A home equity loan is an unsecured loan that allows you to borrow against the value of your home. If you work with private lenders there are no credit requirements to obtain this type of loan, and interest rates are usually lower than other types of unsecured loans. The interest rate is usually based on the current yield of treasury bills, so it can change at any time. With a home equity loan, you may be able to borrow up to 80% of the appraised value of your home, and interest must be paid monthly.
You can use a home equity loan for many purposes but in this post we discuss 5 of the main reasons why you should consider one in the first place.
1. Low Interest Rates
One reason why you should get an alternative mortgage, or a home equity loan for that matter, is because of the low interest rates. Even though lenders benefit from the assurance of your home, you also benefit from the low interest rates they offer. This rate is favorable if you want to pay higher-interest debts that you are unable to pay. Consolidating high-interest debts is sensible since you have a lesser burden in the long run.
2. You Need a Lot Of Money
If you need a large sum of money for a specific project, you can take a loan against your home. Private mortgage lenders offer loans for homeowners who need a large amount for certain projects such as home renovation.
3. You Want All The Money In Lump Sum
Another reason why you should consider a home equity loan is because it can provide you with a lump sum, unlike credit card loans where you borrow based on your monthly needs. So if you need a lot of money at once to complete a project, a home equity loan is the best option. You can use it to pay for a second home or make a down payment. You can also use the loan to complete a large renovation project at once.
4. You Have a Low Credit Score
If you have a low credit score, getting a home equity loan from private lenders is the best way to get funds. However, you need to learn how to get pre-approved for a home loan, considering that your credit score is already low. In this situation, talking with a mortgage broker can help you decide on the best solution for your needs.
5. You Get a Tax Deduction
Another reason why a home equity loan is a good choice is that you can deduct the interest paid on a home equity loan on your taxes. The interest paid on a home equity loan is usually tax deductible. However, ask your tax advisor to show you the way.
These are 5 good reasons why you need to consider home equity loans over other types of loans. You can get one with low interest rates and when working with private lenders you can qualify even with a low credit score.