By James Fu

Home equity line of credit, also known as HELOC, is a loan that tells you how to facilitate the long term financial affairs. By using the route of home equity line of credit, different amounts of money can be withdrawn at different times.

It is the circulation of credit, in which the home of customer acts as collateral. If a person wants to finance the projects extended to long period of time, like an investment in business or shares or a course of study, a home equity line of credit loan is very useful.

When a person needs loan through home equity line of credit, he approaches the financial institutions or money lenders that provide a home equity line of credit loan. After that, an application form is filled and submitted by the consumer to the authorized person of the institution. Now, the consumer has an option to choose the variable rate loans or fixed rate loans. The rate, in case of fixed rate loans, will not fluctuate throughout the period for which the loan is demanded, whereas in variable rate loans, the variation occurs in the interest rate throughout the different stages of loan. The lender will estimate the value of his home and normally lend 75% to 80% of the actual value of the home. Then a credit card is given to the customer for the purpose of withdrawing money. He cannot withdraw over and above the limit stated in the form by the lender.

When a person wants to get a loan by using the facility of home equity line of credit, he needs to visit the market of lenders, and before selecting a lender, he should read the credit agreement, provided by the lender, vigilantly.

The credit card will be issued with annual percentage rate (APR), and he must make sure that the APR and the terms of repayment pasted in the agreement are manageable within the boundaries of his resources. He must check for any hidden fees; he may be liable to pay for the submission fees, home evaluation fees, document filing fees and mortgage preparation.

Some institutions do not charge for such operating expenses, but the customer should examine if they are saddling him with hidden costs. Check the terms and conditions for the payment of interest and loan. Verify the stipulations and circumstances of refinancing the loan. According to the Lending Act, the lending institutions are officially bound to provide you all the required information about the loan.

Many companies, economic institutions and banks offer loans under home equity line of credit. One can get pleasure from the benefits of this facility, as it is very transparent for the various business activities. With newly invented internet services, shopping for the best loan, in order to facilitate the financial state of affairs of business, has become very easy.

The great advantage to the consumer is that the repayment requisites for credit loan under home equity line of credit are very flexible; the consumer has the right to use a large sum of money, which he can withdraw according to need and can allocate to several productive uses. The drawback is that the customer is at extreme level of risk, because he may lose his home if he fails to repay the amount of loan in the manner prescribed.

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