The debate between fixed-rate home equity loans and variable home equity loans continues on to this day. There are a certain unrivaled flexibility and consumer intrigue in a variable-rate loan. Yet, when one really looks at it, a fixed-rate loan is far superior. It avoids many unnecessary trappings that can happen when pulling a second mortgage, for responsibility and safety is better for the long-term.
Variable loans work as follows. Customers are often provided with a type of credit card where they can pull money out as they desire. That amount will be leveraged against their mortgage. There’s typically fees associated with a variable loan, but it can be pretty reasonable. The fees and interest rates associated with the loan vary depending on how much is drawn, how small the payments are, and how long the current terms are for. A Variable-rate Home Equity Loan has come closer and closer to mining credit cards in recent years.
Some detractors of the fixed-rateHome Equity Loan will look at it as taking the lump sum upfront from a lottery win. Usually, clients get a single sum upfront. They pay an interest rate that will go unchanged, and the repayment terms on that fixed-rate are equal as consistent.
The common argument against fixed-rate loans is that they do not provide long-term help. In other words, they act as a single “get out of jail free” card. Though obviously they are not free, a fixed-rate loan is one point of assistance. Comparably, variable rate loans can be used as desired and for as much or as little as needed at that time.
The reason why variable loans often do not work is that they can be so easily abused. People have a tendency to max out credit cards quicker than they ever expected. They end up in a worse situation than they had coming in. Fixed-rate loans are protective at Pearl Hawaii Federal Credit Union. The interest rates are stable and do not change based on sometimes uncontrollable circumstances. The stability provided through fixed loans are comforting. They help in one situation where times are tough, without remaining a burdensome crutch that can be harnessed over and over again. You can follow them on Twitter.
