Needing Fast Cash At Competitive Rates
Should you need fast cash because you lost a job, or perhaps one of your children needs a short-term loan to cover unexpected legal expenses? Whatever the reason, you may wish to consider cash-out borrowing.
With cash-out lending, you can convert a portion of your home’s equity into cash. Most equity loans come with variable interest rates, some with attractive low introductory rates and others with fixed interest rates.
Fees and costs
Some loans come with upfront loan processing fees, and others have closing costs. Since no one loan is suitable for every homeowner, the challenge is finding the home equity credit line that best fits your needs.
Understand the terms and conditions of your loan
It would be best if you did not hesitate to ask questions. To help you do this, consider some of the following issues that may arise:
Home equity loans have their risks and their advantages
While home equity loans can get you fast cash at reasonable interest rates, they also have their risks. Your home equity line of credit will require placing your home as collateral in case of default. This risk cannot be ignored if, by chance, you are later unable to make your monthly payments for some unforeseen circumstance.
When trouble strikes closer to home
Unforeseen circumstances can put you in a vulnerable position should you be unable to pay off your equity loan. Economic conditions can change. So do life circumstances. You can lose your job or suffer a disabling injury preventing you from working at your current job.
Should you be forced to look for another loan to help you pay off the equity loan, you may not qualify due to your current circumstances. You may have to look for other sources of borrowing.
Alternatives to equity line borrowing – a second mortgage
There may be other ways to borrow money, such as taking a second mortgage that provides for monthly fixed installments. Remember that placing an additional mortgage on your home, also called a double mortgage loan, often comes in a lump sum. It will not be considered a line of credit from which you could write checks on an as-need basis. Also, double mortgage loans are almost always offered with a fixed interest rate.
Given the risks involved in double mortgage loans, you should consider other options, such as accessing credit lines that do not collateralize your home. Most of the time, this means unsecured sources and lines of credit you have already established.
When borrowers find themselves in this predicament, it is more important than ever to fully understand the financial and contractual consequences of taking out additional loans to pay other loans. This is one of many reasons why the Federal Truth in Lending Act is so important.
Truth In Lending Act
This critical federal legislation legally mandates lenders to alert you to the key terms, conditions, and costs of the loan before making a formal application for the loan.
The law requires lenders to clearly and visibly disclose and describe to the borrower all material and relevant elements of the loan being considered, including:
- Appraisal Charges
- Opening And Closing Charges
- Credit Report Charges
- Variable Interest Rates
- Annual Interest Rate
- All Relevant Payment Terms
- Penalty Clauses
- Implications Of Changed Terms
- Cancelation of Loan Terms
- Acceleration Clauses
Penalties For Violating The Truth And Lending Act
While there are criminal penalties for willful violations of the Truth in Lending Laws, such as fines and imprisonment. Most violations are associated with civil monetary penalties.
Violations include providing the borrower with false or inaccurate information or failing to provide information that the lender must disclose under law. An example is the bank sales representatives attempting to persuade borrowers to apply for a specific loan using charts or tables that understate the loan’s actual annual percentage rate.
Today, most major online lenders compete for your business and do so legally and competently. These major online lenders offer various options for loan amounts, rates, and terms. One such reputable online lender is Lending Tree.
