Although a home equity loan can be an inexpensive way to borrow money, it's
smart to choose one with the best rates and terms. And, in today's market, a fixed-rate home equity loan may be your best choice. That's because…
Current Rates Are Rising
By choosing a fixed-rate home equity loan, you essentially "lock in" the rate
for the life of the loan. Interest rates are on the rise, which means each
week--or even each day--the rate you'll get charged for your home equity loan
may be increasing. By locking in the rate now with a fixed-rate loan, you'll
never have to pay a higher rate (unless you refinance your loan).
You Won’t Be Tempted to Keep Buying
To get a fixed rate, you have to choose the type of home equity loan that dishes
the money out in one lump sum. Home equity lines of credit, on the other hand,
allow you to dip into the account over and over again. The downside: home equity
lines of credit are almost always adjustable-rate loans, which means your
interest rate could increase over time. By choosing the fixed-rate home equity
loan and getting your cash all at once, you won't be tempted to borrow from the
account over and over again.
You’ll Know Exactly What Your Payments Will Be
Since your interest rate is fixed and never changes over time, and since you can
only borrow one lump sum, your payments will stay exactly the same during the
life of the loan. That makes it easier for most folks to budget since they know
how much they need to make their monthly payments. If you choose an
adjustable-rate loan, on the other hand, your minimum monthly payment amount can
fluctuate from month to month, making it much more difficult to manage your
budget and finances.
There are many advantages to a fixed-rate home equity loan, including consistent
payment amounts and the ability to lock-in a low interest rate. In general, it's
best to avoid an adjustable-rate loan unless the current interest rates are
extraordinarily high, and experts predict they'll fall in the future.
To learn more about a fixed rate home equity loan, or to browse our recommended lenders for the best home equity loan interest rate, visit Carrie Reeder's website, ABC Loan Guide
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