Some Fundamentals on Home Equity Line of Credit
A home equity line of credit also called HELOC is a loan in which a borrower gets his loan by pledging his home as collateral. The house asset is usually a borrower's most valuable asset. Home equity line of credit is a secured debt that the borrower can use to pay off his other debt commitments like vehicle loan, credit cards etc.
Terms of home equity line of credit
The borrower is not provided with the entire loan amount at once. He or she is provided with short sums of the entire amount spread over a period. In other terms, there is a line of credit that the borrower uses in this case. You can use a debit or a credit card to draw the amount.
The amount that has to be repaid monthly generally consists of the repayment amount as well as the interest rates that are based on the prevailing market rates of interest. The borrower can draw for a period that can range from 5 years to 25 years at the end of which the payment has to be made in full. You may be in some cases allowed to renew the loan too. Here are some things you need to know about home equity line of credit.
The interest rate applicable to this type of loan is variable in nature. So your interest rate on the loan depends upon the prevailing rate of market rate. The rate usually fluctuates given the fluctuation in market rates
Benefits of home equity line of credit
Payment of other debts
When you pledge you asset and secure the loan amount, you can actually use the amount to pay off other debts which are of high importance. Usually people apply for home equity line of credit if they want to keep a reserve for any contingent event. This implicitly means that you can get all your debts consolidated into one.
Tax Benefits
Depending upon the economy, there are certain tax benefits you can avail by taking a home equity line of credit. The size of the home equity line if credit will also affect your tax deductions. There is a specific amount limit called a slab till which you will be able to avail these tax benefits.
Interest payments
You will be required to pay the interest charges that are pre determined every month but there is a certain flexibility attached to your monthly repayment of debts. Some lenders don't require you to pay repayments every month. Therefore if you are in a soup financially, you can just take care of the interest payments until you recover.
Improved credit
Like all other loans, home equity line of credit payments also will be recorded on your credit report. If you have managed to pay interest on time and later make the repayments, you will still be given a good credit as you are only required to make interests on time. So make timely interest repayments and get a boost to your credit report.
Terms of home equity line of credit
The borrower is not provided with the entire loan amount at once. He or she is provided with short sums of the entire amount spread over a period. In other terms, there is a line of credit that the borrower uses in this case. You can use a debit or a credit card to draw the amount.
The amount that has to be repaid monthly generally consists of the repayment amount as well as the interest rates that are based on the prevailing market rates of interest. The borrower can draw for a period that can range from 5 years to 25 years at the end of which the payment has to be made in full. You may be in some cases allowed to renew the loan too. Here are some things you need to know about home equity line of credit.
The interest rate applicable to this type of loan is variable in nature. So your interest rate on the loan depends upon the prevailing rate of market rate. The rate usually fluctuates given the fluctuation in market rates
Benefits of home equity line of credit
Payment of other debts
When you pledge you asset and secure the loan amount, you can actually use the amount to pay off other debts which are of high importance. Usually people apply for home equity line of credit if they want to keep a reserve for any contingent event. This implicitly means that you can get all your debts consolidated into one.
Tax Benefits
Depending upon the economy, there are certain tax benefits you can avail by taking a home equity line of credit. The size of the home equity line if credit will also affect your tax deductions. There is a specific amount limit called a slab till which you will be able to avail these tax benefits.
Interest payments
You will be required to pay the interest charges that are pre determined every month but there is a certain flexibility attached to your monthly repayment of debts. Some lenders don't require you to pay repayments every month. Therefore if you are in a soup financially, you can just take care of the interest payments until you recover.
Improved credit
Like all other loans, home equity line of credit payments also will be recorded on your credit report. If you have managed to pay interest on time and later make the repayments, you will still be given a good credit as you are only required to make interests on time. So make timely interest repayments and get a boost to your credit report.
Source...