Emergency Fund Basics – Learn what a home equity loan can do for you
An emergency fund is essentially a huge stash of funds set aside in advance to pay for the unexpected financial shocks that life throws at us. These unexpected financial shocks can be costly and stressful. The most common and costly of these shocks is job loss. In today’s volatile economy it is not uncommon for workers to lose their jobs unexpectedly. While it may be the right time to sell your house or put your car up for sale, it’s not a good idea to wait until your next payday in order to get your cash.
Why you need an emergency fund
On the other hand, there are many unexpected medical bills that can arise. From an injury that requires expensive surgery to an emergency room visit to a serious illness you could have avoided with proper health and preventative measures. These emergencies can often be expensive and painful as well.
An unexpected home repair or even simple repairs can create financial problems that can last a lifetime. It’s not unusual for homeowners to struggle financially when they find themselves unable to make necessary repairs on their own. Instead of being able to handle this financial setback, many consumers decide to turn to a professional to help them handle the situation.
Emergency Fund-Disadvantage of unsecured loans
Unfortunately, there are a variety of short term solutions that homeowners turn to. One common solution is to take out an unsecured loan against their home in order to make the required repairs. Unfortunately, unsecured loans come with high interest rates and can pose serious financial difficulties later in the future. Homeowners who have experienced home repair or home improvement projects that required extensive remodeling will often opt for a refinance or home equity loan instead.
A home equity loan is basically a loan that borrowers put together using the equity in their home. This equity is usually accumulated through years of payments made on mortgages and credit cards.
Many people view a home equity loan as a quick fix when trying to solve their immediate financial needs. However, an unsecured loan can actually create more problems than it solves. Many of the major pitfalls of a home equity loan are due to the fact that borrowers are relying on the equity in their home. Instead of paying off the loan as soon as possible, homeowners may end up in debt because the payment schedule becomes too difficult for them.
Most emergency situations occur when there is no time to get out of debt. When this happens, it is often impossible for homeowners to make an initial payment and must pay the full amount. to avoid facing the financial hardship. If this happens many people tend to turn to bankruptcy and other drastic options to try to get rid of their debt.
A home equity loan is the best way to avoid such a situation because they can help families and businesses avoid paying too much of their financial obligations until their cash flow improves. If you are considering a home equity loan, be sure to do some research on your own to ensure that it will be the best choice for you. By having an emergency fund set up for unexpected emergencies you are protecting yourself from financial disaster. If an emergency ever arises, you will not be left with an overstretched budget that will leave you with nothing but frustration.
Having a secure source of income can also be beneficial in cases where you need to use a home equity loan as an emergency fund. If you find that you need to take out a loan in order to cover an unexpected expense that has already occurred, a home equity loan can help to cover any bills that you were not able to pay for before.
If you are looking for a short term solution that will help you protect your finances, then a home equity loan may be for you. There are a variety of companies that offer this service, and you can select the one that is right for you based on your needs. Most lenders require that you put a down payment, although there are some lenders that require no money down at all. Once you have decided on the amount you want, the lender will typically offer a fixed rate with no balloon payments.
If you are not able to make a payment on the loan for the first six months, you will automatically have to start again at the beginning of the next month, which will mean that the balloon amount is repaid. This means that you are not losing any equity in your home and you will continue to have to work to pay off the loan until you receive your final payoff. This makes a home equity loan the most affordable way to fund an emergency expense.