Finding the cash you need to get your business off the ground can be a frustrating experience frustrating. Most lenders require a solid business history and business assets to approve a loan. Because of this, many new business owners often use personal savings or credit cards to fund start-up costs. But, paying credit card interest rates that can amount to 20% or more and draining your personal savings can be a real killer.

So, what do you do if you don’t want to pay high interest rates rates, and you don’t qualify for a traditional commercial loan? “You might be a lot better off using a home-equity mortgage to get your funding,” says Jay Trien, a certified public accountant in Morristown, N.J. The good news is that there is a way entrepreneurs can tap into their home’s equity while building a credit history in their company’s name–a business home equity line of credit (HELOC).

The business HELOC works the same way as a traditional HELOC except that you must use the money for your business, and the payment history on this type of loan is transferred to your business’s credit rating. As a result, a positive payment history on the business HELOC will result in your building sufficient credit to obtain traditional commercial financing, without including personal collateral, to fund future growth A business HELOC is set up exactly as any other equity line of credit. Business owners can easily access cash out on the line of credit, either by writing a check or electronically transferring funds up to the limit of the loan, which can really help with on-going start-up expenses, act as emergency funds and help preserve your cash flow. Business HELOCs, like other home equity loans (second mortgages), are secured by the equity in your home. The interest rate can be fixed or left as a variable rate, and some HELOCs can be interest only loans. And, the interest in a business HELOC can be tax deductible as a business expense.

The low rates and the flexibility of the fact that you only pay interest on funds you access, make a business HELOC a viable option for securing start-up capital. It is also easier to qualify for a business HELOC than for traditional commercial loans. And, unlike commercial loans, HELOCs do not include application, Small Business Administration (SBA) guarantee fees or other third-party costs, so more of your money will be available for your business. Also, if the term expires while an amount is outstanding, you may be able to extend the line rather than having to apply for a new loan.

Maria Ny is an acclaimed free-lance writer from San Diego. She has published many articles that covered a broad range of subjects ranging from Debt Consolidation, Bankruptcy Reform, Credit Repair to Subordinate Financing. Check out her helpful articles online at BD Second Mortgage Loans. You can learn more about financing credit card debt and get additional loan parameters for debt consolidation loans. Get a free loan quote for a home equity line of credit. We suggest you get more information and learn more about the guidelines for fixed rate second mortgages that could help lower your monthly payments by reducing the high interest rates of your credit card debt.

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Home equity loans allow people with bad credit to access relatively cheap credit. By tapping into your home’s equity, you can afford to do home repairs or pay for college. Home equity loans can also help you get out of debt sooner by consolidating your bills. And in some cases, interest from your home equity loan is tax deductible.

Cheaper Type Of Credit

With the equity of your house as security, a home equity loan provides you with one of the cheapest types of loans. With poor credit, credit cards rates can be 20% or higher. Unsecured personal loan rates can be just as much. But sub prime home equity rates are 1% to 8% higher than conventional rates.

Many people decide to use their equity to pay for large expenses, such as home repairs or college bills. You can also pick a home equity line of credit, which allows you to borrow against your equity much like a credit card account.

Consolidate Other Bills For Lower Rates And Payments

A home equity loan can help you get out of debt sooner by consolidating your bills into one payment with a low rate. Trading in your high interest credit card bills for a low interest home equity loan can save you hundreds a month.

When you select your second mortgage terms, you can negotiate loan terms. You can target your loan’s length to the payment amount. This means that for the same monthly payment you have with your bills now, your loan could be out of debt in less than five years. Of course, you can choose a longer period for smaller monthly payments.

Interest Can Be Tax Deductible

In some cases, home equity loan interest can be itemized on your taxes. If the principal was used to make home repairs, then the interest qualifies. But check with the IRS before including it on your taxes.

Under the right circumstances, a home equity loan can be a valuable tool. However, make sure you do your research on lenders before signing any loan contract. A few hours spent researching rates and fees can save you a real bundle.

View our recommended
Bad Credit
Home Equity Loan lenders.

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Whether you need a down payment on a car, a new computer, or are experiencing life changes such as a new addition to your family or are financing a business or education, you can use the equity in your home to obtain the money that you need. The equity in your home is the difference between your home’s market value and the amount you owe on your home.

Home Equity Loans Basics

Home equity loans, also refereed to as a second mortgage loan or a cash-out refinancing loan, are common place. The advantages to these loans are that they usually have lower interest rates than consumer loans, have fixed payments that are predictable, are backed by your home’s equity, and in most cases, are tax deductible.

The biggest disadvantage to home equity loans is that you absolutely can not default on this loan in any way, or you may lose you home. Another disadvantage is that you may use up the equity that you have built in your home, which results in a longer pay off period for your home.

Home Equity Line of Credit Basics

A home equity line of credit is revolving credit that you can obtain by using your home as collateral. This option is very similar to obtaining a new, shiny credit card with a very large limit: the equity on your home. The term is defined by a draw period that allows you to borrow money from the line. The payment each month is based upon the outstanding balance owed. As payments are applied to principal, your available credit increases accordingly.

The biggest advantage is that the interest rate you pay on the average home equity line of credit is generally lower than the interest rate you will pay on a credit card or other type of non-secured debt. Also, you can usually deduct the interest you pay, but be sure to consult with a tax counselor concerning the deductibility of interest.

The most notable disadvantage to a home equity line of credit is that your home is used as security. If you default on your payments you could lose your home. Also, if you decide to sell your home before paying off the line of credit in full, the amount will be paid from the sale price.

Here are our Recommended
Home Equity Loan Companies Online.

Carrie Reeder is the owner of ABC Loan
Guide, an informational website about various types of loans.

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