Home equity loans are increasingly popular where the value of real estate is rising rapidly. In California, real estate appreciation tends to be over 7% in general, and in specific communities, it is well over 10% per year. In these cases, home owners build up very substantial equity in a matter of 2-3 years, so when the need arises, it is natural to use this equity to borrow the money.
Since primary residence homes are considered a secure investment, using them for collateral is appealing to financial underwriters. With a large number of people with significant equity in their homes, a huge market of home equity lenders has emerged in California.
Generally, home equity loans feature a substantially lower interest as they are secured by residential property. These loans come in form of equity lines that can be drawn down by consumers as required or as term loans where the consumer gets the money up front and then has to make installment payments to service the debt.
Home equity loans are so lucrative for lenders that some of the largest home equity lenders are able to advertise their products on television. They market these products as a means to consolidate debt, take a vacation, fix up the residential property or just about any other purpose that will bring them applicants for these loans.
As the financial companies have expressed a seemingly insatiable appetite for these loans, they have consistently lowered the credit rating requirements for consumers that apply. Many mortgage brokers advertise home equity loans to consumers with bad credit. In response, more and more consumers are using these loans to get money they use to pay off revolving charge card debt.
Most of these loans are appealing to consumers, as well, because the debt service is tax deductible under current tax code.
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