A home equity loan can be a good way to finance various issues including medical bills and business capital. Regardless of the reasons why you wish to get this loan there are certain considerations you need to make beforehand.
Improve Your Credit Rating
To secure a decent amount on your property you should start by ensuring your credit ratings are exceptional. Pay all your debts on time and be sure to close credit cards that are not in use. Making timely payments to your monthly bills can be a good way to improve your credit scores. Most financial institutions are only going to trust you with a loan if your credit scores are commendable.
Identify The Right Creditors
To find the best creditors you must be willing to carry out an initial comparison process. Talk to friends, relatives or colleagues who have taken out a home equity loan just so you can collect some views. These individuals can give recommendations and advice regarding the best creditors in the market today. Make a shortlist of some of the most reputable lenders. Negotiate with creditors to ensure you have the best possible deal on your home.
Debt Management Techniques
A home equity loan is inevitably going to be a debt to you which is why you should be able to come up with a sound debt management technique. Poor management may lead to higher interest rates and loan request rejections in the future.
Hiring a financial adviser may be one of the best ways to handle debts. Such a professional can craft your debt letters and give advice on how to deal with individual loan requests. Creating an elaborate plan on loan repayments is another way you can manage your debt situation.
Making a contingency plan for loan repayment can be key to ensuring that you repossess your home in case of financial difficulties. The Scottish Trust Deed debt solution is one of the avenues you can use to get debt help while coming up with alternative ways of raising funds.
By opting for an IVA (Individual voluntary arrangement) you can be able to diffuse tension between yourself and your creditors because a third party company will be in charge of your debt management. Minimal Asset Process (MAP) is another solution you can incorporate into your contingency plans. This option is ideal for people who have low income and a few assets.
Think Of The Interest Rates
When you take out a home equity loan you are going to have to pay back the loan with an amount that is considered as interest rate. This can be done monthly or according to the agreement you sign with your lender.
It is important for you to think about the overall amount you will pay as interest rate. Compare various offers from different companies to determine the one that allows you to pay a lower rate. This will give you the freedom to spend the money you get as loan without necessarily incurring too much costs on the full and final settlements.
Consider Your Monthly Income
Before you accept a loan offer it is advisable that you think about your monthly income. This will enable you to determine the amount of money you can spare for loan repayment. Keep in mind that your monthly income will not only be used in loan repayment but also to take care of other important living expenses such as medical bills, transport, telephone and electricity bills.
Having the ability to make a budget and plan how to use this income can be key to avoiding bankruptcy and achieving financial independence over time.
Know About All Fees Associated With Your Loan
The last thing you want is to secure a home equity loan only to find out that there are a lot of hidden fees you did not know about. Before signing anything be sure to have your financial adviser go through the loan’s terms and conditions.
This is the best way to determine if there are any other fees you did not know about. If you are not working with a financial adviser be sure to ask the lender to disclose every detail regarding the fees you will incur. Some of these fees include the original fee which is often 1% of the overall amount.
You are also likely to incur interest and penalties in case you make late payments. Knowing these issues is key to staying safe and avoiding any misunderstandings as you move forward.
Understand The Terms And Conditions
Avoid taking a loan without being aware of the terms and conditions that are laid down. All lenders make these details available before issuing any loan. It is true that these terms may be long and difficult to read but you are encouraged to take your time and understand every bit. Failure to comply with the terms and conditions laid down may lead to negative experiences with debt collectors or bailiffs.
Reasons For Taking The Loan
Taking a loan should not be something you do casually. In fact most financial experts advise people not to take out home equity loans unless they absolutely have to. Taking a loan to pay for a vacation or a newly acquired luxury vehicle may not be the wisest of moves.
Instead the loan you take should be used to increase your earning power. This may include paying for an advanced degree or starting a business. These things have the potential of increasing your income rather than leading to more expenses.
Understand Your Tax Obligations
When thinking of taking a home equity loan you should be aware of the tax obligations that you have to comply with. Understand the requirements involved in council tax and how to file them. It is also important for you to keep an eye on your bank account because that is the only way to ensure that your finances are safe. It gives you the ability to make timely correction to any errors that may occur.
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here