There are various types of loans available to you, including a home equity line of credit. There are a large number of reasons why you might consider taking on a loan. You may want to make extensive repairs to your home that you may not have the money to pay. You may want to pay off a large number of various debts and only have one payment to make. When you consider loans in Canada, you want to know all of your options.
When you have a home, you can use it as collateral for a loan, which gives you a better interest rate. A lender is more likely to approve your loan request when you use your house as collateral because it protects the lender in the event you cannot repay the loan.
A home equity loan is a fixed amount that you borrow against your house. It is basically a second mortgage on your house. You and the lender agree on the amount of time you have to repay the loan. You make equal payments once a month for the agreed-upon amount of time. You have full awareness of all this information, including interest rate, before you agree to the loan. Typically, you can borrow as much as 85 percent of the equity you have built up in your house. Your income, the value of your house, and your credit history determine how much the lender will allow you to borrow.
Another type of loan for consideration is a home equity line of credit. This loan is a revolving type of credit, similar to what you expect from a credit card. This means you only borrow the exact amount you need when you need it. There are usually checks or credit cards attached to the line of credit. There is a limit to the amount in the line of credit, and you cannot go over that limit. You only have to pay back the amount that you use.
Your house is still collateral for this type of loan. You agree to the terms before you sign the paperwork, so you know how much interest you are paying. You will also know the length of time you will have the line of credit. If you do not pay back the money you borrow, you can lose your house. It is important that you understand your agreement no matter what type of loan it is. This way, you will not default on the loan.