Get a Lower Interest Rate with Home Equity

By JJ Singh
Loan Page Columnist

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If you're thinking about getting a car loan, consider a home equity loan instead. You could save yourself some money.

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Home Equity Can be Cheap

Home equity is the difference between what your home is worth and what the balance of your mortgage is.

You can use that equity to get a loan, with your home as collateral. Because your home's value is likely to increase over time, your home provides tremendous security to a lender. That means you can get a low interest rate.

Cheaper than Vehicle Loan?

When you get a vehicle loan, the company financing your car will often take a lien on (collateralize) your vehicle. However, because your car is likely to depreciate in value quite rapidly, it does not provide strong security in the eyes of a lender. As such, your loan could have a relatively high interest rate.

In many cases, a home equity loan will carry a lower interest rate than a standard car loan. Through home equity loan refinancing you can get a larger amount of money as well. You might consider taking that money to pay for a wedding, finance a child's education, or remodel your home.

No matter what your purpose, a home equity loan can be a great way to get inexpensive cash. Your first step in getting home equity loan is to get a good faith estimate from your lender. Once you know the terms your loan, you can make an informed decision to get the best rate for you.

Sources:

www.bankrate.com

About the Author

JJ Singh is a loan consultant who has mortgaged his life away to the micro finance industry in New York City. He holds a bachelor's degree in Economics from the University of Virginia.

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