Convenient But Not Without Risks
Home equity loans through a private lender are an amazing tool to access the value you have built in your home when you truly need it. They can provide relief to the despair you may feel when being turned down from the bank at a time of need. They can provide a vehicle to access money you need to consolidate your debts to get lower payments, start or finish home renovations or another project, fund advanced education and career training opportunities. While Equity Approved makes accessing your home’s equity to provide you with the funds you need is a relatively easy and simple process, ensuring the process is a positive one for you means that you need to assume significant responsibility as a borrower.
First, as a borrower, you need to make sure that you are able to, and in fact do, make your loan repayments. They are non negotiable and something that even when times are tough, you make sure you pay. Things like your mortgage, insurance, power bill, and car payments are non-negotiable. A home equity loan is a mortgage and is treated the same.
This article does not all encompassing of any and all risks when taking out equity loan. EquityApproved.ca is not a financial advisor and does not provide financial advice. We can only provide service to connect you to private lenders willing to lend on your situation. With this in mind, it is generally accepted that it is not wise to consolidate your debt payments then go out and buy another car, rack up all your credit cards and everything that you have paid off with the loan over again. You would be back at square one. Getting access to your equity is a tool which if used correctly can really help you in tough times. If used incorrectly it can only make your existing issues worse.
When you take out a loan against the equity of your home, private lenders are quick to give you the loan because they can see and touch the collateral - which in this case is your home. It significantly lowers the risk when lending large amounts of money to a stranger. Part of what makes obtaining a home equity loan so easy, is what also makes it riskier. If you default on your loan payments, ultimately you risk the sale of your home to cover any unpaid debts. This is no different than your existing mortgage.
This doesn’t mean if you miss one or two payments you should be expecting the foreclosed sign to go up in your front yard. Courts provide you with a fair opportunity to make up your loan payments if you have the ability to. Lenders don’t want to deal with selling your house and will do what they can to work with you to repay the loan. They just want to earn the interest they are owed on lending you the money. It’s nothing personal, just business. If you consistently fail to make your loan repayments the lender may need to foreclose to protect and recover their investment. In addition, they may not want to renew your mortgage.
Not so sure anymore if a home equity loan is for you? That is only something you can decide. Know your financial limit, your means for repayment, and the terms and conditions involved with your home equity loan. If for the purpose of improving your monthly cash flow, ensure you use the money to help you get back on track and improve your credit or find the new job that you need.