Even when pressured by surmountable debt, there is always a deal out especially if you haven’t signed an equity loan. This loan is your way out but wait! A couple of missteps here can as well lead you to a deeper financial quagmire so school yourself properly on how to deal with a secured home equity loan.
Setting your house as collateral is no joke. Your house is your most prized possession and one careless mistake could lead you and your family to ruin. Home equity loans should be taken seriously because businessmen are not only after the interest you pay.
Secured Home Equity Loan
It is understandable that when problem pressure becomes too restricting, carelessness is usually a result since the only thing your vision can comprehend is a way out from your financial quagmire. Bad deals and a couple of wrong choices and wham! Personal debt that you have no way of repaying unless you lose your most cherished possession.
So what is exactly a secured home equity loan?
A secured home equity loan is a credit or loan agreement that is secured through the collateral set by the loan applicant. Collateral (in Home Equity) is primarily the property of the applicant whether it is a primary or secondary doesn’t matter as long as the indicated property is legitimately owned by the applicant. The applicant is awarded a credit line or a lump sum that has an indicated set period where the amount should be paid plus the interest. If in the event the applicant cannot repay, the property is foreclosed and repossessed. After which the equity lender should be able to recoup all or most losses by reselling the property. That’s the main reason why secured home equity loans have a lower interest rate compared to unsecured loans.
On the other hand, since unsecured loans have no agreed collateral, interest rates are substantially higher and the set period of repayment time is set shorter. These loan types are dischargeable by declaring bankruptcy. Because of the nature of the deal, lenders are more skeptical about releasing unsecured bonds than secured home equity loans.
By applying for a secured home equity loan, the deal puts your home at risk, especially if you’re riddled with debts. The Truth in Lending Act allows three days from the day the agreement was signed to call off the negotiation. So if the collateral is your principal dwelling, this would allow you to change your mind for any reason.
The only reason that homeowners consider a secured home equity loan is that it provides a substantial amount of money with considerably less interest than credit cards. Plus the length of time needed to pay is long, making the recoup of finances a lesser burden. Be very careful though, these deals are tied to your homes.