If you are new to the idea of getting a loan and learning about how to apply for them, then you should first understand the various types of loans that are available for application. With that, you will find out how each type is beneficial, the downfalls and the credit limits of each loan alternative out there. Here we will introduce HELOC to you and help you figure out what is HELOC and how does it work.
What is HELOC and How does it work?
To understand what is HELOC and how does it work, you must first know what HELOC stands for. HELOC is an acronym that means Home Equity Line of Credit. HELOC is a personal loan which is simply called home equity line. This loan is often called a second mortgage. Your first mortgage is the mortgage you have to pay for owning your house. Basically, when you use HELOC you are substituting your first mortgage to save a large sum of money in a short term. In order to reveal more about the HELOC program, we are going to divide what is HELOC and how does it work into two parts. Part one of what is HELOC and how does it work has been taken care of, let’s move on.
Part Two: What is HELOC and how does it work?
We have answered what HELOC is but how does HELOC function? You should be glad to know that this personal loan is not fixed. That means that if you wish, for example, to borrow more than $150,000 your lender allows you to extend your amount. With that you can also increase the time of your loan but your return rate can remain fixed. You get to draw the line by using a credit card, writing a check or so on. These can be risky but they are easier to process. HELOCs have their draw periods. These draw periods can stay between five to ten years just for interest. The repayment of loan can last for ten to twenty years. Some lender however, do not follow this trend and wish to be repaid within the draw period.
Hopefully, you have understood what is HELOC and how does it work with us!