What to Look for in a Fixed Rate Home Equity Loan

By: Terry Edwards

If you are a homeowner, you may be tempted to get a fixed rate home equity loan. But do so cautiously. Placing a higher burden of debt upon yourself can sometimes have disastrous consequences. So before you decide that you want to get a home equity loan to pay for that Caribbean cruise, make sure that you know exactly what you are getting yourself into.

A fixed rate home equity loan is an installment loan that you are given using the equity that you have built up in your home as collateral. You then pay back the loan over time. But you must be aware that if you default on your home equity loan, the lender will foreclose on your home. Before you decide on a fixed rate home equity loan, make absolutely sure that you will not have trouble making the extra payments.

When shopping for a fixed rate home equity loan, there are a few things that you should be aware of before you sign anything. First of all, shop around a bit for a good home equity loan with a good interest rate. If you have a good credit rating, there is no reason why you should not receive the lowest interest rate possible. It's a good idea to get a copy of your credit report before you apply for a loan. Look for any discrepancies and have them removed before you apply for a home equity loan.

Be wary of the fees. If you have a decent credit rating, you should not be required to pay application or processing fees. A lot of lenders like to tack on extra fees to your loan. Read all of the fine print very carefully before signing. If there is something you don't understand, don't sign it until you do.

Check with your accountant and know the tax rules before you get a loan. A lot of people think that all home equity loans are tax deductible. This is not true in all cases. If you are planning on getting a fixed rate home equity loan and are expecting a big tax break, check with your accountant before you do anything.

Use your ability to get a fixed home equity loan wisely. Getting one to pay for a vacation may not be a wise move. But getting one for a home improvement project can be a smart move. A home improvement project can increase the value of your home and therefore be a wise investment.

Fixed rate home equity loans are wonderful things if you know exactly what you are getting yourself into. Educate yourself and you should have no trouble finding the best home equity loan available.

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