Preparing for a Home Equity Balloon Loan

The balloon home equity loan is a very popular loan in the industry today. With a balloon home equity loan, you are given the money that you need upfront and then pay only the interest on the loan for each payment. The balance of the loan is never addressed until the end of the loan unless you make extra payments. Failure to plan for the balloon payment can result in some serious problems for you financially. Here are a few things to keep in mind when preparing for a home equity balloon loan.

Make Extra Payments

One great technique to taking care of a balloon loan is to make extra payments when you get a lump sum of money. For example, every time you get your income tax refund, apply it to the balloon balance. This will go straight towards the principal of the loan and can help you have a smaller balance when the loan comes due. 

Prepare to Refinance

Many of these loans are simply refinanced into another loan at the end of the term. This means that you will have to get ready for the refinance process before the balloon payment comes due. Apply for the new loan with plenty of time to spare.

blog comments powered by Disqus