An equity loan is a one that is secured by property that you own or in the context of a business loan; the equity will be provided by the assets that are owned by the amounts.
Equity loans are beneficial to the borrower in several ways whether it is a home equity loan that is taken to fund the remodeling of a house or a business loan take to support new business ventures.
Return on Assets is an important aspect of running a business, and in such equity based business loans, it is sensible and useful to put your non-liquid assets to work so that you can use the loan generated thus to further your business.
Here are some of the main benefits of taking out an equity loan?
Whether you wish to take out an equity loan using your home as security or you take out a business Slogan using business assets including property as collateral, equity loans are available at relatively low rates of interest that are averaging around 5,2% in the USA. The reason for the lower rates of interest is that equity loans are fully secured loans and hence reduce the lender’s risk considerably.
Further, when you own some property and wish to security against an equity loan, your application may still be accepted even if you don’t have a very high credit rating otherwise.
Many equity loans offer up to 100% tax deductibility, for the borrower and hence, may be considered as a better borrowing option when compared to the steep rates of interest charged by credit card companies for credit card debts. However, the degree of taxability may vary.
The more equity you possess, the larger the loan value. Typically, lenders may expect a loan to value ratio that is 75% of property value or higher.
Equity loans may also offer you flexibility with regard to how you receive the loan money. You could take out a one-time lump sum loan at a fixed rate of interest or you may be permitted a line of credit using which you can borrow small sums of money as required subject to an absolute maximum limit.