Coronavirus not only threatened public health safety but also created an economic vacuum leaving thousands of people bankrupt. With the global recession brought on due to the pandemic, everyone wants to secure a personal loan to gain easy access to money. But getting loans has become harder than ever. In such a scenario, a home equity loan is your best bet to boost your finances.
Risk during COVID-19: In order to lessen the lender’s risk, borrowers now need to pledge equity to secure competitive interest rates. As housing prices fluctuate with the economy, people should be extra careful while choosing a home loan plan. In a simple equation,
The home equity = Market value of your home – Mortgage payment left.
It is recommended to maintain a credit utilization limit of below 30%. Thus, if the set credit limit is $10,000, spend no more than $3000 during each billing cycle. It displays credit-healthy behavior and good borrowing habits. Moreover, while going over the limit reduces the credit score minimally, doing it frequently may damage it.
Moreover, banks have now limited the number of loans they approve due to the pandemic. Try consulting banks or credit unions that you already have accounts with or local institutions offering services to specific customers like you. The banks are willing to offer affordable and fixed home equity loan rates to loyal, creditworthy loanees.
Each lender is different: Every loan provider uses a different set of criteria and qualifications to determine eligibility and interest rate for borrowers. Usually, the factors considered are the mortgage balance, verifiable income, payment term, loan amount, the current property value, and the credit report. An applicant with high equity in their home and an excellent credit score will be offered a lower rate due to their good credit.
During COVID-19, stable income and mortgage balance have been the most crucial factors determining eligibility for a home equity loan. Ensure that you submit the latest income proof and disclose any assets or investments that may bolster your application. Verify that the loan estimate provided by the lender is equitable and valid for your circumstances. Often, these estimates are negotiable and take into account changing circumstances or unexpected expenses.
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Home as Collateral: If the mortgage is not paid on time, the lender can seize the house during foreclosure. They will gain legal possession of the equity pledged to recover their losses.
- Be proactive and not reactive. Contact your lender for a new repayment plan as soon as you face difficulties meeting the monthly payments.
- The foreclosure process can take anywhere from 2 to 18 months, depending on the loan terms and closing costs involved. Usually, if the monthly payment is not received within 150 days beyond the deadline, the lender can initiate the foreclosure process.
With these tips in mind, one can quickly obtain a much-needed loan in the midst of a pandemic. One is guaranteed peace of mind in knowing that the rate and monthly payments are fixed with home equity loans.