How To Use Home Equity Lines of Credit

If you own a home, chances are that you have built up equity. Equity is the difference between what the home is currently worth and the current principal balance of your home mortgage loan.
 
You may choose to utilize the equity in your home in the form of a home equity line of credit. This increasingly popular loan allows you to borrow money against the equity you have built in your home for anything from college payments to home improvements and remodeling to vacations to credit card debt.
 
Most major banks will now write home equity lines of credit loans. Simply contact your bank of choice by phone, in person or over the Internet for details on how to apply for a home equity line of credit loan.
 
Once you have received your home equity line of credit, there are a number of ways you can use it.
 

  1. Through a home equity line credit card. Many banks will offer you a credit card with either a Visa or MasterCard logo that will be charged directly to your home equity line of credit. The card is used just like any other credit card, with the difference being that the balance will show up on your equity line of credit balance.

  • By home equity line check. The loaning bank will also provide you with a checkbook that will access your home equity line of credit. The checks are written just like any other check, but like the credit card, the balance will be transferred to your equity line of credit.
  • Transferring money to your checking or savings account. If you have a checking or savings account, you can also transfer cash from your equity line of credit to your checking or savings account for use.
  • By visiting your branch or local ATM. You can go to the teller at your local branch or use the home equity line credit card to make a cash withdrawal against the equity line of credit.
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    There are a few things to remember about most equity line of credit accounts.
     

    1. The rates are typically variable. Typical equity line of credit accounts feature a variable rate until you choose to lock a balance for repayment. Interest rates have been steadily increasing and each increase in interest rate can make a significant difference in your monthly payments.

  • The debt is secured by your home. The loan differs from a credit card in that if you default, the bank can foreclose on your home. With a credit card, you will typically have much higher interest rates but the debt can be erased by bankruptcy.

  • There are specified repayment terms. Be sure you understand the terms of repayment before signing the final loan papers.
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    As long as you bear the above notes in mind, your home equity line of credit can be a benefit to you and your household. A home equity line of credit is not only easy to apply for, but easy to use.

     

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