Home Equity Loans (home loans)

A home equity loan (sometimes the abbreviation HEL is used) is the credit form in which the debtor uses the equity of his home as collateral. As a rule, this type of credit is given with the fixed percent, all monthly payments are also fixed. Usually home equity loan is paid off during the long period of time. Very often such credit is used to defray considerable expenses, for example, education, medical service, house repair, purchase of real estate, investments in business etc. Besides, the credit can be used for consolidation of debts with the high rate of interest. It gives an opportunity to control effectively all your debts, making only one monthly payment, the sum of which is lower than a total sum of credit payments. However, it is necessary to take into consideration the fact that the consolidation of the debts requires the limitation of your expenses. For example, if the consolidation concerns a credit card, it does not have to be used before the total repayment of the credit.

There are some advantages of this type of crediting. The first one is that it is possible to define low rates of interest of the credits which are often more favourable, than the rates of the credit cards or of the other kinds of ensecured credits. Besides, the percents of this credit can be subtracted from the sum of taxes in contrast to the other types of credit.

In order to receive the equity loan, the real estate which is mortgaged, should be a place of permanent residence of the debtor.

Both hired worker and the businessman can get equity loan. The sum of monthly payment of the credit is defined in each specific case and depends on the sum of the credit, of the term and the rate of interest. The debtor has the right to pay off the sum which is bigger than monthly payments, if he has such possibility. As a rule, only the borrower with excellent and good credit history can receive home equity loans. For reception of the credit he has to give a bank information concerning a place of work and incomes, his credit history, mortgaging property and the obligations connected with it. After that the bank makes the decision on delivery of the credit and on the crediting sum. The credit sum directly depends on real estate cost, and also obligations which are connected with it.

It is necessary to know that there is often a swindle in such kind of crediting, therefore making a decision on reception of the given credit should necessarily include gathering of the information on that bank which the borrower plans to address to. It is not necessary to be tempted with low interests for the credit and too high sum of the credit.

Home equity loans can be the good financial tool, however, it is necessary to use it correctly. The real estate is a potential way to receive a considerable quantity of cash, but it is not necessary to abuse it. It is not necessary to use the received money for the game in a casino, a lottery or at a stock exchange (it sounds rather ridiculous, but some do so), for expensive vacation or expensive wedding. It is not necessary to use this money for expensive purchases: if you venture yourself these purchases, only having mortgaged the house, it means that actually you cannot allow yourself them. Especially it concerns purchases which loose their cost with time – for example, the car or the yacht.


The cultural transformations that have made people accept life in debt have had a direct impact on the approach youngsters take to money matters, which could lead to negative consequences in the long run as many of the next generation would resort to IVAs to cope with serious financial issues.

When we put efforts into our work and get paid for this, we get an amazing feeling of satisfaction. Our hard hard work seems to have been remunerated financially. We go shopping and buy the items we need and the items we simply want.