Aside from the personal tax benefits for interest on tuition costs, home equity loans can offer significant tax benefits to small business if they are used for business purposes. Even though the loan may be borrowed in your personal name, if the whole amount is re-loaned by you to the business and the business uses those funds for business purposes, then the net interest paid on the home equity loans can be tax deductible. We recommend that you discuss this with your tax advisor to take account of individual circumstances.

Home Equity Loans Explained
A home equity loan is a secured loan. A method to release the embedded equity in the home you own. An alternative expression is that homeowners use the equity in their home as collateral. Such loans are often taken out by homeowners that wish to either; finance home renovations, pay for unexpected expenses, pay for higher education or even to refinance your credit cards or fund that ideal holiday.

Essentially this loan creates a charge, or additional charge, against the home until it is repaid. If the borrower already had an existing mortgage then the Home Equity loan will be a second mortgage ranking behind the first mortgage for security purposes, hence the need for the lender to ensure that the borrower has sufficient equity in the home to cover their loan advance

Obviously there are conditions that borrowers must meet before they become eligible for a home equity loan. These loans were historically only available for homeowners that had substantial equity in their home, as well as a good credit history, however many banks and loan companies have become more aggressive pursuing profits in recent years and some have been advancing home equity loans to borrowers with less equity and with less than perfect credit rating credentials.

How Can I Get an Idea If My Home Will Meet the Lenders Criteria
A new loan, or debt refinance, or a consolidation of smaller loans, into a Home Equity Loan will mean security based on your equity in the home. This the lender's most important criteria especially if you have had bad credit.. You can estimate your level of equity by getting an estimate of the home's fair market value by watching the market for similar sales in your area. (This would be less that the best possible figure achievable, but more in line with what is realistically achievable if the lender had to foreclose).
If you then deduct the amount of your existing loans secured against the property, you will have an approximation of your equity. The residual amount you would receive if you sold up at that figure and repaid related debts. This is your estimated equity in the property and the maximum amount a lender may be prepared to lend against the property, if you also have the income to support repayments on that additional level of debt.
Types of loans
Home equity loan rates and terms vary, essentially, loans on your home’s equity fall into one of two types: open ended loans and closed loans. A closed or fixed loan would be for a specific time frame with fixed monthly payments usually up to 15 years in term.

Open ended loans are those most often called a line of credit. With a highly flexible line of credit type loan, the borrower can draw, repay and then redraw, so they treat it like an overdraft and determine when they want to borrow and repay. Much the same as a credit card facility, in fact some of these facilities can be access with a credit card.

Line of Credit type loans usually require a more comfortable home equity for the lender and sound credit history, as they never know what their exposure on that loan will be from time to time except for its credit limit.

The Rate Difference Between Home Equity Loan And Line Of Credit.
Its hard to directly compare interest rates between what are quite different products even though they are both based on your home's equity level. You can only compare like product accurately, however you can compare what you may pay back assuming you don't redraw. Read more...