Why cash out using home equity loan?
There are several ways to get cash out from your property, to sell your property or collect rent from your property. However, if both is not an ideal solution to you, home equity loan may be your best option.
While you may be considering renovation loan, personal loan, business loan, etc., home equity loan trumps the rest of the loan with its lowest interest rate. The effective interest rate for home equity loan is approximately 1.5 to 2%, while renovation loan is 4 to 10%, personal loan & business loan range between 10 to 25%.
With its low-interest rate, home equity loan can also be used to reduce other debts.
For example, you have a personal loan of $100,000 to be paid over 36 months with an interest rate of 10%; you will have a monthly payment of $3,227 and a total interest of $16,162 for the 36 months loan.
However, by using home equity loan to pay off the personal loan, you will be enjoying the low interest of 2% with a monthly repayment of $2,864 and the total interest payment of $3,113. Using home equity loan, you would have saved up to $13,049 of interest payable.
Tool used in the calculation: Loan Repayment Calculator