It is not one of the best known financing methods, but sometimes it appears as a very interesting alternative. Home equity loans are a solution to consider at times. However, we must take into account some of its characteristics and its operation before deciding on it. In this article we present 3 keys to assess before requesting it. Having all of them in mind can save more than a hassle.
The mortgage guarantee, the key to the loan
We must understand how home equity loans work. In this last pigtail lies its main advantage and at the same time greater concern. In order to qualify for this type of financing, we must be owners of a property. This can be a house, an apartment, an office or a premises and will act as a guarantee of payment, that is, in case we could not respond to the monthly fees, the lender could keep the property.
Is the best option?
We must be clear that this is financing for special situations. And we must not forget that we put our house as a guarantee and, therefore, we cannot use it lightly since the consequences can be very negative. It wouldn’t make much sense to put our house on the line for a few thousand euros. In fact, this financing is intended for large amounts of money.
Therefore, before opting for this alternative, we will consider other market options such as personal loans. These, in addition, usually have a lower cost than home equity loans. In fact, according to the bank, the average APR for consumer loans stood at 8.35% in September, while that of loans with a property as collateral moved above 10% APR.
Will I be able to pay the fees?
Another differential aspect of home equity loans is that they are granted to a person with a lower financial profile, even if they have no income or appear in files on defaulters. However, that should not serve to take advantage of it. In fact, we always recommend that we must be clear (with this and with any loan that we request) that before requesting the credit we must ensure that we can return it.
If that precaution we must take it in any financing, even more so when dealing with a loan with a mortgage guarantee in which, if we do not pay, we can lose our home.