What You Need to Know About Home Equity Loan Rates And Debt Consolidation
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Written by: authordeepower
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Date: Thu, 10 Sep 2009 |
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What You Should Know:
They Differ Depending on the State and Area You're In. If you thought that all home equity loan rates were created equally, then you're wrong. Home equity loan rates vary greatly from state to state, and what's more, they're even different from city to city. These rates are set both by banks and by the federal government, based on things like inflation. While Michigan may have a home equity loan rate of 8%, New York might have a home equity loan rate of 7.55%.
They Depend on the Length and Principal of the Loan. You might not think that home equity loan rates are based on the length and principal of the loan, but in reality, they are. Lenders want to make sure they get enough money out of the deal, so they look at the length of the loan and the principal of the loan when determining the rate.
They Depend on Your Credit. Anytime a lender extends a loan to a borrower, they are taking a chance. They can tell how much of a chance they're taking by looking at your credit worthiness. If you have a credit score that is low, then the lender is taking a huge risk in giving you a home equity loan, which means that the rate for the loan will be higher. Or if you have an excellent credit score, the lender will know they're not taking a very big risk in extending the loan to you, and will be more inclined to offer you a better rate.
You Can Negotiate It. With how tough the economy is right now, many lenders are willing to negotiate with borrowers if it means they'll get more business. This means that no matter what your credit is, you can generally negotiate for a lower home equity loan rate than what they may initially offer you. How do you negotiate? By following the simple rule of making them think they'll only garner your business if they offer a lower rate to you.
Home Equity Loan Rates Are Lower Than Other Loans. Because the loan is secured to the house, home equity loan rates are generally significantly lower than other loan rates out there. This is one reason why so many homeowners decide to get a home equity loan as opposed to a traditional loan—it's a lot less expensive in the long run.
One of the most common uses of a home equity loan is for debt consolidation.
About the Author
Dee Power is the author of several nonfiction books. Find out how to repair bad credit. If you're barely keeping your head above water you may need to reduce credit card debt The first step is to get your free credit report and scores.
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