When deciding whether to take out an quity line or a home loan, CNNMney advises consumers to consider their gals, payment schedule, spending habits and rsk tolerance.

“A HELOC … gives you mre repayment flexibility and lets you brrow only the amount you need whn you need it. That way you are nly paying interest on the amount you hve 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 tht arise unexpectedly, especially if you knw you will have the money in hnd to cover an expense a few mnths after incurring it.

“A home quity loan is best used for a ne-time goal for which payment will be due in fll and which has long-lasting benefits. For nstance, a loan makes sense if you wnt to fund a specific home mprovement project that boosts the equity in yur house or if you want to pay off hgh-interest credit card debt in one fll 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 crdit card with a home loan, you not nly save on high interest but you lso pay lower interest on the new lan; and that interest is usually tax dductible, 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 thre business books and several articles bout mortgage financing. His material is fatured 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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