Home equity line of credit?
What are advantages and disadvantage of it???
What are Installment Loans?
Advantage and disadvantage of it??
If I want to pay my credit cards and I own a home should i take a home equit line of credit or Installment loan
Answers:
A home equity line of credit is a line of credit secured by the available equity in your home. It functions like a credit card in that you have an upper limit of available funds and you only pay for the portion you actually use. You will have a minimum monthly payment much like you do on a credit card, but you can over pay to bring the balance down faster. Also, each dollar you pay off the principal becomes available for use again. You will need to check with a local bank to determine what the laws in your state will allow you to borrow. Typically, it's not as easy as saying that you have a 100k mortgage and your home is worth 200k, so you can get 100k in available equity. In Texas, for example, on your primary residence you must remain 20% vested at all times and thus if you had a 200k home you owed 100k agains, your available equity would be 40k, not 100k since you must borrow against the 80% rule called the "combined loan to value calculation." It gets a little bit more complicated that that which is why I tell you to speak with a bank in your state to get the actual numbers.
Most Home equity lines come with variable interest rates that are a function of prime. For instance you may find a rate quoted as Prime -.26. With prime rate currently at 8.25% that means that the rate as of today on your line would be 7.99%. This means that as prime moves up (which it is likely to do from here) so will your rate. Because of this you would want to make sure that the bank you take your HELOC with will allow you lock in partial balances for specific terms and rates. Most will allow you to do so, but make sure that the bank you go with will. This will negate the variable rate problem a rising rate environment might present.
The biggest advantage though, is that your balance is available to draw off of for 10 years as much as you need. Contrast this with a Home equity installment loan, which will typically grant you a specific amount no more than once per year and you can see that the HELOC gives you much more flexibility.
The Home equity loan will provide you with much the same features as the line, but will give you a fixed rate, payment, and term and will only be accessible typically once per year per your states regulations.
My suggestion is almost always the Home equity line of credit due to the flexibility and the fact that with internal locks, you can essentially have the best of both worlds by naming a term, rate and payment, not to mention that if interest rates fall, you can always unlock a Home equity line of credit to follow them down. A home equity loan can't do that.
I'd be happy to give you some more information or even connect you with the right people to help you get it done if you'd like to e-mail me for either reason.
I hope I've been helpful. There's a lot to cover and I didn't get to it all, but it should be enough to help you make the decision you asked about.
Take the home equity line of credit...
A home equity line of credit allows you to borrow money on the value of your home. For example... If your home is worth 300k and you have a mortgage right now of 200k, the equity (the portion you own free and clear) is 100k. The home equity line of credit allows you to tap into that 100k by putting a second lien on the house and then you can use those funds as you wish. A HELOC is basically like a credit card. You only pay interest on money that you borrow. You basicaly have a credit card with a credit limit of 100k (you dont have to tap into the full equity, you could just do a HELOC for 20k)The HUGE advantage is taxes! ANY INTEREST YOU PAY ON A HELOC IS TAX DEDUCTABLE (in 99% of cases). You cant get that from your VISA card! Also, the interest rates are much lower then most credit cards (depending on your credit and LTV ratios anywhere from 5%-9%, keep in mind this is a VARIABLE interest rate like credit cards). The only disadvatnage is you have another payment to make towards your home. But if you are paying off and consolidating credit card debt then at least you dont have those payments to make and you lowered your interest rate and tax savings.
Installment loan means any loan that has a fixed payment... your 30 year fixed mortgage is an installment loan. I will assume you meant a home equity loan, which is an installment loan. This is basicaly the same thing as a HELOC but instead of working like a credit card, you recieve a lump sum of money and its a FIXED interest rate. If you want to take all the equity out of your home then your bank can deposit 100k into your checking account. All of the advantages I mentioned before still apply and same goes for the disadvatages.
If you talking about a unsecured installment loan (the bank gives you money with no collateral) to pay off credit card debt I would NOT do that. You might save a few percent on your payment, but if you have equity in your home the advantages I mentioned are far greater.
While this tactic may have worked for one individual, in general it is a practice to avoid.Anytime a consumer applies for credit, the lender will do an inquiry into their credit history. This generally causes a deduction to the score. Controlling and limiting inquiries is part of the strategy to improve credit scores. Since your credit score is, in the most basic sense, a history of how you have managed debt, new accounts also cause deductions to the score. New accounts have no history yet.These deductions drop off sharply after 6 months and your score begins to receive additions based on how you are paying the account. So, any account held for less than 6 months is damaging to the score and is too "young" to confer benefits.There is also a target range of the number of revolving accounts that maximum points. The range is two to four and includes both credit cards and other types of revolving accounts (like Home Equity Lines of Credit). Credit card jumping causes crazy variations in this section of the scoring software also, especially if the consumer is not attentive about having the accounts notated as "closed by consumer". Still another important component to increasing scores is the way revolving accounts are used. The industry term is "utilization". This describes the percentage of the balance in relation to the credit limit on any card.Hopefully, you begin to see the complexity credit scoring programs and how difficult it is for an uninformed consumer to make the right choices. Educate yourself and use credit very carefully! Read more from: http://www.credit-card-forums.com/thread...
Well there is a home equity loan and a equity line of credit. A loan is a flat out loan that you get all at once and have to pay back all of it in installements. A home equity line of credit is a sum of money tht you may take from in pieces like an overdraft. You pay back what you use.
I like the line of credit, you can have it there is you need it but only pay back what you use.
This way you can determine what you need and how to use it.
these are very dangerous, because unlike with credit cards, if you default on your payment, they can take your home.
remember that you have to spend less than you make to get ahead. start by a strict budget. stick to it.
then do a debt snowball --- pay off the smallest balance card first, then add that payment and pay off the next one, and then add that one .
a good web site to get started is www.crown.org
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