What Is The Term Of The Loan

Category: Finance, Mortgages.

So you need some money for unexpected expenses. You bought too much Christmas on credit now the bills are overwhelming.

The roof took on a leak, the deck rotted through and a new family addition tightened living space. Junior got accepted to that Ivy League school. Before deciding on borrowing ask yourself a few questions first. Tapping into your home equity can help ease your financial burden. Do I need a home equity loan or a home equity line of credit? You can borrow the full amount at once ant get a fixed rate on the entire amount. If interest rates are low, a loan is a smarter choice.

The advantage allows you to know how much to budget for monthly payments. You access the money just like a checking account by writing a check for the purchase. On the other hand, a line of credit will let you borrow from a revolving line of credit with variable interest rates. Then the amount used is paid back. Are there restrictions on how I use the borrowed money? If the rates fluctuate, your payments will also.

Most loans and lines of credit can be used for a variety of things. Be sure to ask yourself if you can afford the extra payments. Whether you want to consolidate all your debts into one, do some home improvements or pay for college tuition, an equity loan or line of credit can be the answer. Is your budget flexible enough? How do I find the best interest rate? Will adding another payment won' t over- extend a tight budget?

Your best bet to determine the variety of interest rates offered by financial services companies is to shop around. Try to find a company your comfortable doing business with. Ask questions. Look for ones that don' t charge application fees. What is the term of the loan? Ask about charging a penalty for early payoff.

Is it better to get a 5- 10- or 15 year term? If you' re planning to retire soon, you may want to ask for a shorter term. You' ll want to determine what your financial future strategy is when deciding on the term of the loan. The longer your loan terms, the lower your monthly payments. There are many good tax advantages to home equity loans and lines of credit. Are there any tax advantages to borrowing with a home equity loan? The interest is tax deductible on your federal income tax.

Is the loan application lengthy and how long before I get an answer? Be sure to consult your tax advisor before applying for a loan to be certain of the deductions. More and more lenders are allowing consumers to apply for loans over the phone or on the Internet. And many pre- approvals can be delivered in a few hours. It can take as little as 10 minutes for the application process. Final approval often takes any where from 5- 10 days while evaluating your house is taking place. Tapping into your home equity to ease financial burdens can be a good idea.

Often the entire process can be completed without leaving your home with final documents and checks being sent through the mail. Do your homework. Set up your budget. Shop around. Use the money for what you need.