If you’ve amassed debts since becoming a student, you are not alone. Recent research published by the BBC found that student debt levels are projected to rise to £25,000 for current first-year university students with the situation only likely to get worse as tuition fees rise.
The annual survey across 139 universities in the UK asked 2,000 students to work out their debts including everything from tuition fees to credit card and bank debts, but to exclude mortgages. The research found that students in England had an average debt of £5,293 per year, while those in Wales netted an average of £6,411.
So, if you have amassed significant debts whilst studying, you may be exploring ways to repay them. Or, perhaps you want to help your children meet the cost of their further education? In either of these situations, a home equity loan could be the ideal solution.
Introduction to Home Equity Loans
In order to take advantage of a home equity loan you will need to be a homeowner, typically over the age of 21. You will also need to have some equity in your home – defined as the difference between your property value and any outstanding mortgages or loans secured on it.
A home equity loan allows you to borrow some or all of your equity for almost any purpose. You can generally borrow from £3,000 to over £100,000 depending on your income and the amount of equity in your home. The loan will generally be separate from your main mortgage and can be taken over a term of 3 to 25 years.
One of the main characteristics of a home equity loan is that the loan is secured on your home. This means that the lender takes a legal ‘charge’ over your property and so your home is at risk if you don’t keep up repayments on your loan.
Paying Off a Student Loan Through a Home Equity Loan
One of the most popular reasons that people take out a home equity loan is to consolidate other debts. As the lender has your home as security, they can offer lower interest rates on home equity loans than on other sorts of riskier, unsecured borrowing.
This means that the interest rates charged on home equity loans can often be lower than other loans such as credit cards, personal loans or student loans. It therefore makes sense to borrow cash secured on your home at a lower rate in order to consolidate debts at a higher interest rate. You can repay your student loan, bank overdraft or any other debts you accumulated while studying.
In addition, as you can spread your home equity loan repayments over a long term, you can reduce your monthly outgoings to an affordable level.
Helping Your Children Through University
If you’re looking to help your son or daughter through university or college, a home equity loan can be an affordable, simple way to do this. You can raise a lump sum at a low interest rate in order to pay tuition fees, and accommodation or to help them meet their living expenses.
By supporting your child financially through their degree course, they can graduate without the £25,000 of debts the average student will have to manage as they start their working life.
To access the money tied in your home equity and get a great loan rate, book an appointment with the Mortgage Genie.