benefits and drawbacks with every loan. What separates
home equity loans from other non-secured, or credit card
loans, are the tax and interest savings. Because the loan
is secured by the equity in your home it presents a lower
risk to the lender.
This reduced risk allows lenders to offer a lower interest
rate than a non-secured loan. Also the first $100,000
in interest on the borrowed amount is tax deductible.
This means the amount paid in interest is deducted from
the borrower's taxable income.
These great benefits do not come without drawbacks. The
biggest risk involved in a home equity loan is the risk
of losing your home. If you are unable to payback your
outstanding debt to the lender, your home can be liquidated
in order for the lender to collect payment.
The amount of equity in your home represents the percentage
you own. One way to avert loosing your home is not to
borrow more than you can afford to pay back. That is one
of the reasons it is important to find a lender who will
prepare a loan solution that is suits your financial needs.
Home Loan Resources Index