If you need to make a relatively large purchase, and you do not have the funds to make that purchase, then you will need to take out a loan. There are several types of financing you can seek. You could put the purchase on a credit card, or you could take out a personal loan. But if you own a home and have equity in that home, then your best choice is likely to take out a home equity loan. Here are a few reasons why home equity loans tend to be such a great choice.

You get a fixed, low rate

It's amazing how much of a difference a small difference in interest rate makes over the life of a loan. For example, if you borrow $5,000 over a term of 2 years at 5% interest, you'll pay a total of $264.57 in interest on that loan. If you borrow the same amount of money over 2 years at 3%, you'll pay only $157.75 in interest. Home equity loans almost always come with the lowest interest rates of any loan you can apply for. And this interest rate is fixed; it remains the same for the life of the loan.

It's easy to apply

If you have a mortgage and have equity in your home, it is fairly easy to get a home equity loan. The bank will typically just need some basic information from you. They already know you are credit-worthy, based on your current mortgage. Most people can get approved for a home equity loan within days, whereas it tends to take a bit longer to get a personal loan. 

You can take the loan out over a long period

If you have limited money in your budget to pay back the loan, then you can take a home equity loan out over a long period, meaning your monthly payments will be quite low. And even with a long loan term, you will not pay an astronomical amount of interest because the interest rate is so low. Your banker should be able to tell you what your payment would be over 5, 10, and 15 years. You can then compare these and choose the best loan term for your needs.

Home equity loans are really popular for a reason; they're affordable and easy to get. If you need to make a large purchase and have equity in your home, make sure you talk to your bank about this option. For more information on home equity loans, contact a local lender.