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Home Equity Loans, Line of Credit

Home Equity Loans, also known as Line of Credit Loans – offer a revolving line of credit secured by the available equity in your home. A home equity loan works similarly to a bank overdraft or a credit card. The borrower is able to make interest only repayments on the funds drawn out. Home Equity Loans are aimed at persons already holding real-estate property who would like instant access to their available home equity for any one of a variety of reasons.

Most commonly Home Equity Loans are used for home renovations, investments and even overseas holidays. The main advantage of these loans is that funds are made available quickly and at home loan interest rates – significantly more affordable than credit cards or personal loans.

The borrower needs to possess strong financial discipline to ensure that funds drawn out are used wisely and the borrower is still able to make interest repayments on the overall drawn out loan balance.

Key advantages :

• Money is available whenever needed and can be paid back when borrower chooses to do so;
• Money is available at rates significantly lower than unsecured personal loans and credit cards;
• Borrowers are able to pay ‘interest only’ on the outstanding balance, rather than both principal and interest;
• Credit limits are generally higher than those available with personal loans or credit cards;

The main risk attached with Lines of credit is that irresponsible borrowers may erode all the equity in their home. However, for most home owners a line of credit is the most cost effective loan available and are hence the most sensible choice.