With A home equity debt consolidation loan, you’ll borrow against the value of your house to help resolve your high interest debts. If you’re thinking about using home equity financing to resolve some financial obligations, now is a great time to do so. Interest rates on these loans are very favorable as of this writing. The following terms will help you compare home equity loans offered by various lenders so you can get the best possible deal.
Debt-To-Income ratio: Ideally your debts will be less than your total income. Otherwise, your credit score will be soft. If you do not have good credit scores, then it may be difficult to qualify. It’s a good idea to compare your income to your expenses before applying for this type of financing.
Credit scores: When considering home loan rates, think about what credit profile or range is needed for each type of financing. A consolidation loan may require a better credit score than a straight home equity loan if you plan to borrow less money and have shorter repayment terms.
Interest Rates: Your interest rate home equity loans will depend on how much cash you want to borrow and also your income and credit profile. Compare lenders offering both types of loans by asking them for their lowest available rates and then asking for any discounts that you can get on top of that rate.
Loan Balance: Look at the monthly payment, interest rate and term length of each provider you can find. If you have $50,000 in cash you want to borrow against your property, then look for the best deal with terms that offer your money over the longest period possible (5 years or more.)
Credit Union Rates: Compare credit union rates on home equity loans vs bank rates. Banks offer less attractive terms than most credit unions.
Rate discount options: Look for lenders that offer discounts when rates are lower than bank rates or when borrowers combine their high interest rate credit cards with their home borrowing needs.
Points or Origination Fees: Before you compare lenders, decide how important it is to pay 0 points vs origination fees on loans above 80%. Weigh your pros and cons before making this decision.
Read the fine print: Find out how often rates will adjust on loans that have variable rates vs fixed-rate loans. Determine what gauge will be used to determine when your rates adjust, so you can keep an eye on it. Ask about any prepayment penalties if you plan to pay off your loan early.
Negotiate: Find out if the lender offers better deals when borrowers combine their new home borrowing needs with other financial services such as life insurance. Get the lender’s lowest available rate and see what discounts they’ll offer on top of that rate.
Write a letter: If you’re willing to switch lenders for better rates, then write a nice letter explaining how much you’ll save the lender on interest payments over the life of the loan. Ask for a discount to offset the costs you’ll be saving them.
Finally, remember: If your credit scores and income qualify you for a loan, then chances are good that many different lenders will offer competitive rates. Shop around using free online comparison tools to see what your best option will be. You’ll find some good ones at bills.com.
Remember the whole point here is to end up with a lower aggregate interest rate than the ones you’re currently paying on your debt. This is the advantage that makes consolidation worthwhile.
One last thing, you must e absolutely certain you can make the payments on this loan as required. Your home serves as collateral against this type of loan. You could be forced to sell your house if you default on the agreement.
