Comparing Costs



Cost Comparison

To compare the costs of your home equity loan, you must first be aware of the different kinds of fees associated with the loan. An APR (annual percentage rate) is a calculation of the interest rate and additional fees. So searching for the lowest available APR among loans with the same terms, is a good way to find the right loan.

Two of the fees that are included in the APR, are Points and Closing Costs. Closing costs are fees due at the beginning of the loan (paid during closing).

Points are used as a bargaining chip to reduce the payment amount of loan interest rate. A point is usually represented by one percent of the total loan value. So if your loan calls for 1 point at the end of its term, you will be expected to pay 1 percent of the loan amount. In some cases, points will be paid down at closing and in other cases may be called up at the end of a loan term.

Points and closing costs can be adjusted in order to make the loan more compatible, but changing them can affect your interest rate directly. If closing costs and points are reduced, chances are your interest rate will increase. If on the other had your points and closing costs are increased, you interests rate should go down resulting in lower monthly payments.

If a lender promises no fees there is a strong possibility that the fees have been included in the loan amount and are financed with interest. Find a balance that is good for you can compare your APR to make your final choice.

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