• Rates on Home Equity Loans - 6 Tips to Save You Money on You

    By:Bill Cook

    a)Are you a first timer?
    If you happen to be person who is looking for a home equity loan for the first time, whether for any addition or renovation of your house or with the objective of investing, unless you absolutely need the money somewhere else, we would advise you to tread the path with caution. Naturally, one would get quite excited about the money which one is supposed to get. So go slow and explore all the options, which are available in the market. Act with wisdom, because this is going to be long term commitment from your side and any crucial mistake at this time could make you feel sorry for a very long time. So caution is the keyword for such loans.

    b)For whom these loans are meant?
    Home equity loans are best suited to those people who have a secure job with a regular income. This is the best solution, when you need extra money on addition or renovation of your house or consolidation of other loans. If your need for the loan is for a short duration and you are sure of paying off the debt easily, within the stipulated time, then it is the ideal loan for you.

    c)What is Annual Percentage Rate?
    You need to be watchful to ensure that the loan you choose is best suited to your requirements. Read the loan agreement carefully to understand all the clauses in detail. Find out what the Annual Percentage Rate or APR is on the loan, this will be a pointer to the effective rate of interest you will have to pay on the loan. APR will give you the information on the total cost of your loan i.e. principal amount plus interest. It will help you in making a comparative study, to find out which is the cheapest loan available to you in the market.

    d)Change in Interest Rates:
    The rate of interest at which credit is given to you, is connected with some indexes like U.S. Treasury Bills etc. Equity home loans are generally characterized by variable interest rates instead of fixed ones. So in case the interest rate goes up in the future, you will have to pay an increased amount on your loan which means the total cost of your borrowing will go up. So you have to undertake a careful analysis of the index of a particular lender to find out the past performance of that index, which will help you in appropriate selection of your loan.

    e)Change over from variable to fixed rate plan:
    Some of the lenders provide a facility for change over of the loan from variable to fixed rate plan, during the currency of the loan. Some plans allow you to convert partly or wholly, the amount outstanding of your loan from variable to fixed rate plan.

    f)Consolidation of debts:
    If your idea of taking a home equity loan is to clear off your debts or other loans which you have previously taken, then it will work out much cheaper than other consumer credit loans. Apart from giving you low interest rates, the equity home loans also provide you the facility of tax deduction. But you need to make a list of item wise taxes payable by you, before you embark upon taking the facility of this loan.

    So your home equity loan should provide you with peace and happiness and make your home, a sweet and happy home. Good luck.

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