The home equity loan is another popular style often used for business purposes. Basically the home equity loan is a second mortgage taken out over an already existing one in which the property owner leverages the equity of their home against the borrowed amount.
The two main categories of the home equity loan would include the fixed rate loan and the line of credit loan. Both these are equally popular but usually chosen according the needs and compatibility of the borrower at the time monetary funds are an issue.
• The fixed rate loan provides a single, onetime payment to the borrower in which the repayment is done over a fixed period of time and at a fixed amount. The payment and interest does not change over the stipulated agreed upon period.
• Lines of credit style however differs in the basic dispersement of the borrowed amount. The initial amount is usually offered and agreed upon at the onset of the agreement; however the dispersement can be taken in amounts required at a particular time and for a particular amount. The monthly payments will vary depending on the amounts dispersed as the interests are only calculated on what has been utilized and not on the whole amount. However all outstanding amounts have to be repaid in full at the end of the due date of the agreement.
The home equity loan provides for a comparatively easy source of cash although the interest rates are higher than the first mortgage it is still a more viable way of acquiring cash resources quickly. It has been noted that besides using the money for business purposes the home
equity lines of credit is also recommended to be a better option to use than credit cards advances as the interest rates incurred are far less in comparison. There are also better tax relief benefits in using the home equity loan option.