Knowing about Home Equity Line of Credit
A line of credit loan is available in a variety of different ways. You may be able to qualify for a line of credit home loan depending on your financial situation, and credit history. Home equity line of credit loan is the most common and the popular loan, which provide you with the benefits and access to cash that can prove to be helpful at the time of your needs. The simple definition of home equity line of credit is that it is a type of credit line that allows the property owner to get a loan by using his home as collateral.
A home equity line of credit uses the equity in your home as collateral for your loan. Equity is considered as the balance between the appraised worth of your home and the outstanding mortgage balance. You will be given a particular amount of credit or credit limit. This is the maximum amount you can borrow at any time. As for most consumers, homes are the greatest asset they own, a home equity line of credit is used mainly for major expenditures such as home improvements, renovations, education, medical bills and others. It is becoming more popular as property values climb, and consumers find out how they can manage their personal debt more efficiently.
For many years now, home equity line of credit has become one of the most profitable and rapidly growing sectors of consumer loans. Thus, many financial institutions offer home equity loans and lines of credit at varying rates and deals. So to determine how much credit you can qualify for, you have to use home equity line of credit calculator. The calculator computes your potential line of credit based on a percentage of the appraised value of your home minus the balance due on your existing mortgages, including first mortgages, second mortgages and other debt. The higher the value of your home, the higher the amount of credit you borrow.
A home equity line of credit is not the same as the standard home equity loan in that it does not involve a fixed amount of borrowed money. The advantage of a home equity line of credit is that the approval process is a bit stringent than a home equity loan. The main benefit of a home equity line of credit is your ability to control cash flow. It gives you a continuing ability to tap into your home equity. It is simply revolving line of credit that gives you the ability to borrow as you need it as opposed to receiving your money in one lump sum as with a home equity loan. Another positive aspect is that once you are approved to withdraw the cash as the need approaches. The great thing about this is that you simply pay the interest on the credit you use, saving you a lot of money each year on interest payments. A home equity line of credit is an effective tool because you only meet with the interest charges when you tap the line.