ANSWERS: 1
  • A home equity line of credit is a type of loan that uses part of the value of your home to secure or guarantee the loan. As you pay back a home equity line of credit, the money becomes available for you to borrow again, which leads to many advantages.

    Availability

    Because you only pay interest on what you spend, a home equity line of credit allows you to have a loan established to provide money quickly if you have an unexpected emergency.

    Use

    Unlike installment loans, home equity lines of credit allow you to draw money as you need it. This makes the loan ideal for such projects as remodeling, where you pay your contractor in installments.

    Ease

    Home equity lines of credit typically provide easy access to your funds through convenience checks or the transfer of funds directly into your checking account.

    Interest

    Home equity lines of credit typically feature lower interest rates than other revolving loans that allow you to reborrow as you repay the debt, such as credit cards or unsecured personal access lines of credit.

    Collateral

    Because home equity lines of credit offer collateral to creditors, you may qualify for a larger amount than you might for a credit card or personal access line of credit.

    Considerations

    Home equity lines of credit often feature variable interest rates that may cause your payment to increase over time. If you default or fail to make payments, your house may go into foreclosure, warns the U.S. Federal Reserve Board.

    Source:

    U.S. Federal Reserve Board: What You Should Know About Home Equity Lines of Credit

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