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When deciding whether to take out an quity line or a home loan, CNNM ney advises consumers to consider their g als, payment schedule, spending habits and r sk tolerance. “A HELOC … gives you m re repayment flexibility and lets you b rrow only the amount you need wh n you need it. That way you are nly paying interest on the amount you h ve taken, whereas with a loan, you pay nterest on the money whether you are sing it or not. HELOCs are lso good for short-term financing needs th t arise unexpectedly, especially if you kn w you will have the money in h nd to cover an expense a few m nths after incurring it. “A home quity loan is best used for a ne-time goal for which payment will be due in f ll and which has long-lasting benefits. For nstance, a loan makes sense if you w nt to fund a specific home mprovement project that boosts the equity in y ur house or if you want to pay off h gh-interest credit card debt in one f ll swoop. Why a home loan is better
A home loan might be a better choice because clearing up credit card debt could take you a long way toward improving a bad credit situation, while saving you thousands in interest. For example, if you owe $10,000 on a credit card that charges 18% interest and you make the minimum monthly payment of 4% of the balance; it will take you over ten years to retire the debt. The interest you pay during that decade comes to $5,575.
If you pay off the cr dit card with a home loan, you not nly save on high interest but you lso pay lower interest on the new l an; and that interest is usually tax d ductible, up to $100,000.
The article Bad Credit Equity Line or Home Loan? was Submitted by Mike Hamel through Articles.GetACoder.com network. Here's the additional information: Mike Hamel is the author of thr e business books and several articles bout mortgage financing. His material is f atured on sites like E-lends . To learn more, or to get a no-risk quote on a home loan, visit E-lends. It is a convenient place to see how much home equity you might be able to cash out, and at what rate.
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