A very important key to personal freedom is Financial Freedom. Debt and poor management of your capital or money is a large hurtle for people in the modern world. Being a child of the ’80 when credit card boom began, my family didn’t really warn me to much on the dangers of debt. (Or I may just not have been listening.) My family and I have worked hard over the last several year to pay off debt. My wife and I went to college together. Which was fun but two student loans resulted. We’ve now cleaned that nightmare up we focus more on our property. We purchased and planted many blue berries and black berries. Planted many apple trees, and 100 strawberries. Built and planted four raised beds in the Square Foot Gardening style. In the past we put that money toward debt. Today we got stuff done.
So next step. Become financially smarter. By learning a new financial term each day I can accomplish this. I subscribed to the “Term of the Day” at http://www.investopedia.com/. I will share these with you.
So today’s is…
What is a ‘Home Equity Line Of Credit – HELOC’
A home equity line of credit (HELOC) is a line of credit extended to a homeowner that uses the borrower’s home as collateral. Once a maximum loan balance is established, the homeowner may draw on the line of credit at his or her discretion. Interest is charged on a predetermined variable rate, which is usually based on prevailing prime rates.
Once there is a balance owing on the loan, the homeowner can choose the repayment schedule as long as minimum interest payments are made monthly. The term of a HELOC can last anywhere from less than five to more than 20 years, at the end of which all balances must be paid in full.
BREAKING DOWN ‘Home Equity Line Of Credit – HELOC’
Several factors can lead to strong growth rates in this type of borrowing:
-Increased retail sales channels, which have brought HELOCs to the masses. Most of these sales channels come from local banking institutions.
-Rising home values, which increase the amount of equity available to homeowners
-Prevailing low interest rates coupled with moderate inflation
-The fact that mortgage interest is often tax-deductible, making it more attractive than alternative borrowing methods
Because HELOC interest is variable, homeowners must be aware of prevailing interest rates -aspike can cause repayment balances to rise rapidly.
Here’s a video on the same topic.