There are many different types of borrowing available on today’s financial markets and for homeowners, there are even more choices. Because homeowners have built up equity in their home by paying down their mortgage every month, they can borrow against that equity once they have earned enough. And when homeowners decide to borrow against their home equity, one of the best ways they can do that is with a home equity line of credit.
A home equity line of credit differs from other types of home loans such as home equity loans because they are just that – a line of credit that is known as ‘revolving’ and can be withdrawn from a little at a time, and paid back a little at a time. The amount that needs to be repaid to the line of credit will vary depending on how much the homeowner has borrowed. In addition to not having a fixed monthly amount that needs to be repaid, there are many benefits that come with this kind of line of credit.
Low secured line of credit rates are one of the biggest advantages that come with home equity lines of credit. Banks and other mortgage lenders are able to offer low secured line of credit rates because the loan is backed by a major piece of collateral – the person’s home. This is much different than unsecured loans such as credit cards or personal loans. A line of credit will generally run about 4% to 7%, while a credit card will run you about 10% to 20%. And of course, if you’re not paying too much in interest, you’re not paying too much for your loan.
Compared with secured types of loans such as a credit card, which might give you a $10,000 limit, a secure line of credit can give you up to 80% equity in your home. And if you have $200,000 worth of equity in your home, you could get a loan up to $150,000. Just doing some quick math shows you how much more a line of credit could pay off for you than other types of loans.
Secured lines of credit are a great way to borrow against the equity in your home, as they hold many benefits over other types of loans – even other types of home loans. Whenever it’s time to borrow against your own equity, a secure line of credit can bring you all the benefits of a loan, without all of the responsibilities like huge monthly payments.