Welcome to North Shore Bank's In Your Interest Podcast. Today, let's take a closer look at home equity loans and see what financial benefits they provide. If you're considering taking out a loan, you may be wondering if a home equity loan is right for you. Home equity loans are a type of second mortgage that allow you to borrow money using the value of your home as collateral.
Here are four reasons why you might consider applying for a home equity loan. Reason one. You want a low interest rate. Fortunately, the benefits of a home equity loan don't reside solely on the side of the lender. Banks and other financial institutions that are giving out loans prefer to do so in a way that guarantees them the surest return.
So they offer lower interest rates for home equity loans compared to many other loan types. This low interest rate can be beneficial to you if you have a high interest debt on your credit card. According to Eric Carter, contributor to Forbes, refinancing high interest credit card debt with a home equity loan or line of credit can make sense, since your interest rate could be much lower and tax deductible.
Reason number two. You want to borrow a large sum of money. You may need to borrow against the value of your home in order to receive a larger sum of money. If you're in a situation where you want to borrow a lot, such as starting a new business, a home equity loan could be a great option for you.
Reason three. You need a lump sum. The main difference between a home equity line of credit and a loan is that a loan is distributed in a lump sum, with set monthly payments, while a credit line allows you to draw funds from a set limit depending on varying monthly needs, like a credit card. If you need your money all at once, for example, to purchase a car, a loan can be a better choice than a credit line or credit card.
The fourth and final reason is you can get a tax deduction. Another potential benefit of a home equity loan is that the interest that you pay can be tax deductible. Your tax advisor can help you determine if this is a possibility. If a home equity loan sounds like a good option for you, or if you have questions about these great benefits, please give us a call or visit northshorebank.com. Thank you for listening to this episode. If you haven't already, please subscribe to this podcast in iTunes or your favorite podcast app. Learn more about North Shore Bank's Inner Interest Podcast at northshorebank.com/podcast. Member FDIC, Equal Housing Lender.