Author: Ryann Cairns
In recent years, interest rates have been at historical lows. At the same time, consumers are carrying more debt than ever before. Given these two facts, it is no surprise that many homeowners are using the equity in their homes to retire their high interest debt.
There is no doubt that using the equity you've built up over the years can be an attractive way to consolidate and eliminate household debt. There are some important considerations with this option, however. It is no secret that the housing market has boomed in recent years.
The home that sold for $95,000 five years ago may now be worth $150,000 or more. What this means to you is that if you have a $70,000 mortgage, you now have $80,000 worth of equity built up in your home. That equity can make consolidating your other debt with a home equity loan a very attractive option indeed. Getting the best rate is very important when shopping for a home equity loan.
How can I tell if a home equity loan is right for me? There are several things to consider when considering a home equity loan. The things to consider include:
Ø How much you owe your creditors. If you are carrying a lot of high interest rate debt, getting a good rate on a home equity loan may be the best way to reduce and eventually eliminate this debt. After all, paying 6% on a home equity loan beats paying 16% on your credit cards.
Ø Your fiscal discipline. The last thing you want to do is go back out and rack up lots of new debt after you've paid off your old debt. Never forget that you are borrowing against your home to pay off your credit card debt. The last thing you want to do is end up with a home equity loan and more credit card bills.
Explore your options and make sure a home equity loan is the best move for you. How can find the best interest rate on a home equity loan? Interest rates change all the time, so it makes sense to check them frequently. There are numerous sources, both online and off that you can use to track the direction of interest rates. Get used to checking these resources weekly to determine the best rates on home equity loans.
Remember that interest rates can vary widely from one lender to another and even from one part of the country to the other. Just shopping around can save you lots of money. It pays to get several offers and compare the terms and conditions of each one to determine the best loan for you.
Don't forget that your personal credit history and credit score will affect your interest rate.
Track the direction of interest rates It is a good idea to track the direction of interest rates when you are shopping for your home equity loan. Knowing which direction rates are headed will help you to lock in the best rate on your loan. Interest rates change frequently, so it is important to check frequently. There are so many factors affecting interest rates that it is often difficult even for the experts to accurately predict them, but an understanding of key economic indicators can be very helpful.
Know your credit score. Knowing your credit score number will give you a huge advantage when trying to find the best home equity loan rate. The higher your credit score, the lower your interest rate will be, and vice versa. Knowing your credit score before you shop will give you a bid advantage and help you get the best possible rate.
Get a copy of your credit report. Don't forget to get a copy of credit report before you begin shopping for a home equity loan. Study it carefully and report any inaccuracies to the credit-reporting agency immediately. A mistake on your credit report could cause you to be charged a higher interest rate or even cause you to be turned down for the loan altogether. Eliminating any erroneous negative information in your credit report can help you get the best rate on any loan.
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