Advantages & Disadvantages of Home Equity Loans

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Advantages

1) Home equity loans are easier to get because of their secured nature and are particularly good for those with a tarnished credit rating or history.

2) Home equity loans offer far lower rates of interest than unsecured loans and credit cards, and this is because they are secured loans and therefore less of a risk to the lender. This contributes towards lower monthly repayment as well as less interest to pay overall on the total loan.

3) Home equity loans enable you to unlock the cash that is tied up in your property without having to actually sell your property.

4} Extended Repayment Schedules – You can often choose to hold onto a home equity loan for as long as you own your home.

These extended repayment schedules make the month to month management much easier.


Disadvantages

1} The biggest drawback of a home equity loan is the fact that your home is on the line and you could lose your home if you default on your payments.

2} When you borrow from your home's equity you also reduce the equity or ownership you have in your home. This means that you trade ownership or equity in your home for cash that you will use for some other purpose.

3) In addition to interest you will pay on the loan, there are also costs associated with taking out a home equity loan -these costs are similar to the costs you paid when you bought your home.

Cheers
Samantha


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