Are you wondering what Home equity line of Credit means? Or do you want to know whether you are eligible for it? If so then you have come to the right place for this is the article for you. Home equity line of Credit is basically a loan that you can take but the security for it is your house, which works as a collateral for the money you borrow. This is pretty much like a second mortgage. Home equity line of Credit also known as HELOC can be taken for several reasons. Whether you have to pay for an education, a special event, consolidate your high interest debts, purchase a new vehicle etc.
How Home equity line of Credit differs from other loans
Home equity line of credit mainly differs from other loans because you use your house as a security in it. The other main feature of Home equity line of Credit is that this sort of loan is not paid to you as a lump sum directly. Instead a line of credit is established and you can take the money periodically as required. There is a ‘draw period’ given in which you can borrow the money after which you need to pay the loan back with interest in the decided time.
How does Home equity line of Credit work
The money you borrow through the Home equity line of Credit depends on the difference between debt secure by the house you are putting on mortgage and the current value of that house. Hence HELOC can be used if you are not eligible for a personal loan. This works like a credit card once your HELOC is approved you can withdraw the amount of money you require within a given period of time and you only have to pay interest on the money that you withdraw.
The line of credit is divided in to two time periods:
- A period to draw funds
- The period to repay funds
Equity rates can vary, if you are looking for the current HELOC rates then you should refer to the Wall Street Journal. For further information check out the links below.