Can a home equity loan be used for something other than a home?
I need a loan and some people have suggested that I look into a home equity loan because it would have lower interest rates than credit cards. The money I need is not for a home and I don’t have enough collateral for the amount I’d like to borrow. I have a good credit score (over 700) but I also have student loans and credit card debt. I earn enough to make all my payments and I have always payed on time. If I can’t get a home equity loan, what kind of loan can I get? What amount and interest rate would I be able to get? I’ve searched online, but all the bank terminology only confuses me. If anyone could explain all this in more “user friendly” terms, it would be really appreciated!
The money I need is basically a business expense, but I don’t think a lender would consider it a business loan.
Oh, and one “minor” detail… I don’t own a home.
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You can use the equity loan for anything. They will literally give you a check book and debit card in many cases. You are basically borrowing against the equity you have in your home. The interest you pay on this loan will be tax deductible and that is also what makes it more attractive than a credit card or personal loan. Be very careful! Turning your home in to an ATM machine is what has gotten many people in trouble and is what has caused the "credit crisis" that we are seeing right now. The stock market has plunged because of this and the negative effects on the economy are still being played out. I would only do this if it is necessary or if the loan will add value to your home. You may find yourself in a position where your home is worth less than your first mortgage and equity loan which means you will not be able to sell your home if you have a financial hardship and you may be forced to foreclose like all those people out there…
You have to own a home to get a home equity loan. Equity is the amount of value the house has that you don’t owe.
Say you put down 5k on a 100k condo, and after living there a year they tell you the condo is now worth 120k. You owe 95k on a 120k home, so you have 25k equity (120k – 95k = 25k), more or less.
You can then get a 25k home equity loan, and use the money for a car, a face lift, new furniture, or a big bag of crack, whatever you want.
You can try to get a signature loan or unsecured loan, but it’s going to be at a higher interest rate because it’s a high-risk loan.
You can get someone to co-sign a loan based on their home equity, but then it become their risk and they own you. They get to judge you. They get to ask what the loan is for.
Many mortgage companies will allow YOU (over 700 credit score) to refinance your home for whatever you need–not just home improvements. Ask for a "home equity refi(refinancing)". Shop around for the best deal as there are many companies who WANT YOUR BUSINESS. Good luck!
Seek a professional financial adviser, your finances seem to be in disarray. Looking for more loans while you have so many other debts is a serious indicator of financial trouble. If you make enough to make the payments comfortably, you should be able to pay them off soon or reduce your debt significantly.
In most cases your total loans may not exceed a certain percentage of the home value. I believe this percentage has decreased with the current housing crisis. Lenders don’t want you to owe $180k on a home that is valued at $200k if it would be difficult to sell it for at least $180k.
You should not be looking to start a business, which will drain you dry in the first years, until you get some of the debt paid down.
It’s never a good idea to jeopardize your home unless it’s absolutely necessary.
You want a home equity loan, but don’t own a home? Can’t be done. A home equity loan is a loan using the house’s value above the mortgage amount as the collateral. So, you have to have the home first for this kind of loan.
You can use your home equity loan to pay for education, for consolidating your debts or for doing some home improvements.
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Qualify for credit Can a home equity loan be used for anything you want?
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