You must be thinking the same thing I was when I heard about this. How can someone possibly scam you with a home equity loan? Are you not protected by the government or some other organization to get these people to be “real” with you? One would think it’s hard to pull these scams off, but in this fast paced world we want things done quickly with the least possible amount of work with the most pay off.
The home is, arguably, the biggest asset you can possess and this makes the home equity loan conmen’s mouths collectively water at the prospects of turning it to their favor. If you’re a minority, elderly or have poor credit you’re a potential target. The federal trade commission (FTC) wants everyone to be knowledgeable about these underhanded practices so you can protect yourself.
I’m sure we’ve all heard a lender tell us to pad our income numbers. You know what I mean. You write down your income as more than what it is to help nudge you along to a better shot at getting a home equity loan. Lenders will encourage you to do this because they don’t care if payments aren’t made. You have money built up in your home and if you can’t meet the payment they foreclose and take it, selling it for profit. This is known as “equity stripping”.
So your equity mortgage loan is a bit high. You’re falling behind and don’t see yourself being able to pull yourself out of the hole. You look around for solutions and a lender offers you another loan to refinance your current property. You pay off the old loan and begin a new one, saving yourself. All you’ve done is saved yourself from lender #1 while lender #2 lurks in the bushes waiting for the dreaded “balloon payment.” This is the reason why your loan payment is lower than before. When the principle term of your loan is up you may have a balloon payment due. This is the total amount you financed, due in one lump sum. If you can’t pay it or can’t refinance then you face losing your home.
One of the most widely used scams is the “make the equity in your home work for you” scam. Your payments are nice and manageable, your rates are low but you would like a few extra bucks to have fun with so they prey on your good fortune. This home equity loan gets you some extra cash and after a few months they call to offer another loan under the guise of a “home improvement”, “vacation” or “new car”. You bite and you get another loan refinanced. Eventually your payments grow, your fees are higher and your manageable payments become too much and you fold.
There are several other scams involving home equity loans, but these are the top three instances. The worst part here is that they are perfectly legal. Is it moral? Not even close. Read everything. Don’t go to over the phone lenders for things you don’t need. You’ll be better off in the long run taking the high road.
Secured home equity loans are financial sums loaned to you through using your house or property as collateral. Mostly, these loans have low interest rates attached. These are secured home loans. They are also often provided to those individuals with bad credit holders with defaults in payment, county court judgments and arrears Understanding equity. Equity is defined as the amount obtained by subtracting your total mortgage balance from the market value of your home or your property. The higher the resulting equity balance, the higher the amount you can opt to receive. As much as 125% of the value of property can be borrowed.
Secured home equity loans:
There are two types Secured home equity loans, these are: home equity loan and home equity line of credit. In home equity loans permits you to receive the entire amount of the whole loan in one lump sum. You, on the other hand, are required to repay this entire amount plus the interest in regular installments at a fixed rate. The home equity line of credit, also often referred to as HELOC, allows you to utilize the loan as if you were using a credit card. This means, you only pay interest only on the amount that you borrow. However, there is a limit under which you can borrow money under HELOC. In general, the sum given by these secured home equity loans can increase up £75,000. Additionally, the length of time for repayments can stretch up to 25 years.
In order to access secured home equity loans that will keep you out of financial woe, it is best to approach various agencies that can guide you through the rigorous process of finding you the best lender. The purpose of these agencies is to provide you with a spectrum of secured home equity loans from which you can then choose the best suited one. These also allow you to compare the interest rates offered by various lenders through these agencies.
Practicing precaution with secured home equity loans
Your home is the lenders security that you will make repayments. For this reason make sure you have read and understood the terms and conditions of the lenders. In many cases there are hidden loan terms. It is incumbent on the borrower to check the credentials of the lender.
