So college is done and a new job is on the horizon, but there are student loans to pay off and your home needs a major overhaul. The wedding put a major dent in your savings and with the baby already on the way, it is going to be impossible to meet all these financial expenses. The easiest thing to do is to take out a home equity loan. To put it simply, it is a type of loan in which the borrower uses his home equity as a collateral. But remember that if you have a poor credit history, it makes it difficult to get this loan.
There are a lot of aspects that go into getting this loan. Here is some advice on how to get one:
- You may need the money urgently, but if you do not know what you are getting yourself into, you could be in more trouble than you started with. If you do not pay your installments on time or if you do manage to become a defaulter, you could very well lose your home. The lending institution, that has given you a loan, will take over the collateral-your home-in lieu of the payments due to them.
- If you have decided to go for the loan, you need to start taking steps to repair your poor credit history. You can start by paying off your outstanding bills, close unnecessary accounts, and improve your rating.
- Be prepared to face higher interest rates and hesitant lenders. Do not be put off, find out as much as you can about different lenders and their rate of interest, before making the final decision.
- If you have narrowed down to some of them, then you need to compare them religiously. Check whose rate of interest is higher, and also check for the policies, and terms and conditions. Go in for a lender that suits your needs.
- If you are not getting credit anywhere, you need to consider the Internet as an option as well. There are many subprime lender websites that will give you quotations for free.
- Understand what fees you are going to be paying. There is the closing cost, which is the rate of closing a successful deal. There are other fees like the lawyer fees, application fees, credit reports, title search fees, notary fees, insurance fees, property appraisal fees, and documentation fees included in the mix, which can easily add up to 5% of the entire loan. Do not fall prey to lenders who do not advertise these charges. Always be aware of ‘hidden’ costs.
- If there is no closing cost, they have most certainly included it in your interest rate. Ensure that you verify this.
- Another thing to consider is the points to be paid on closing. This is nothing but a service fee, which is charged on the settlement of the deal.