Hi everyone. J.G. Wentworth here.
In a number of my recent posts, I’ve covered lots of places you can go to get money and compared these sources to structured settlements. So far we’ve covered things like credit cards, your 401(k), bank loans, friends and family and even rent-to-own stores. Pretty exhaustive, but we’re not done yet. Let’s not forget home equity loans.
With a home equity loan, you can tap into the value of your home that, hopefully has built up over time. Let’s say your mortgage is $85,000 and your home is worth $150,000. The equity you have in your home is what it’s worth versus what you owe on it, or in this case, $65,000 ($150,000 value - $85,000 mortgage = $65,000 in home equity).
Positives:
· Rates for home equity loans are lower than most other forms of financing.
· Getting and paying off your home equity loan may strengthen your credit score.
· Many banks, including the bank that wrote your original mortgage, will consider a home equity loan.
· Home equity loans are relatively straightforward to apply for.
Negatives:
· If you don’t own your home, you cannot get a home equity loan.
· Having a home equity loan outstanding may negatively affect your credit score, especially if you miss or are late on payments.
· A home equity loan creates a debt that must be paid back in full with regular, fixed payments.
· Some banks may limit the ways in which you can use the proceeds of your home equity loan. For instance, you may not be able to use it to start a business.
· The bank that gives a home equity loan to you will have a lien on your home.
Compared to Selling Structured Settlement Payments
Even if you could get a home equity loan, selling structured settlement payments might be a better option. Here’s why:
· There are no limitations to how you can use your structured settlement proceeds.
· When you sell payments, you are selling an asset and therefore, you are not creating a debt that you have to pay back.
· When you sell structured settlement payments, you maintain control over the number of lenders with a financial interest in your home.
Of course these factors must be balanced against your need for income. If you need all of your income from your structured settlement, cannot afford to sell any payments, and you own a home, getting a home equity loan may be a good option for you to consider.
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