What is the Better Home Equity Loan Rate?
Edited by Honey B Wackx
When the going gets tough and the tough keeps on going, borrowing money seems to be the only solution available. Even if consumers would like to move away from any kind of loan, hard times will still compel them to start borrowing money.
Today, many people are enticed to try home equity loans as feasible alternatives to high-rate loans and credit cards. For people who are having a hard time getting approved on a good loan, home equity loans are the best option for them.
In essence, home equity loans are one of the most low-cost means of borrowing money. This is because home equity loans are protected and guaranteed by your home. Hence, lesser interest rates are being charged.
However, not all home equity loans are the same. The amount you will have to pay may vary according to the kind of rate you have availed on home equity loans.
For this reason, it is important that you choose the best home equity loan packaged with the best payment scheme and interest rates.
Home equity loan rates can be either fixed or variable. Fixed rate home equity loan means the interest rates are provided on fixed monthly charges. On the other hand, variable rates may change from time to time depending on several factors that will have an impact on the resulting payments.
Between the two kinds of home equity loan rates, fixed rates are considered the most feasible means of charging home equity loans.
Here are some reasons why:
1. It will let you shun away from temptation
With fixed-rate home equity loans, you can be sure that your finances are secured and tightly kept on a budget. This is because fixed-rate home equity loans provide money in lump sum amount. Hence, you will be able to budget your money wisely.
In contrast, home equity lines of credit will let you borrow money from time to time. Hence, you may not be aware of it but your loan gets bigger until such time that you will not be able to pay off the balance anymore. Moreover, its rates are variable and adjustable, which means that the interest rate that you have to pay together with your principal loaned amount will swell in time.
2. You can have a clear view of your total loan
With fixed-rate home equity loans, you will have a clear view of your entire loan. Hence, you will know how much you have to pay in a month. This will enable you to budget your finances wisely.
Moreover, since your loan’s interest rates are on a fixed charge, your monthly payments will still be the same until you have already paid off all of your balances.
3. Will protect you on the on-going growth of interest rates
Interest rates nowadays continue to rise. With various factors affecting home equity loan interest rates these days, you may only end up paying more than the actual loaned amount plus the appropriate interest rate.
Hence, getting a variable rate home equity loan can only give you changing payments and may only ruin your budget from time to time.
With a fixed-rate home equity loan, you will be protected from any possible changes in interest rates. This means that you will never have to worry on paying high-rate monthly charges.
Now you know why fixed-rate home equity loans are better than those with variable rates, it would be better if you will settle on the dependable interest rate. After all, money does not grow on trees so it is best that you try to save more as much as possible.