There may come a time where you need to obtain a personal loan. One of the most common reasons for applying for a personal loan is to help pay financial obligations, such as high-interest debt or in many cases medical emergencies or car troubles. Others want to obtain a personal loan to help make necessary home improvements or to help finance an entire remodel. No matter what your reason might be, one of the questions that we are frequently asked is “Can I Use My Home as Collateral For A Personal Loan?”
The quick and simple answer is yes. You can use the equity in your home as collateral for a personal loan. However, just because you can do it doesn’t mean that you should. One of the biggest concerns about using your home as collateral for a personal loan the risk of losing your home. If you cannot afford the payments, you will end up not only defaulting on the loan and hurting your credit, but you will lose your home and any equity you might have (or had).
If you decide to use your home as collateral on a personal loan you are going to want to take certain measures to protect your home. You must always remember that not all creditors are created equal and some of them prey on people with bad credit, low income, or even the elderly. Some of these shady creditors offer loans based on the equity you have built up, not on your actual ability to repay the loan.
Before you agree to any kind of loan you want to shop around. Contact more than just one or two lenders and ask them for information about the best loan you can qualify for with them. When comparing the different options look at the following information:
- Loan Term
- Monthly Payments
- Penalties for Balloon Payments
- Points and Fees
Once you have chosen your creditor, be sure to review the loan agreement carefully. Ask the bank for a blank copy of the form you will be signing at closing so you can review the loan carefully at home or have someone you trust go over it with you.
Once you have carefully reviewed the loan terms, sit down and do the math. Look at your monthly income and expenses and make sure you can afford the payments.
If you’re considering taking out a personal loan to consolidate debt, there may be a better option. You may be able to sell your house for cash, which will help you get the money you need to pay off your debts and give you a fresh start (without stacking up more loans and debt!). Contact your 800-BUY-KWIK representative for a 100% free, no-obligation cash offer on your home. Learn more here.