An Introduction to Home Equity Loans

In financial terms, a loan is a borrowing of funds by one or more people, institutions, businesses or other legal entities to another people, companies etc. The borrower is then liable to repay the principal amount borrowed and the interest on that loan until it is fully repaid. It may be in the form of a personal loan, business loan or other secured loans. It is not uncommon to have more than one type of loan in a single transaction. Lenders also give borrowers a grace period (or period of time) to pay back their loan before interest charges start to build up.

Mortgage loans are made through a deed of trust. A deed of trust contains the details of the loan and its various terms. It also includes the method by which the loan was applied for and any clause included under the deed such as pay back date etc. After getting such details, the lender then hands over the deed to the borrower who now becomes the lender. He is responsible for assessing the borrower’s capacity to repay the loan, which may include the amount of equity he/she has in his/her home, whether the borrower has any existing mortgages, and any other details the lender requires.

To apply for a loan, the borrower must submit an application accompanied by the required documents and information. This will include the name of the borrower, his address, and contact numbers if any. The lender will evaluate the loan details and then either approve them or reject them based on their terms and conditions. The lender may reject the loan application if he finds that the borrower does not have enough collateral to support the loan. Collateral is any asset that could be seized by the lender if the loan were to be defaulted on.

Usually, banks and financial institutions require the borrower to furnish the details of his income and expenditure along with the details of the property concerned. After being approved for the loan, the lender will be issued a deed of trust which clearly states the amount to be lent as security against the loan. The loan amount is then transferred to the borrowers account usually through a debit card. This transaction is considered to be the repayment of the loan.

In case the borrower fails to make the required payments, a legal action will be taken against him. If the borrower fails to pay the principal loan, the lenders can take legal recourse against the borrower under the law of foreclosure. Legal recourse means taking possession of the property used as security against the loan and reselling it in order to recover the principal loan. The legal recourse also involves repossession of the property until the lender gets his money. If the borrower fails to make the specified payments, the lender has the right to take legal recourse against him under the law of foreclosure.

When the borrower fails to pay back the loan, the lender can initiate legal proceedings under the law of foreclosure and force the borrower to refund the outstanding balance plus interest. The legal recourse and the repossession of the property can occur at any time and at any location. It is advisable to discuss the terms of the loan application with a lending company or a broker before signing the loan papers. All the relevant information should be clarified to avoid any misunderstanding at a later stage.