Home Loan Disadvantages

Often times people don't truly understand what a home equity loan is and how it works. Many times individuals find themselves signing up for home equity loans without really researching and finding out what they are applying for. A home equity loan is a loan that uses your home, usually the client's largest asset, to leverage your loan. Basically you are using the title of your home to ensure the lender that you will pay back the amount of money as promised.

Although there are hundreds of people who apply for these easy approval loans it might not always be the better option to do. When you apply for any type of loan there are advantages and disadvantages. The advantages of getting a home equity loan is that you can be approved very easily and get the money you need in sometimes a matter of days. However, the advantages are far and few between when you compare pros and cons.

What is the Catch?

The major disadvantage of a home equity loan is that you are using your house to get approved for the loan. For some people who have flawless credit this might not be a problem, because they can insure themselves that they will do whatever it takes to pay off their loan. However, instances have arisen where individuals have forgotten or were they are not financially able to pay for their loans. So at this point you're wondering what happens if you cant pay your home equity loan? With all financial decisions come risk and the risk of losing your home wouldn't be an option, especially if you have a family.

Once you are not able to make your payments lenders will not hesitate to take your home from you. The equity that you have taken years of earning will not only be stripped from you, but so will your house. I have seen this more then enough times when individuals don't watch what they sign and let lenders (who don't care about you, besides the fact that you signing this piece of paper gives them a larger paycheck) talk them into just about anything.

Sites like the consumer's union will be able to inform you more about the do's and don't of the home equity loan. All of this information should help you better understand the way these lenders do business and hopefully keep your home, your home.

When dealing with your mortgage or home equity loan you should always make sure you are doing what is best for you. Do not let anyone talk you into anything you do not think is best. Just protect yourself and you will be fine.