If you decide today that you need to borrow a bit of extra money to cover a few of your expenses, there are a few options you can proceed with. You can take out a personal loan, apply for a credit card, or look for ways to borrow against wealth you already have, such as the equity built up in your home.

If you’re looking to pay lower borrowing costs, a home equity loan allows you to get a loan backed by your house, although this option is mostly geared to consumers who owe a lot less than their homes are worth. Meaning, if you just recently got a mortgage on your home and are still a long way from paying it off, home equity loans might not be your best choice, as the amount available for you to borrow from will be very limited. Most home equity loans allow you to borrow up to 85 percent or 90 percent of the value of your home, and typically with low interest rates and fair terms, since you’re using your home as collateral for the loan.

Borrowing against the value of your home can be a low-cost way to finance a new addition to the house, replace an old roof or consolidate high-interest debt. You can also use it to attend to outstanding bills that you might not be able to cover for the time being. Another common use is taking out a home equity loan with a low, fixed rate to pay off high-interest credit card debt. There usually aren’t any conditions against what you can spend your home equity loans on, as long as you make payments on a timely manner.

What Is A Home Equity Loan?

Home equity loans let you borrow against the equity of your home with a fixed interest rate and fixed monthly payment.

These loans are funded in a lump sum, making them similar to personal loans. With the fixed interest rate and fixed monthly payment, you get with a home equity loan, you’ll also have a fixed payoff schedule and an exact date when you’ll become debt-free.

While options vary from lender to lender, home equity loans usually come with terms of anywhere from 5 to 30 years. During this time, you won’t have to worry about rising interest rates, since your payment will never change.

If you are considering taking out a home equity loan, contact one of our specialists at Leap Financial today! We can help explain to you the pros and cons of it, and whether it would be the best choice for you.