Essay On Home Equity Line Of Credit

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Home Equity Line of Credit

Let's set the stage by stating that a home equity line of credit is an effective financial tool for some folks. It is a variable-rate revolving credit line that uses the equity in your home as collateral.

The word "equity" in "home equity line of credit" is defined as the difference between your home's market value and the amount outstanding on your mortgage. It's similar to having a credit card with a low interest rate and high credit limit.

One important point to bear in mind is that a home equity line of credit is not your traditional loan. A home equity line of credit is very closely related to a home equity loan but the subtle differences between the two can mean a lot.

Not Your Standard Home Equity Loan …show more content…

The home equity line of credit is a better match than a home equity loan if you have to to have access to funds for more than one academic period for instance (each semester over the next four years). And best of all, the interest is generally tax deductible (discuss with your tax advisor for additional information).

A home equity line of credit is one of the most practical tools that a homeowner can have in his or her financial arsenal. Available to qualifying homeowners, it is a smart choice for financing nearly anything. They are a great way to consolidate high interest credit cards, free up money for home improvements or get your kids off to college.

Pay Interest Only On the Amount You Use

Another of the positive aspects is that it can sit idle until you need it. Once you are approved, you withdraw the cash as the need arises. The great thing about this is that you simply pay interest on the credit you use, saving you hundreds or even thousands of dollars each year on interest payments. A home equity line of credit is an efficient tool because you only meet with interest charges when you tap the line.

Once your home equity line of credit is set up, you'll have access to an continuing source of low-cost funds to use as you see fit. The interest is normally lower than other types of credit and as we mentioned above, an additional benefit is that the interest is often tax-deductible.

A home equity line of credit is excellent for emergencies and debt

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