With a good credit rating, you can eliminate high-interest debts with a low-rate home equity loan. Borrowing up to 125% of the value of your home, you don’t need equity to qualify for a second mortgage. With low rates, you can cut your payments by as much as two-thirds.
Advantages Of A 125% Home Equity Loan
The primary advantage of a 125% home equity loan is that you can secure lower rates than what you are currently paying on your short-term loans. Essentially, you aren’t increasing your debt; rather, you are trading one rate for another.
With lower rates, your payments immediately shrink. You also have the option with a home equity loan to maintain the same payment amount but take fewer years to pay off your debt, saving you even more in interest charges.
Financial companies are willing to lend to you based on your credit history and the expectation of increasing property values. Both you and your lender are banking on your home appreciating in value.
125% home equity loans are ideal for those who plan to stay in their home for several years or at least until their property value increases significantly. Consolidating your debts with a home equity loan maximizes your term choices, allowing for loan periods of five to thirty years, which will affect both payment and interest size.
Look For The Best Loan Rates
Take the time to look for the best loan rate before signing any loan contract. Many financial companies now offer 125% home equity loans, so you should have no problem finding loan quotes online.
Comparing closing costs is as important as comparing rates since this can be a hidden expense. By looking at the APR, which calculates both closing costs and interest, you can determine who has the cheapest loan overall. Your loan terms will also affect your rates; the shorter the loan term, the lower the rate.
When you have found the right loan, start the application process immediately to secure the quoted rates. With online applications, you will receive the final paperwork in days. Then, you can have your debts paid off in just a couple of weeks.
Conclusion
A 125% home equity loan can be a powerful tool to eliminate high-interest debts and improve your financial situation. By taking advantage of lower rates and flexible terms, you can significantly reduce your monthly payments or shorten your loan period. However, it's crucial to shop around for the best rates and understand the full costs involved to ensure you make a financially sound decision.