You are not alone if you have recently faced financial challenges , such as a loss of employment , significant medical bills , or a tragic incident . The majority of the world ' s population is affected by the COVID scenario . Over 57 % of American adults , for example , are unable to pay medical costs , which are the leading cause of personal bankruptcy .
Some people may attribute their financial difficulties to illogical spending or bad saving practices . If you ' re one of them , and you have a significant outstanding balance on one or even more credit cards , you might be finding it difficult to get out of debt . If you can only afford to make minimum monthly payments , paying off your credit cards might take several years , if not decades .
If you own a home , you might apply for a home equity loan and use the funds to pay off your credit card debt . You might be able to handle highinterest unsecured debts like credit card debt or payday loans using a home equity loan . Let ' s look at the best ways to do that through a home equity loan .
But before going further , let ’ s know a bit more about Home Equity loans .
What is a Home Equity Loan ?
Image by mohamed Hassan from Pixabay
Requirements to Borrow from Home Equity
Analyze your requirements , how they would fit into your finances and style of living before taking out a home equity loan . The criteria differ depending on the lender , but in general , you ' ll need :
Image by mohamed Hassan from Pixabay
A home equity loan helps you borrow against the value of your home that has grown over time . If your home is currently worth $ 500000 , but you owe $ 200,000 on your home loan , you have $ 300,000 in equity .
A financial institution , credit union , or other lenders might be willing to give you a home equity loan equivalent to a percentage of your equity , depending on this information . Other criteria , such as your credit score , will influence how much you may borrow and if you can get a loan at all .
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• A specific amount of equity in the house ( 15 percent to 20 percent )
• Creditworthiness
• Low debttoincome ratio ( DTI )
• Having enough income
• A decent payment history
The balance between the amount you owe on your home loan and the home ' s market value is known as equity . Lenders use this number to compute the loantovalue ratio , or LTV , which determines whether you meet a home equity loan criteria .