Have you ever encountered such a situation: You own a home and now want to take a loan against its equity but you just cannot get a home equity loan or a loan of the exact amount you require. You may be surprised to know that having a home doesn’t automatically guarantee a home equity loan. The equity you have is equal to the value of your home minus the amount you still owe on it. So, if you purchased your home in the recent past, or if home prices have crashed in your area, the equity on your home may not be enough.
Also, when you approach a lender to borrow a home equity loan, the lender will assess your credit and financial situation. And here, your credit score, current employment and income play a very important part and your loan approval can depend on them. Of course, it is easier to get approved for a home equity loan than other types of loans, you still may not qualify if you don’t meet the lender’s requirements.
Even if you get the loan easily, don’t squander it away like a few people do. Quite a few people take a home equity loan to finance their vacations or gift buying sprees. Avoid such spending if you can afford it since your house is collateral for the loan. So, if for some reason you cannot repay, the bank or lender can actually repossess your house. As a rule, try to take a home equity loan only if you need to consolidate your debts, or make additions or repairs to your home and that too, only if you're absolutely certain that you'll be able to make the monthly payments.
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Posted by: Kelly Miller | December 04, 2006 at 06:48 PM