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Article Excerpt
If you need money to pay bills or make home improvements, and think the answer is in refinancing, a second mortgage, or a home-equity loan, consider your options carefully. If you can't make the required payments, you could lose your home as well as the equity you've built up. That's why it's important not to let anyone talk you into using your home to borrow money you may not be able to afford to pay back. Not all loans or lenders are created equal. Some unscrupulous lenders target older or low-income homeowners and those with credit problems. These lenders may offer loans based on the equity in your home, not on your ability to repay the loan. High interest rates and credit costs can make it very expensive to borrow money, even if you use your home as collateral.
Talk to an attorney, financial advisor, or someone else you trust before you make any decisions about borrowing money. Non-profit credit and housing counseling services also can be useful in helping you manage your credit and make smart decisions about loans.
You can take some steps to protect your home and the equity you've built up in it. Here's how.
1. Shop Around
Contact several lenders--including banks, savings-and-loans, credit unions, and mortgage companies. Ask each lender about the best loan you would qualify for. Compare:
* The annual percentage rate (APR). The APR is the single most important thing to compare when you shop for a loan. It takes into account not only the interest rate, but also points (one point equals 1% of the loan amount), mortgage broker fees, and certain other credit charges the lender requires the borrower to pay, expressed as a yearly rate. Generally, the...
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