Home Equity Loans 101

Home Equity Loans 101
By Frank Kelly

A secured home loan differs from an unsecured loan in that the
secured loan borrows against one's home as collateral, thereby
reducing the risk to the lender.

As such, secured home loans often offer better interest rates
than unsecured loans, but offer higher risk to the borrower, as
defaulting on these loans can have greater consequences, such as
fines, or even possible repossession of the home originally put
up as the secured collateral (subject to the amount of the
loan, of course).

As the interest rates for secured home loans are usually
significantly lower than unsecured loans, more of the monthly
payment goes towards paying off the capital, rather than paying
the accrued interest.

The monthly payments are often more flexible in secured loans,
affording the borrower more leeway in working out a payment plan
that fits his or her needs. However, care must be taken not to
use this as justification for taking out such a loan, as it is
a financial contract between lender and borrower.

There can be a number of reasons for taking out a secured
loan, such as debt consolidation of high-interest loans,
financing for remodeling, or repayment of college or car loans.
Most lenders offering these types of loans recommend loan
repayment insurance, to guard against an inability to pay on
the loan for a time due to factors such as illness, losing a
job or other unexpected occurrences.

Before taking on a substantial loan such as a secured home
loan, a careful analysis of personal finances is in order.
Having a friend or an accountant or finance officer assist in
this process can save trouble and headaches later, as they may
bring up issues and/or expenditures unthought-of, issues such
as examining how much is spent on morning mochas at a favorite
coffee shop? An outside perspective can often help clarify
these matters so a better-informed decision can be made.

If proper planning and care is taken, a secured home loan can
be a valuable tool for managing personal debt. Talking to a
loan officer or financial advisor at a major lending
institution can help make these possibilities a reality, and
can be a step towards the realization of financial freedom.

About the Author: Frank Kelly is a freelance writer. Years ago
he was an employee who regularly used payday loans to get thro
the month. Then he disocvered the better alternative of a home
equity loan. Discover useful advice and information about home
equity loans. Website contains articles and advice about home
equity loans. Click ==> http://www.homeequityloans-cheap.com/

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