How do you Get a Home Equity Line of Credit

How do you get a home equity line of credit? Before you can get a home equity line of credit loan, you should know a little bit about them to make sure that you are getting the right type of loan for your specific needs.

Learning about what it takes as well as what is required in order for you to receive a home equity line of credit loan is necessary for you to be able to start this process.

Keep in mind that this type of loan is also known as a HELOC loan, so don’t be confused if you hear this term used in place of the longer version in this article and when speaking with a lender.

So how do you get a home equity line of credit? Since a person’s home is their most valuable asset, it is the biggest collateral — something that they promise the lender to assure that they pay their loan back — that they can have.

If a person defaults on their loan, the lender would own the person’s home in exchange for not receiving their money. This was a major cause of the financial economic crisis that occurred not long ago.

How a home equity line of credit loan differs from a home equity loan is the fact that a home equity line of credit loan allows the borrower to take money over time with a limit each month, sort of like a credit card. With a home equity loan, you are given a lump sum of money all at once, and can spend it as you please without any limits.

The downside with doing a normal home equity loan is you are given a lot of money all at once, which may be overwhelming. Having all this money at once means that you can lose it all at once very easily.

Home equity line of credit for home projectsWhere Should You Go?

With out a doubt, you should always go to your bank if you want to discuss getting any type of loan involving your home as collateral. Your bank can discuss rates and the total amount of money that they can temporarily lend you.

They can answer any other questions that you may have about home equity line of credit loans as well.

Preparing to Talk to your Bank

Before you go to your bank to talk to them about getting a home equity line of credit, you need to not only know how much money you will need, but you need to have a reason for the loan.

In order for a bank to feel comfortable with giving you any type of loan, they have to know if it is a wise investment so that they can get their money back, plus interest. The reason that this type of loan was popular before the recession was because the interest paid was a federal tax deduction.

Many banks are not as picky as to the reason that you want this specific type of loan because they can just foreclose on your home to make up for the difference if you are unable to pay, which is the biggest risk that you have to take with a home equity line of credit loan. Don’t take out this kind of loan unless you know that you can repay it, or it could cost you dearly.

Open and Honest

Banks are willing to work with you as long as you can demonstrate that you can repay the money that you need. Therefore, it would be wise to pull your credit report to see what is on it because they are going too immediately. They will ask you about your credit report and any items that they feel needs to be talked about.

If you have payment arrangements setup with collectors bring in written proof of the agreement. You will also need a letter that states you have made or continue to make all of your payments on time from the debt collector.

Additionally, you should definitely be honest about the amount of money that you make from your job. Banks call to verify your employment and also ask you for check stubs.

There are obviously some hoops that you will have to jump through but you should not be shocked. After all, borrowing $30 is completely different from borrowing $30,000 from someone with the promise to pay it back.

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