Since home equity loans are secured by equity in real estate they are considered a safer investment by financial institutions than unsecured consumer debt. As a result, the rate of interest reflects the value of this collateral on the debt. While the interest rate of a home equity loan is higher than a first mortgage it is considerably less than general consumer debt.
Like most other financial instruments, the rate varies based on supply and demand factors and the overall availability of credit in the market. Common standard interest rate levels used to compare debt service are the governments LIBOR measure and the Prime Rate, which banks offer their best customers. Since home equity loans are consumer level loans, their rates are much higher than these levels, however they do tend to be in line with mortgage interest rates.
Based on the type of financial institution and the borrowers credit rating, interest rates for these loans can vary by as much as 3-4%. Another factor that determines the interest rate of such loans is the loan to equity ratio. When 100% of the equity is used as collateral it is considered more risky than when a smaller portion is used...
To view and download this full PLR article, you must be logged in. Registration is completely free. Once you create your account, you will be able to browse, search & downlod from our PLR articles database of over "1,57,897+" on 1,000's of niches and 200+ categories without paying a penny. Click here to signup...
