The primary benefit of homeownership is building up your equity. Your property can increase your wealth over time. This increase only comes about when you sell your home or borrow against it. When it comes to borrowing the money, there are many options to choose from;however, we will focus mainly on home equity loans(HELOANs) and home equity lines of credit (HELOCs). Each loan will have advantages and disadvantages, so choose wisely. As these options are both forms of credit, we would look ateverything credit: fix my credit score,buildmy credit score, improvemy credit score, and boost my credit score.
- Spending: You can receive a large sum of money in one go. This amount will fund any significantexpenses that you may have and can be kept in your checking account. Keeping these funds in your checking account and using the funds directly from there will enable you to build a credit history, which is paramount for improving your credit score.
- Payment: These payments are made through monthly payments. The payment amount and interest should remain constant. The bank will set up a payment schedule for you that includes any interest incurred. These regular payments that are paid on time EVERY month will allow you to fix your credit score.
- Interest rates: Fixed interest rates assist with scheduled, predictable payments, which,in turn,allows you to plan accordingly. On account of there being no surprises, building up your credit score with this feature is an excellent perk.
- Interest cost: Interest is charged on your entire loan amount and will be highest at the start of your loan.
- Spending: Typically, you will have a 10-year window from which to draw. You can withdraw funds as many times as you need. Examples of methods to access these funds are as follows: write a check, transfer a sum into your checking account, or use a card linked to the loan.Using the money only as and when you need it is an excellent way to boost your credit score, enabling you to keep a close eye on your money and using youravailable credit when necessary.
- Payment: During the loan, you can make small interest-only payments on the allocated debt before you start your repayment period. When the repayment period begins, no withdrawals may take place. Timeous, regular payments will blaze the trail for boosting your credit score.
- Interest rates: These rates will vary, but if the rates rise, so will your costs.
- Interest costs: These costs can be kept at a minimal rate if you use the money only as and when you need it.
The borrowing amount is,for the most part, the same for both. In most instances, your bank will allow you to borrow up to 85% (which will have an incredible impact on building your credit score),and this will include any existing debt that you may have. There may be instances that allow you to borrow more than 85%. However, should you choose to do so, you will incur higher interest rates and costs.
When a HELOC is chosen over a HELOAN and vice versa:
- There is no need to apply every time you require funding.
- Over the ten years, you can withdraw and repay as often as is required, assuring you of a maximum available credit at all times. This access will be fantastic for a credit score boost.
- Interest loans minimized
- When you borrow money, you pay interest. Should the funds go untouched, no interest is levied, thereby improving your credit score
- A payment schedule is arranged for you, and you know ahead of time what your monthly payments are for the duration of the loan. The ability with features to build your credit score is enormous. Not only can you build your credit score, but you can lay the foundation for repairing your credit score.
- Consolidation of debt
- Car loans and credit cards can be risky if you use your home as collateral. You may increase your secured debt, which is not the desired goal.