For those looking to take out a loan, the multitude of different types of loans that are in existence can be somewhat confusing, particularly when an individual is trying to decide what specific loan would properly fit a specific situation. One of the more confusing concepts to people centers questioning what exactly a home finance equity loan is.
A home finance equity loan is a loan that is secured by the borrower putting up his or her home as collateral. Because the home is put up as collateral, the interest rates of a home finance equity loan will be generally much smaller than those interest rates that are offered by non-secured loans.
Probably the most common use of a home finance equity loan is for credit card and bill consolidation purposes. As stated before, the interest rates on a home equity loan will be very low and, as such, will be far more preferable to the interest that is being paid on the accrued debt that represents a number of unpaid credit card debt.
Because a home finance equity loan offers a proper management solution to escalating debt, it can literally save a person from financial ruin. It also helps get one’s payments in order as the need to track only one monthly payment vs. several always keeps one at a solid knowledge base of where one’s finances are at all time.
Keep in mind, a home equity loan will prove worthless is all those zero balance credit cards are immediately run up. People sometimes assume that the home equity loan eliminates debt. It categorically does not! It simply moves the debt to a lower interest area designed to save money over time.
Using the home equity loan to go on a new credit card inspired spending spree will defeat the purpose of the home equity loan and lead to even more dire financial situations.