Home Equity Lines Of Credit For Greater Flexibility

Lines of credit, as opposed to loans do not have fixed installments and instead can be repaid the way you want and best suit your monthly budget. Also, home equity lines of credit provide a flexible source of funds, because you can withdraw as much money as you need up to the credit limit and as long as the limit is not reached or if you repay any amount, you can withdraw money again whenever you need it as many times as you want. This is an excellent tool to solve cash flow problems. Home EquityEquity is explained as the difference between the value of a property and the amount of debt that is secured by it. This amount includes loans, liens and any other monetary obligation attached to the property, but usually consists only on a mortgage loan and that’s why home equity loans are called second mortgages. This remaining value can be used to guarantee an additional loan or line of credit called home equity loans or home equity lines of credit. This can be done up to the limit of the available amount but only when the applicant has perfect credit. Otherwise, the limit is usually 85 of the value of the asset with the mortgage and home equity loan or line of credit combined. Line Of CreditA Line of Credit is a revolving account with which you can obtain funds whenever you need them and repay it the way you want with few restrictions. There is a credit limit that you can’t bypass but up to this limit you can withdraw as much money as you need and only the amount withdrawn will generate interests. Otherwise, only a small monthly fee will be charged. Lines of credit can be secured or unsecured. An example of unsecured lines of credit is the overdraft agreement on bank accounts that due to their unsecured nature, usually charge higher rates and offer only small amounts. Business lines of credit are also usually unsecured but more advantageous because the bank knows exactly the cash movement of the business and usually processes client’s payments too. As to secured lines of credit, the best example is actually a home equity line of credit. These lines of credit based on home equity provide a great flexibility for the borrower and due to their secured nature, very advantageous terms too. Home equity lines of credit charge only slightly higher interest rates than home equity loans but the interest rate is variable as opposed to the usual fixed rate of home equity loans. As stated at the beginning of this article, home equity lines of credit are excellent for solving cash flow difficulties that can happen when you have a variable income or when you can’t predict the exact date when you’ll receive money. Thus, to solve these budgeting problems, you can keep an open home equity line of credit and whenever you need money, you can withdraw it till you finally get some income and cancel the debt.

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