Homeowners often use home equity to pay for various expenses. A Home Equity Loan (HEL) or Home Equity Line of Credit (HELOC) can be used to consolidate high-interest debt at a lower interest rate. Homeowners may also use home equity to pay for other personal debts, such as car loans or credit cards. A Home Equity Loan, also known as a second mortgage, is a type of consumer debt that allows homeowners to borrow against the equity of their homes.
The loan amount is based on the difference between the current market value of the home and the homeowner's mortgage balance due. Home Equity Loans tend to have fixed rates, while Home Equity Lines of Credit (HELOCs) generally have variable rates. The Home Equity Loan is a lump sum of money that is given to the qualified homeowner and is repaid over time with fixed monthly payments. Each payment reduces the loan balance and covers interest costs according to a known repayment schedule.
Home equity can be used to pay off personal debt and help manage monthly bills. Obtaining these loans can help you consolidate high-interest debt at a lower interest rate, potentially reducing your monthly expenses by a significant amount.
