A lot of people would usually say that a person's home is his greatest asset, and indeed it is. Many people apply for loans and use their house as collateral.
People apply for loans for a number of reasons. There are also a lot of options available for them to set up a loan. One of them is Home Equity Line of Credit (HELOC).
How does it work then? Well, first we tackle the basics. A home equity is the market value of a homeowner's interest in their real estate property. Home equity loans are secured by the home itself and interest rates may be fixed or variable.
A HELOC is where homeowners apply for a limited amount of money and make withdrawals on the limit. It is like a line of credit. These may be based on a variable rate that may fluctuate since it is tied to an index rate.
Now, for those who do not want to use a HELOC because there might be monthly changes in rates, then you can look for HELOC loans that offer standard fixed rates. Also, some HELOC loans can convert the variable rate to fixed rate – which can be useful during situations where prime rates are continuously rising. Remember to read the fine print carefully as there are some hidden fees. You might not know that you are being required to pay hidden fees in order to borrow money.
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