The article in Wall Street Journal talks about the different types of home equity loans and helocs. The loan for purchasing homes is called home equity loans on which there is a mortgage. There is another kind of loan which is called a home equity loan. This loan acts as a lump of cash which is provided to you for you to use as and when you want to. This is known as home equity loan. Home equity loans are received in the form of a check of the total amount and the same carries annual rate of interest and a fixed amount of time. The interest is paid until the full amount is repaid. This kind of loan is suitable when there is only one expense. You get the money immediately, you start paying off the installments until the total amount is repaid.
In case of home equity line of credit, the amount is approved for loan but the bank only gives small sums in the form of a debit card or a credit card and you can withdraw it whenever you need the money. You only need to pay interest on the amount of money withdrawn by you. This gives a flexibility in terms of the payment of interest. There are a few issues to look into before opting for a home equity line of credit, one is the fluctuating rate of interest due to which the payments may increase drastically. There is a fixed period of time during which you can withdraw money and then you are required to pay off the same amount in the next coming years during which you cannot withdraw any money. Sometimes Helos can charge a large sum of annual fees in addition to the interest Though the approval process of any of the two is not tedious and the credit history does not matter. Hence it is easier to get a loan in either of the two. It is important to understand the annual charges and fees involved in both the cases, the rates of interest should also be thoroughly studied so as to avoid any increase in payments. Read the fine print in detail before signing any documents. The terms of withdrawal and repayment should also be studied.
Hence the article discusses two possible options of home loans which may help consumers in their personal expenses also. What is more important is the need to study the various possible options and interest rates along with the annual charges and withdrawal terms and conditions. Home loan is one form of a consumer loan which is provided by the bank. Home equity loan is in addition to the basic home loan. This loan just provides additional cover and cash to the consumers to use as and when the need arises. Hence a consumer should study his requirement, then go through the options and only pick the one which is applicable to him. He should also have adequate cash flows to fulfill the repayment criteria otherwise the interest will be increasing and he will end up paying more than the principle amount.
