Got bad credit? That’s ok, most lenders will still over a loan for up to 85% of your home value for up to 35 years!
That sounds like good news, right? Well, what if the lender forced you to sell your home in order to recoup their money?
A homeowner loan means that the loan is secured against your home. So there is barely any risk for the lender, and you take on all the risk. Even if you don’t pay, the lender knows it can get their money back by taking control of the house and selling it. While it’s not an ideal situation for them, it’s better than giving unsecured loans which they would have little defense against if you stopped paying and filed bankruptcy.
Ask yourself these questions before taking out a secured home loan:
Are there other loan options that might be available to you? If you’ve got good credit, it’s always worth shopping around for loans rather than taking the first one offered. The difference in rates could save you thousands of dollars.
Most loans feature variable interest rates, meaning that the rate of interest could be increased, and so would your monthly payments. This could make it harder to budget for monthly payments and you can never be sure how much you’ll end up paying.
Usually, homeowner loans have attractive repayment rates, but this is often because the time period you’ll be paying back can be as long as 25 or 30 years. The loans may look good up front, but there could be more than meets the eye.
What if you get into financial trouble? Do you have a backup plan to losing your house?
What are you going to use the loan for? Only on the house? Or will you spend it on a car, vacation, or maybe education? Are all of those worth risking losing the house for?
Unsecured cash loans are a great alternative to secured homeowner loans because you don’t run the risk of losing any of your assets. It’s always a good idea to shop around for a loan that fits both your needs and your budget.
Great Points. However, nowadays HELOC’s really aren’t secured by anything since home values have dropped substantially. Ok I know, “technically” they ARE secured by the home, but if a homeowner forecloses on the house, it seems unlikely that 2nd lien holders will be able to recoupon anything.