|By David Pilley on March 7, 2011
Because interest on your mortgage is tax-deductible, getting a home equity loan was a popular trend during the 2000s. People still do this today, though the recent housing crisis has wiped out many people’s equity. Nevertheless, a home equity loan can be used to purchase just about anything you need, and you can certainly look for one as long as you can keep up with your house payments and not go into foreclosure. Instead of using a credit card, you can look at the multiple sources of getting this type of loan.
The most common place to get a home equity loan is your traditional bank. Since most Americans use commercial banks like BB&T, RBC, or Wells Fargo, this is the most widely available source for a home equity loan. Your bank might offer low closing costs or no annual fee, and your interest rate will be lower if you are a customer of the bank. However, the bank might not offer the best possible interest rate, mostly because it is affected by your credit score. A low credit score will always mean a higher interest rate when it comes to getting a loan from the bank.
A lesser-known source is a savings and loan association (S&L). These establishments specialize in accepting savings deposits and giving mortgage loans. S&L savings accounts accrue more interest than a savings account in a commercial bank, and S&L’s also offer lower interest rates on their loans. Once again, you need a good credit history to receive a lower rate. An S&L might also not run in your state because of a financial crisis in the late 1980s-early 1990s, when nearly half of them closed down because of poor real estate lending.
Consumer finance companies, also known as “small loan companies,” may be another source for your loan. These companies specialize in giving loans, so it may be easier to get a loan here, even with a bad credit score. Interest rates, however, will not be low, and you might need a cosigner in order to be approved for the loan.
A credit union is another option for a home equity loan. As this institution is owned and controlled by its members, you must be a member to have this source available to you.
Finally, a brokerage firm could also be an option. This type of firm looks at the market and sells loans based on trends. The repayment plan offered may be flexible, but if the market crashes, your payments could end up skyrocketing.
Since you have multiple places to get a home equity loan, you shouldn’t just look at one place and settle for the first option. You should look at competitive rates and consider if turning your equity into money and putting your home at risk is something you want to pursue.