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By Sarah Christensen
If you need money and already have a mortgaged property where you have a reasonable amount of equity, then consider getting information on a home equity loan.
Over the years you will have paid a proportion of the principal and interest on the outstanding amount. The principal is the amount that you borrowed when you took out the mortgage. The interest may be fixed or variable depending on what type of mortgage you agreed at the time. The equity is the total amount of principal that you have paid to date, in other words it is the proportion of the value of your home that you own outright.
If you need extra money to fund college fees, debt consolidation, home improvement, legal fees, or a new car, then you can release money using a home equity loan. The amount that you borrow in a lump sum is limited by the amount of equity you have. Depending on where and who you borrow from; loans are available at fixed or variable rates of interest. Your home may be at risk if you do not keep up with repayments on this type of loan or any other loan secured on it. A secured loan generally has more favorable rates of interest than an unsecured loan due to the lower risk to the lender. You may be eligible for tax advantages, so make sure that you check your eligibility with a tax professional. Tax concessions and the lower interest rates offered on secure loans could well make this option the cheapest way for you to borrow money.