Important Things To Remember While Looking For Home Equity Loan – Part 2
Posted By Terrie on May 14, 2010
Usually, in order to pay off the entire loan within a fixed time frame, you are required to make equal monthly payments. The lenders are obliged to disclose all important facts of their home equity plan, all terms and costs, such as the APR, different charges, and payment terms. After you have received this information, lenders do not normally charge any other fee that has not been specified in the plan. When you take on a home equity loan, you normally have a few days from the day the account was opened to cancel it.
There are some basic although important things you should consider when you’re obtaining a home equity loan, in order to avoid a life changing mistake.
If you decide a home equity loan is what you want, you should research the offers from several lenders, including banks or a credit union.
You have to be aware of some abusive practices home equity lenders are using against homeowners with little or no knowledge in this area. It is absolutelly essential to be aware of every single detail in your agreement before you commit to anything.
Here are some of the “predatory” practices of some home equity lenders:
Equity Stripping: it is illegal to give any false statement about your income situation when applying for a loan. If your lender is encouraging you to falsify any of this information, this should be a warning sign for you. You should never hide a fact that you might not have enough cash flow to make your monthly payments. You also shopuld never commint to such financial operation if you know you cannot meet the conditions. Some lenders might try and rush you through the application process without giving you a chance to carefully go through the agreement. In case you sign up for a loan with high interest rates without being aware of this, you will loose your home.
Home Improvenemt Scam: while making plans for a home improvement project you realise you might not have enough money to finance it. If a contractor that you hired is offering a nice sounding deal, be extra careful! Make sure that you understand every detail of financing proposal. In many cases people do not realize that what they sign is actually a home equity loan with high interest rates. If you fail to pay it back, you will lose your home.
The Balloon Payment: even though this lending practice is not qualified as a scam in most cases, some unscrupulose financial dealers might take advantage of unavare homeowners, presemting a “wonderful” opportunity of borrowing money against their home equity with very small and affordable monthly payments. What some home owners might not realise is that all they pay each month is only their interest. Such homeowners do not know that at the end of their term the ENTIRE loan amount is due to be paid at once.
These are some, but not all known pitfalls a homeowner might fall for if they are not fully aware of every condition and detail of their loan agreement. Be sure to do your homework and educate yourself thoroughly before committing to any financial operation!
To summarise it all, a home equity loan might be the answer for your financial needs. It has some definite advantages, but it also can be one of your biggest financial mistakes that might cost you dearly if you do not approach it very seriously.
Important Things To Remeber While Applying For A Home Equity Loan – Part 1
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