projects. They may also offer tax advantages that personal loans may not--if the loan meets IRS guidelines and you itemize your deductions. Because the loan is secured by your home, the interest rate is generally much lower than for unsecured debt.
What to Watch Out ForBefore converting unsecured debt to debt collateralized by your home be very sure that you can make your payments. While a credit card company can't do much if you default, your mortgage lender can foreclose and take your house if you can't pay. A home equity loan can be a smart way to finance your large expenses by providing you the flexibility to get that cash from your home. Just be sure you understand everything the loan entails, including interest rate, term, tax consequences, and associated fees.
U.S. Census Bureau Statistics
About the Author
Debbie Wilson owns and operates a lakeside resort. Her previous experience includes profitability consulting for a national healthcare company. Debbie holds a B.A. in Business Management with a minor in Physical Education.