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With interest rates at historic lows, it's a fantastic time to borrow money: to pay off credit card debt, invest in your child's education, make home improvements, or splurge on that big-ticket item you've always wanted.
There are two ways to take out a home equity loan: as a cash-out refinance of your current mortgage or as a standalone second loan. Depending on your circumstances - how much equity you have in your home, the terms of your current mortgage, credit score, and so on - you may find that one approach works better than the other.
Wednesday, June 29th
Discover isn't just for credit cards. Their home equity loans are some of the best in the industry, with extremely competitive rates that will get your attention.
Many Fees Eliminated
Discover eliminates the home equity loan fees that you'll see with other lenders: you won't pay anything for origination, appraisal, or application, and there's zero cash required at closing. You won't find that anywhere else! The only caveat is that if you pay off your loan balance in full during the first 36 months, you'll be obligated to reimburse Discover for some of the closing costs paid on your behalf, up to a maximum of $500. That doesn't apply if you're a resident of Connecticut, Minnesota, New York, North Carolina, Oklahoma or Texas, however.
Home Equity Loan Eligibility Criteria
What are the eligibility requirements for getting a home equity loan with Discover? Although final loan approval depends on your specific situation, here are a few criteria they look for:
Wide Range Of Loan Amounts And Terms
Discover offers home equity loans ranging from $35,000 to $200,000, with terms of 10, 15, 20 and 30 years. We recommend that you use their helpful calculators (right underneath the table showing Discover's loan options) to see how much you can borrow or how much you can save if you use your loan for debt consolidation.
Rate And Payment Calculator
Our favorite tool is the Rate & Payment Calculator. Unlike some lenders, who require you to have a soft pull on your credit history in order to get a rate quote, Discover lets you enter your desired loan amount, property value and current mortgage balance, credit score range and state of residence, then voila: you can see your estimated APR over all four available terms (10-30 years). While our initial rate was higher than we expected, Discover explains that their lowest APRs are "available to borrowers requesting at least $80,000 with the best credit and other factors". Sure enough, when we increased our desired loan amount to $80,000, we qualified for their lowest interest rate.
Apply Online Or Over The Phone
Discover makes it easy to apply for your home equity loan online - or you can speak with a representative. If you complete the "apply now" process, it will impact your credit history like any other loan application. But, you have the convenience of getting it all done through the Discover site, any time of day or night.
And, as you'd expect from a financial services company that has been in business for more than six decades, Discover has a fantastic reputation. This is most clearly demonstrated by their "A+" rating and accreditation from the Better Business Bureau.
There's just no better option for your home equity loan than Discover. You won't find another provider with zero fees for appraisals, origination or closing, and this lender's rates are particularly competitive on larger loan amounts. For all of these reasons, Discover earns our highest recommendation for your home equity loan.
US Bank has been in business for nearly a century. If you like the peace of mind that comes from borrowing from a well-established financial institution, this lender is a great choice for your home equity loan. The Better Business Bureau gives US Bank their highest rating and accreditation.
Both Home Equity Loans And HELOCS
US Bank offers both home equity loans and HELOCs. Those work very differently in terms of interest rates and structure, so make sure you're clicking on the option for home equity loans when you get started. If you're not sure which one you need, scroll down to where it says, "Find the right approach for you" and then the "Get a recommendation" button.
We really appreciate US Bank's transparency with rates and terms. Right on their Home Equity Loans main page, they display what interest rates you can expect and under which circumstances. For example, at the time of our review, we qualified for their lowest rate on a 10-year home equity loan of $50,000 to $250,000. This assumed a loan-to-value of 70% or less and a FICO score of 730+. Of course, your home equity loan terms will depend on your LTV, credit score, and other factors.
Save Money By Opening An Account
US Bank gives its lowest rates to customers who make their monthly payments from a checking or savings account held at their institution. It might be worth it to open an account with US Bank for the savings on your interest, but being an account-holder isn't a requirement to be approved for a home equity loan.
No Closing Cost Option
You can also get a no-closing-cost option here. However, you'll have to agree to certain terms: a prepayment penalty of 1% of the original loan amount (maximum $500) if the loan is repaid within the first 3 years, or an origination fee of 1% (also with a maximum of $500). The latter option will increase your APR.
Fill Out The Online Form And Wait
To find out what US Bank can offer you, you'll need to fill out their online inquiry form with your name, address, phone number, ZIP code, desired loan amount, and whether you are currently a US Bank customer. From there, you'll be contacted by a representative. That doesn't quite offer the convenience of some online lenders, who let you complete the entire process online.
On the other hand, the rates offered by US Bank were extremely competitive, and we appreciated being able to see the fees and terms spelled out so clearly - even if our specific loan offer might vary. Although we'd like to see more options for completing more of the process online, US Bank is still an excellent choice for a home equity loan at a great rate from a trustworthy lender.
SoFi stands for "social finance", illustrating this company's approach to lending, different from traditional lenders like banks. Treating their clients as "members", this company aims to help both investors and borrowers to reach their financial goals.
Spring HQ Is The Real Lender
You don't really need to know very much about this company as a source of home equity loans. Why? SoFi passes all of those inquiries along to Spring HQ, which bills itself as "one of the nation's largest non-bank home equity lenders". That's a positive for SoFi: where they only have an "A" rating and no accreditation with the Better Business Bureau, Spring HQ has an "A+" and is also accredited there.
Solid Reputation, But A Few Complaints
Spring HQ has an overall solid reputation, but we still found some complaints. Customers said that the process dragged out over weeks, not days, and that they were still denied a loan at the end - despite meeting all of the criteria for income, loan-to-value, and so forth. Many clients had a hard time getting a response from Spring HQ representatives. Others said that they paid $250+ for a drive-by appraisal that significantly undervalued their home, compared with other reliable evaluations of the property.
Getting Started With Your Loan Application
Let's say you go ahead with the process. What can you expect? First, you'll complete their preliminary application, to prequalify you for your home equity loan. Fill out basic details like address, phone number and email, then information about the current mortgage and value. On the slider where it indicates how much you'd like to borrow, it will automatically populate to represent the minimum and maximum amounts based on a debt-to-income ratio of 43% or less. (You'll have to take out a home equity loan with a minimum of $25,000.) Finally, once you provide your birthdate (so that Spring HQ can do a "soft pull" on your credit history), you'll get a prequalification results page.
We weren't blown away by our results. Despite having two columns - "Lowest Payment" and "Lowest Rate" - our offers were exactly the same: a term of 240 months, with a middling APR. While our rate was lower than some of SoFi/Spring HQ's competitors, we didn't love the fact that our only option was a 20-year term.
Schedule An Appointment
Spring HQ also comes up short compared with lenders that let you complete the entire process online: after getting your results page, you have no other option than to schedule an appointment to speak with a representative. That takes away a lot of the convenience offered by 100% online providers of home equity loans.
Wait For Your Money
Another drawback? Your home equity loan could take a little longer here to reach your account: your cash might not be deposited for two weeks or more. In fact, while their website said loans are funded as quickly as 14 days, the intro email we received from Spring HQ said we should expect it to take at least three weeks for funds to be deposited.
Good Rates, But Inconvenient And Fewer Options
In short, we can't say much about SoFi with respect to home equity loans, since they don't have any part of the process beyond funneling your inquiry to their partner, Spring HQ. This partner lender is a decent option for a home equity loan: their rates were fairly competitive and the company has a good reputation. But, they don't measure up to comparable services that fund loans much more quickly, and you won't get the convenience of a 100% online application process.
LendingTree is a service that matches you with home equity loan offers from their network of vetted lending partners. If you like the idea of comparison shopping for the best rates and terms, this site could be the right place to start. In fact, some of the other companies in our review may even come up in your LendingTree results list!
Choose Your Lender
Before you get started with this referral service, there are a few things you should know. First, because LendingTree doesn't actually fund your loan, you'll still have to take the extra steps of choosing a lender, completing their application process, and so forth. It's great that you'll receive multiple offers from companies competing for your business, and you can save some time and hassle by using this platform to get several offers with one inquiry. Just don't forget to factor in the time you'll need to invest in learning about the lender you select.
Share Your Information
Next, since LendingTree shares your information with lenders in their partner network in order to provide you with competitive offers, that means other companies will receive your contact information. We found complaints from more than a few people who said that using LendingTree resulted in a considerable amount of unsolicited calls and messages.
Compare The Offers Carefully
Finally, this company discloses that the offers you'll get aren't necessarily the five best for you. LendingTree is compensated by their partners, and that financial relationship "may impact how and where products appear". That doesn't mean you won't get fantastic competing offers from trustworthy lenders here. In fact, you can actually see what other LendingTree users have said about each one, from the application process all the way through to the home equity loan servicing afterwards. Just make sure you do your homework and read all of the fine print on the rates and terms offered by the lending partner you ultimately choose.
Good Reputation With Some Minor Complaints
The Better Business Bureau gives LendingTree an "A+" rating and accreditation, making them a reputable option for your home equity loan search. While there are more than 200 complaints registered with the BBB, the majority of them are related to the unsolicited texts, calls and emails we mentioned earlier. Few people have anything negative to say about using LendingTree to get a great loan.
Great For Convenience, Just Do Your Homework
LendingTree is a good choice if you'd like to see several options for your home equity loan, especially from smaller lenders you might not hear of otherwise. The numerous issues people have with unwanted messages keep this service from ranking higher in our evaluation, but it's still a useful site for finding multiple home equity loans with one online application.
Figure offers home equity loans with an all-online process that can deliver approval within just five minutes. You won't need an in-person appraisal, and even their notary services are provided via video in some states!
With this lender, you'll need to borrow a minimum of $15,000 ($25,001 in WI and AK), and the maximum you can borrow is $150,000. The total for which you qualify depends on your home's value and your equity at the time of your application. If your application is approved, your funds may be deposited in just five days.
Rate Discounts, But Replaced By Fees
This lender advertises low rates - but of course you'll have to qualify to get those rates for your home equity loan. First, Figure has partnered with Quorum Federal Credit Union: if you open a savings account there with a minimum deposit of just $5, you'll get a 0.50% discount on your interest rate. Next, if you set up automatic payments on your account, you'll get an additional 0.25% off your interest rate. Be aware, This lower rate comes with an origination fee of 4.99% - and Figure says this isn't available to all applicants or in all locations.
Not Available In All 50 States
Be aware that Figure's Home Equity Line isn't available in all 50 states. If you live in Hawaii, New York, Texas, South Carolina, Utah, Maryland, West Virginia, Kentucky, or Delaware, you can't get a home equity loan here.
Getting Started With Your Loan Application
To see if Figure can offer you a loan you like, you'll need to start by filling out a one-page online form: the property address that you're financing, the reason for the loan, annual household income, and so on. From there, you'll be taken to your personalized offer.
We weren't impressed with our offer. Even though we have excellent credit (800+), we weren't given the lowest possible interest rate. Plus, we were only offered a 5-year term. In addition, the fine print on our offer said that we might not even qualify for those less-than-impressive rates; we wouldn't know for sure until we finished the application (which would include a hard pull on our credit history).
No Explanation Given
We also noticed that the name of the credit union wasn't Quorum, but Teachers Federal instead. There was no explanation as to why that was different from what was explained on their main Home Equity Loans page.
Inaccurate Home Appraisal
Our confidence in Figure was further eroded when we saw that our automatic Property Valuation Report had incorrect information: the sale date was off by 6 years, and the value was $25,000 less than the in-person appraisal conducted just two months earlier.
Positive Customer Reviews But Failing Grade With The BBB
But the final nail in the proverbial coffin was Figure's poor showing with the Better Business Bureau, where they had an "F" rating at the time of this review. Figure's BBB listing showed no response to customer complaints there, which isn't encouraging. We will say that we found over 800 5-star reviews from Figure clients on other review platforms, and those usually praised the company for quick responses and fast funding of loans.
Room To Improve
Figure is still fairly new in the lending marketplace, and we think they have the potential to make big improvements as they move forward. But, until their rates become more competitive with other lenders' and they expand their service area to include the states that are currently ineligible, Figure falls short of earning our recommendation for your home equity loan. We suggest you look to the higher-ranked lenders in our review.
Shopping around for the best rates on your home equity loan is a wise idea - don't just go to your current lender and assume they'll give you the lowest interest rate or best terms! It's worth your time to consider multiple lenders; even a difference of a few tenths of a percent can save you thousands of dollars in the long run, and some companies will reduce their fees or eliminate them completely just to earn your business.
Fortunately, the internet makes it effortless to compare your options with just a few clicks of the mouse. Many lenders provide their rates upfront, so you'll know if they're worth considering before you even begin an application; others may do a "soft pull" on your credit history, so that they can offer personalized rates based on your specific situation. Plus, some lending platforms give you the ability to compare offers from multiple banks with a single online form, saving you time while connecting you with the best rates on the market.
As you decide which provider to use for your home equity loan, there are several factors that can guide your choice:
TopConsumerReviews.com has reviewed and ranked the top options for home equity loans available today. We hope this information helps you get the money you need to pay down debt, start your home improvement project, or invest in a new business - the possibilities are limitless!
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