subject: Advantages and Disadvantages of Home Equity Loans [print this page] Advantages and Disadvantages of Home Equity Loans
The amount he receives as a loan is the current market worth of his property. For example, if a person owns a property worth $1 million and he keeps it as collateral for receiving a loan from the bank. Then the principal amount of the loan will be $1 million, which is the market price of his property.
There are numerous benefits of a home equity loan and a very few disadvantages. Advantages of home equity loans are discussed in the following strides.
The rate of interest on which the home equity loan issued, is very low. This is the foremost benefit.
You can repay all the other debts and arrears with huge interest rate, by paying a lump sum amount received from the home equity loan.
Home equity loans can be of great help in medical emergencies.
Credit scores can be improved by repayment of loans with huge interest in one go.
There are absolutely no constraints or limitation in the use of loaned credit. You can use that money in whatever way you want. You can pay back your educational loans or car loans and can even use that money in your house restoration and renovation.
Through home equity loans, people with huge debts can become arrear free by paying back the balance amount.
It is a much secured loan.
But in case you have spontaneous and madcap habits of spending money, then it is advised that you don't go for it. Home equity loan is perfect for those who can limit their expenditure whenever required and absolutely not for a brash money spender. The later one will definitely not be able to pay back the home equity loan and will ultimately end up losing his property as well.
This is the only disadvantage of home equity loan, that you stand a chance to loose your precious property on not being able to repay the loan. Therefore, before acquiring a home equity loan, people must reconsider their decision and indulge in it only if they are sure of its repayment.
