Millions of homeowners use the equity they have built up in their homes to make repairs, pay medical bills, fund college for their kids, make major renovations, and pay off credit cards. When home values rise, the amount of equity you have automatically goes up, which is a good time to consider borrowing. Where to Obtain Good Loan Rates It is generally a good idea to use a lender you’ve worked with in the past. When applying for a loan with your house as collateral, the only hurdle is verifying your income. This streamlined process means that most borrowers can get funds pretty quickly, usually in less than a month’s time. You’ll need to shop around because all lenders have their own quirks when it comes to fees associated with home equity loans and HELOCs. Fees can be substantial, so if you work with a lender who knows you, you’re more likely to get a break on upfront charges, fees, and other miscellaneous expenses. Your current mortgage lender is a good place to start, but keep in mind that other major lenders might be able to offer you lower fees and interest rates. Shopping to Avoid Forced Withdrawals and Prepayment Penalties If you’re in the market for a HELOC, be sure to delve into the fine print on loan contracts and ask lots of questions when shopping for an ideal lender. Some HELOC contracts force borrowers to withdraw fixed amounts of cash a few times each year. If you want more freedom with how and when you take money out, search for a lender who lets you use the HELOC as you please and when you please. It’s also important to understand whether a particular lender extracts prepayment penalties on equity loans. You might decide to close the loan by paying it off early. Find a lender that has no prepayment charges and you’ll have more flexibility when it comes to your HELOC or home equity loan. Finally, besides your current lender, look at credit unions in your local area. In general, credit unions offer better deals on all types of home equity loans and HELOCs. Credit Scores, Interest Rates and Other Key Factors It’s important to understand how interest rates are set on HELOCs and home equity loans before deciding where to shop for a good deal. In most cases, your credit scores and payment history are not a huge factor because you are using your home as collateral. Many homeowners with poor credit scores are surprised when they get fast approval for HELOCs and home equity loans with favorable rates. The downside is that you’re basically putting your home at risk. If you miss more than one or two payments on a home equity loan, the lenders can begin repossession. And remember that a HELOC, because it’s really just a specialized version of a line of credit, will usually knock your credit score down a couple notches when get it. But if you pay it off in a timely manner, your long-term credit rating will usually go up.