What’s a home equity loan?

After years of making payments on a home mortgage, the home starts to build equity. A home equity loan is when the homeowner takes out a loan using the home as an asset to get a lower interest rate. Loans tied to assets will usually have lower rates than loans that are not.

What’s the difference between a mortgage and home equity loan?

A mortgage is a loan people get when purchasing a home. An equity loan is more like a personal loan, where the borrower can use the money however they like. With an equity loan, the house is put up as an asset with the bank.

Is an equity loan better than a personal loan for debt relief?

The major difference between a home equity loan and personal loan is, with an equity loan, you are putting your home up for collateral. In order to receive an equity loan, you will have to have a home with enough equity in it to take out a loan. Personal loans are not tied to any of your assets which makes them “unsecured” loans. Since unsecured loans aren’t tied to assets they tend to have higher interest rates over equity loans.

Is a home equity loan a good idea?

A home equity can be a good idea if it’s used to increase the home’s value or reduce your debt. Some people will take out an equity loan for home improvements that ultimately increase the value of their home. Other people might find it beneficial to pay off multiple high interest debts with a lower interest equity loan. Just be careful not to rack up the same high interest credit cards, this would lead to a worse debt situation.

7 Benefits You'll Experience After Paying Off Debt

It’s easy to keep kicking the can down the road when it comes to paying off your debt. Soon the interest starts adding up, making your debt even more unmanageable, until you trip into a debt spiral. That’s why it’s so important to find motivation by reminding yourself of the benefits of eliminating debt. In case you need a refresher, here are seven benefits of life after debt.

1. Free Yourself from Creditors

Creditors maintain a certain amount of control over their borrowers. They decide when and how you pay them, and can even increase your interest rates. Being debt free allows you to take back control of your financial life. Your creditors will have no reason to harass you. That means no more creditor calls, no more late payment fees, and no more interest.

2. Earlier Retirement

Every penny you’re spending on paying down your ballooning debt is a penny you can’t use to save for retirement. Consider that the penny saved for retirement will increase in value over time if invested wisely in a tax advantaged retirement account. The earlier you pay off your debt and start saving, the more you will reap the benefits of compound interest in retirement.

3. Guilt-Free Spending

When you’re in a debt spiral, you often don’t have cash, meaning you have to go deeper into debt just to pay for essential items and bills. When you end the cycle by paying off your debts, you can check out at the grocery store without feeling guilty.

4. Less Bills

You won’t have to worry about making monthly payments and late fees on multiple credit cards when you no longer owe your creditors. That means you can focus on paying for bills like insurance and utilities, while budgeting for savings.

5. Better Credit Score

Having a high credit utilization score and being late on payments will kill your credit score. A poor credit score can hinder your ability to rent an apartment, get a job, or finance a car. Paying off your debt is the first step to healing your credit score.

6. Ownership

If you’re paying a mortgage, then the bank owns your home. If you’re paying an auto loan, your lender owns your car. When you pay off your secured debts, you no longer have to worry about the bank foreclosing on your house or getting your car repossessed because you truly own your assets.

7. Increase Future Earnings

Every time you charge your credit card you are borrowing from your future income. That $200 pair of sunglasses you buy now, is $200 out of your paycheck next month. Debt lowers your future standard of living by spending your future earnings today. Paying off your debt allows you to make the most of your income.

Start Eliminating Your Debt Today

You can start enjoying the benefits of life after debt by getting in touch with a trusted consumer credit and debt relief solution company like Americor.

Contact a certified debt consultant today to receive a free debt analysis. Learn more: what is a home equity loan.

Click here to apply: https://apply.americor.com/new

Aaron Sarentino

Aaron oversees executive, administrative and management functions for the firm. Aaron has a Bachelors in Business Administration from Pepperdine University. He is responsible for helping customers at every stage of the debt settlement process and focused on building loyalty to ensure long-term client retention by addressing customer issues. Aaron plays a pivotal role in the upliftment of the Americor team to ensure the best possible customer experience for clients.