Knowing Home Equity Line of Credit
By Charles Hopkins
Published 10/26/2007 | Finance
Are you looking for a way to finance your everyday expenses? Do you want some improvements in your home, but you do not have any budget for it? A stable income lets you have the necessary budget to do these things. But sometimes, due to unforeseen circumstances over which we do not have any control, stable monthly incomes is not enough to finance all of these. In times of desperate needs of money, you can always borrow from creditors. The best way that you can do is to apply for a home equity line of credit.
People tend to borrow money from creditors without knowing the basics of the loans they are applying for. This carelessness may result to ones own downfall because they cannot repay the loan that they borrowed. In order to eliminate such situation, it is very important to know the basic tenets of home equity line of credit so that borrowers will not be astray in their own loans.
The Basics of Home Equity Line of Credit
Just like any other loan, home equity line of credit allows you to borrow a sum of money payable with interest over a specified period of time, using your home as a collateral or security. To be more specific, home equity line of credit (or HELOC for short) is a type of loan in which the creditor allows the debtor to borrow a maximum amount of money repayable within a specified period of time (called a term), where the collateral is the borrowers equity of his or her home.
There are many purposes of having a home equity line of credit. Some apply for it because they want to have the budget to finance their home improvements or renovations, or sometimes there is an emergency that needs money. You can also use home equity line of credit to pay for your tuition fees (education), daily expenses, medical bills, and other expenses that you can think of.
How home equity line of credit works? You can only borrow a sum of money depending on your equity. An equity is defined as the difference between your total outstanding worth of your home being used as collateral and the total obligation of the said home. You are assigned with a credit limit over which you cannot exceed. Thus, the sum of money that you can borrow is very dependent in your equity and your assigned credit limit.
How to Have One
There are numerous creditors out there offering home equity line of credit. Thus, the choosing is your responsibility. You must scout for one creditor whose interest rate is very low, lowering your monthly dues. It is also advisable to have an adviser for it. This adviser must be an expert in this field so that he or she can give you tips on how you can repay your monthly dues conveniently. Remember these things, and you will surely have a home equity line of credit that is very advantageous and comfortable to you.