If you have built up substantial equity in your home, then you can use your home equity to take a second mortgage loan. Your equity is the difference between the current market value of the house and the amount of the loan that you still owe to your lender.
There are two types of a second mortgage loan – home equity loan (HEL) and home equity line of credit (HELOC). HEL is usually a fixed rate mortgage loan which is taken against your home equity. On the other hand, a HELOC is quite similar to a credit card debt and it is secured by your home equity. The rate of interest on a HELOC is variable in nature. Usually, the income from HEL is used to meet one-time specific need, whereas HELOCs are usually used to meet ongoing expenses. The benefits of taking out a HEL or HELOC are plenty and the rates of these loans are much lower than the comparable unsecured credit card debts. There are few alternatives to a second mortgage loan. Here we discuss about two alternatives to a second mortgage loan.
Cash advances
One good alternative to a second mortgage loan is a cash advance. Generally cash advances are taken to meet unintended contingencies and unanticipated events. Usually cash advances are short term in nature and the rate of interest associated with these loans are quite high. To obtain a cash advance loan you may be or may not be required to keep collateral.
Personal loans
Another alternative to a second mortgage loan would be a personal loan. Personal loans may be secured or unsecured in nature depending upon who is actually issuing the loan. The terms and conditions attached with these loans vary widely. Rate of interest associated with an unsecured personal loan is more than the rate of interest associated with a comparable and secured personal loan. In case of a secured personal loan, you can use your other properties such as owned vehicles to be kept as collateral.
These are two other alternatives to a second mortgage loan. If you are unable to get a second mortgage loan but still in need of funds, you can explore these alternatives.