Loans are indispensable to a lot of individuals. This is true to majority of people who would work on the given conditions of loaning. Loans generally finance certain needs and wants that are indispensable for the moment. Yet, they must always be within the limits of one’s paying capacity. This is the reason why banks review an individual’s financial records first before they loans are granted. Yet, loans aren’t exactly acquired singularly. There are different ways of acquiring one. There are company loans that come as cash advances where the payment of the loan per se and the interest are deducted from the regular salary. There are also other loans where collaterals are needed. An example is a home equity loan.
A home equity loan utilizes property as the collateral to the money to be borrowed. This means that the amount is relative to the equity of the house. In simple terms, this translates into that portion that one has paid for the house is the base of the loan.
There are given conditions that make an individual eligible for a home equity loan. For one, pre-existent loans and bad debts must not be reflected in the records of the applicant. The equity itself must also reach a certain percentage that exceeds 60% or more of the total cost of the property. This ensures the financiers that the individual can really pay the loan.
The obligation of the person who gets the loan is to pay the entire thing within the time frame stipulated in the terms and conditions of the negotiation. The ramifications of late payment and non-payment come in forms of growing interests and property acquisition.
The benefits of using property as equity are that the rates of the allowable credit line are big enough. Furthermore, access to this type of loan is non-seasonal.
There are several safety guidelines that one must take into full consideration before applying for a home equity loan. First is that the applicant must have a financial plan on the mode of payment. This means that one’s resources must be intact so that when payment date comes, there’s money to give. What is at stake is one’s shelter thus, priority must be given. Second is that one should check the interest rate of the loan itself. Home equities, being fixed and tangible collaterals do not yield overwhelming interests. Finally, the rate should be fixed. By opting for this kind of loan, one is free of market risks that may balloon one’s payables.
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