* It is a good idea if the take out would go directly to the party whom you want to pay with the loan. This would minimize the risk of spending the money for something or somebody else.
* Ask for an official list of fees and interests before going further with the loan negotiation. Some agents conveniently fail to mention some fees like the closing costs and prepayment fees. Closing costs and prepayment fees are important information just in case the borrower decides to make advance payments later.
* Be wary of scams. Some lenders may appear to be assisting the borrower to have a good deal by approving loans that are more than they can afford to pay but actually, the borrower is being led to the road of payment default and consequently foreclosure.
* Research before signing anything. Contact people who have taken out loans from the lender. The Better Business Bureau is a good source of information regarding good business practices.
* Don?t be misled by the low amortization. It may not even be enough to cover the monthly interest and the consequent is a surprise after years of payment that the principal of the loan is not yet paid.
* Don?t be afraid or ashamed to ask about anything that is not clearly understood. In fact, any items that seem to be subject to interpretation should be confirmed with the lender.
* The Truth in Lending Act gives the borrower the right to cancel the loan by informing the lender in writing within three days of issue.
The home equity loan is an excellent and tempting source of cash for the home owner. The lenders consider it a safe investment but the opposite applies to the home owner.
Yes, there are advantages like the tax-deductible, lower-than-the-credit card interest and the convenience since you can apply on line and agents are eager to do business. However, the collateral?s value is more than what the appraiser reports. The appraiser has no idea of the true value of a home.
If ever a home owner finally decides to have that home equity loan, it should only come after a careful study of the pros and cons of the decision.