Shopping around for a Home Equity Loan?
If you decide that the timing's right for a home equity loan, ask your friends or family for recommendations of lenders. Then, comparison shop. Comparing loan plans will help you get a better deal.
Contact several lenders, not just the ones that send you mail, call you, or knock on your door. Talk with banks, savings and loans, credit unions, mortgage companies, and mortgage brokers. Remember, brokers don't lend money: they help arrange loans.
Ask all the lenders you interview to explain the loan plans they have for you. If you don't understand any loan terms and conditions, ask questions. They could mean higher costs. Knowing just the amount of the monthly payment or the interest rate is not enough. Pay close attention to fees, including: the application or loan processing fee, origination or underwriting fee, lender or funding fee, appraisal fee, document preparation and recording fees, and broker fees which may be quoted as points, origination fees, or interest rate add-on. If points and other fees are added to your loan amount, you'll pay more to finance them.
Also ask for your credit score. Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences - like your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts - is collected from your credit application and your credit report. Creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points - your credit score - helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when they're due.
Negotiate with more than one lender. Don't be afraid to make lenders and brokers compete for your business by letting them know that you're shopping for the best deal. Ask each lender to lower the points, fees or the interest rate. And ask each to meet - or beat - the terms of the other lenders.
Before you sign, read the loan closing papers carefully. If the loan isn't what you expected or wanted, don't sign the loan. Either negotiate changes or walk away. You also generally have the right to cancel the deal for any reason - and without penalty - within three days after signing the loan papers. The lender must return any money you've paid to date.
Home Equity Loans: Compare Terms Carefully
Before you borrow money on your home's equity, think twice so you don't end up paying more than you expected. People borrow on their homes for many reasons - to make repairs or improvements, to consolidate debts, to pay off medical bills, or something else. Sometimes there may be benefits to using your home equity when you borrow. But if the loan costs too much, the benefits disappear ...
Sometimes a home equity loan is a good way to borrow money, but there are some lenders that only bring problems. Once they find these people, the lenders often use high pressure sales talk, high interest rates, outrageous fees, and repayment terms that the person can't afford. Fast talkers can trick homeowners into taking out loans that they can't afford to pay back. Whether you have excellent credit or not-so good credit, you want the best possible loan you can get.
Getting your credit report and credit score may help you negotiate the best loan for you so you don't pay more than you should have to pay. Loan offers may tell you how you can save money by paying off credit cards with a home equity loan, but what they don't say is that your home is at risk if you do it. Yes, sometimes this type of loan is useful, but only if the loan's terms are very good-and you won't run up another credit card bill. Even then, if something should happen and you can't make the home equity payment, your home is at risk of foreclosure.
