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One of the smartest and most cost-effective ways to borrow, if you are a home owner, can be taking out a home equity loan or line of credit secured by your home.

What makes these loans a good choice for your family?

The answer is simple! The interest on a home equity loan or credit line is usually tax deductible.* The interest you pay on credit cards, student loans, and personal or auto loans is not. And, because these loans or lines of credit are secured by your home, they are often available at a lower interest rate than other types of credit.

How do they work?

Home equity loans and credit lines are easy and economical. The amount you can borrow is based on how much equity you have in your house. With a home equity loan or credit line you may be able to borrow up to 90% of your home's appraised value, less any mortgage balance outstanding. For example, if your home is appraised for $150,000, (which happens to be exactly what you paid for it), and you have a mortgage balance of $100,000, you may be eligible to borrow as much as $35,000.

What's the difference between a home equity loan and a home equity credit line?

A home equity loan provides you with a lump sum cash amount. You repay it as you would any other installment loan in fixed monthly payments, with terms usually ranging from five to 15 years. These fixed-rate loans guarantee your payment will never increase. This loan is ideal for debt consolidation, large expenditures and home improvements, or for those who prefer the budgeting ease of fixed payments.

A home equity credit line establishes a maximum line of credit that you can draw against by simply writing a check. You borrow what you need when you need it. With a home equity credit line you are billed for interest only for the beginning of the term and principal payments can be made at any time. As you repay your principal, that money becomes available to borrow over and over again. That means you don't have to reapply every time you want to borrow against your home. Most credit lines allow you to pay interest only for a period of 5 to 15 years, followed by an amortization of the remaining balance for an additional 5- to 15-year term. A home equity credit line is the solution for those who want the financial flexibility to use their equity only on an as-needed basis.

How long does it take to get approved?

It's possible to obtain an initial credit decision on a home equity loan in as little as 24 to 48 hours. Applications can even be made by phone, mail or in person. You'll have to provide details about your property as well as your personal finances.

Home equity loans and lines provide quick cash, and they're easy and economical. It is important to remember that if you should default on home equity loan or credit line payments, you are putting your house at risk. Lenders have the responsibility to foreclose for nonpayment. As with any loan, it is important to determine your ability to repay the amount you borrow before you commit.

* Consult your tax advisor concerning the tax deductibility of interest and charges on your loan.

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