A lot of people with financial troubles go for home equity loans as the most plausible solution to deal with the crunch. Many who need money for investments and businesses also look for home equity loans. There are many kinds of home equity loans depending on the amount needed by the home owner. A 100 % home equity loan has been opted by many and now lenders are offering 125% equity loans which offer money 25 % more than the actual value of the house.

A 125 % home equity loan appears too good to be true and people feel great uneasiness when going for such a loan. The fact is that 125% equity loans offer such a huge amount of money which automatically makes them quite risky. While there are risks involved there is no doubt that such loans can provide immense financial help to the borrower.

There are many companies offering 125 % home equity loans and there are a lot of private lenders out there as well. Before you start finding a lender you should look into the pros and cons associated with the loan so that you can make an informed decision.

The most evident problem with 125% equity loans is that the lenders usually offer high interest rates which mostly do not suit the borrower and he asks for a lower offer. For offering a lower rate the lender charges 10 % extra, putting the borrower in more financial trouble. The lenders also charge a lot of money in different categories such as payment for origination, closing, processing and others.

One condition that is common to all 125% equity loans is the restriction to move or sell the house as long as the loan is unpaid. To be able to sell the house before the time period ends, one must pay off the entire loan. Here comes another financial hurdle as not only do you have to pay the price of the house but the additional 25%, which the borrower might not be able to do.

If you opted for a loan with adjustable interest rates when you borrowed the money, you might be in a lot of financial trouble in the time to come as the lender might increase the rate considerably in the future. Paying monthly installments with highly inflated interest rates even up to 50 % can be troublesome for any borrower. This will put a huge crunch on your earnings and in the end you might end up getting in more and more debt.

The most important factor to consider before opting for such a loan is that if you fail to come up with even a single monthly installment the result might be legal proceedings and you might end up loosing the house. If such circumstances arise you can end up losing all you have worked for.

It is pertinent that you figure out a surefire way to make the money back with profits so that you do not get into trouble. 125% equity loans are good but they have too many risks attached so unless it is an emergency the best course of action would be to opt for a less risky loan.

Author Bio: If you want to know more information on equity loans, please visit; http://125equityloans.net/

Category: Finances
Keywords: 125% loans