Not many people keep a large sum of cash on hand just in case an emergency arises. But if life throws you a curve ball, you have to be ready to take quick action. If you have equity in your home, a home equity loan might be one of the most efficient ways to raise the money you need quickly and painlessly.
Home Equity, Not Just for Home Improvement
The amount of equity you have is the difference between what your home is worth and what you owe on the mortgage. As you build equity, your financial flexibility increases, because home equity loans are among the simplest, least expensive means of borrowing money. Traditionally, they're used for home improvement projects. But more and more homeowners are turning to their home equity to fund unexpected, emergency expenses, as well.
Benefits of home equity loans
Home equity loans have several features that make them ideal for funding unforeseen expenses:
- The application process is quick, particularly in comparison to a mortgage refinance, which can take weeks to fund.
- Home equity loan rates are usually lower than a credit card's cash advance rates.
- Borrowers with credit problems have an easier time qualifying for home equity loans versus other types of loans.
- Interest might be tax deductible. Check with your tax advisor.
- Loans can be amortized for up to 30 years, which can make monthly repayments extremely manageable.
- If you have a large amount of equity, you could have access to a sizeable sum of money.
Knowledge is your best weapon when you see that curve ball coming. Once you've built up equity in your home, you can walk up to the plate with the confidence of knowing your options. Even if you don't see the curve ball yet, it doesn't hurt to consider a home equity loan in your financial contingency line-up.