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HelpFixed rate home equity loans are great for consumers who need a large amount of money upfront to fund a home improvement project, pay out-of-pocket medical expenses, or any other need. Payments remain stable because interest rates are fixed for the term of the loan.
A fixed rate loan is perfect for someone that wants to consolidate consumer debt, such as credit cards, car loans, etc, because the home equity loan rate will usually be much less. Plus, consumer debt is often accompanied by a variable interest rate which can fluctuate widely and at the issuer’s discretion. Plus with many credit cards if the card holder misses one payment, they could see their rate jump substantially.
Also equity loans offer tax deductible interest unlike consumer debt (with exception of student loans which are limited by one’s income). Not only are the loan rates much lower, but after taxes you would pay considerably less with an equity loan.
Before you sign on the dotted line however, you should understand a few things about fixed rate home equity loans. Understand how much interest you’ll pay over time and make sure you can afford the monthly payment. And remember that you are stretching out your payback period too. So if you have the ability you want to make extra principal payments where possible to save interest paid over the long run.
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