The internet is a great place to learn more about home equity loans and how they work. As long as you don’t fall for an online home equity loan scam, it’s also an excellent location to discover a trustworthy mortgage broker.
1. Be wary of subprime loans
When a lender gives you a loan with a very high interest rate and other costs, they are engaging in subprime lending.
These loans typically go to high-risk borrowers who are in such a rush to secure financing that they don’t take the time to look around for a lender willing to work with them despite their poor credit.
Read: Understanding Cash Out Refinance Mortgage Loans: What to Look Out For
2. Equity stripping is a risk you must avoid
To “strip” your equity means to take out a loan based entirely on the worth of your property without considering your income or other assets as collateral.
When borrowers of this type of loan are unable to make their payments, the lender often takes possession of the property and any equity it may have accrued.
3. Avoid lending from predators
Predatory lenders seek to profit off of putting borrowers in circumstances where they will default on their loans and lose their homes.
Warning flags of a predatory lender include being asked by your broker to provide false information on your loan application, to request more money than you actually need, or to sign blank loan documents with the promise that they will be completed later.
Read: How to Improve Your Odds of Getting a Small Business Loan
Avoid loan providers who tell you one thing when you apply, but then change the terms at the last minute or who won’t provide you with copies of the paperwork you’ve signed. Many predatory lenders conceal important information about the loans they provide and provide inaccurate descriptions of the terms.
Applying for a home equity loan online has many advantages. If you take care to avoid the hazards of dealing with dishonest brokers, the process can be quick, simple, and convenient.
