What Does A Home Equity Loan Consist Of ? ?

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What Does A Home Equity Loan Consist Of ? ?


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Most people assume that home equity loans involve a straight forward process of raising capital against the equity in the home.

However, there are different facets to a home equity loan or HEL, and they consist of two types of loans, namely the simple home equity loan and a revolving line of credit that is called the home equity line of credit.The former is type of loan paid in installments against the equity of your house and the loan account is closed once the amount and the interest is repaid. The latter is like a credit card where you draw upon the equity in your house similar to that of a credit limit and you can use it to fund your purchases. The account is not closed after the payments are made and the line of credit is a continuous process that goes on well after the initial payments are done. The LOC or line of credit is extended against the equity of your house and this can continue till the home loan is paid off. The HELs are relatively inexpensive as compared with a bridge loan as the lenders have the liberty to offer competitive interest rates as the home equity is guarantee for the loan.

The HEL consists of a principal amount and the interest to be paid on the same. The principal amount is the lien against your house that is the equity part. The interest amount is the added part that you pay after the principal is computed and the installment amount is decided.

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What Does A Home Equity Loan Consist Of ? ?