1. What is Home Equity Loan Interest?

Home equity loan interest is the cost of borrowing against the equity in your home. These loans typically have interest rates between 7-9% per annum and use simple interest calculation.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (USD)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time period in years

Explanation: The formula calculates the total interest you'll pay over the life of the loan based on the principal amount, interest rate, and loan term.

3. Importance of Interest Calculation

Details: Calculating interest helps borrowers understand the true cost of borrowing, compare loan offers, and plan their finances accordingly.

4. Using the Calculator

Tips: Enter the loan amount in USD, annual interest rate (typically 7-9%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between home equity loan and HELOC?
A: A home equity loan provides a lump sum with fixed interest, while a HELOC is a revolving credit line with variable rates.

Q2: Are home equity loan rates fixed or variable?
A: Most home equity loans have fixed rates, unlike HELOCs which typically have variable rates.

Q3: How does credit score affect interest rates?
A: Higher credit scores generally qualify for lower interest rates, potentially saving thousands over the loan term.

Q4: Are there tax benefits to home equity loans?
A: Interest may be tax deductible if used for home improvements (consult a tax professional for details).

Q5: What's the typical repayment period?
A: Home equity loans typically have 5-15 year terms, though some may extend to 30 years.