The cost of a home equity loan comprises of factors that include interest, real estate taxes, homeowner's insurance, private mortgage insurance, processing charges, brokerage commission, fees and closing charges. The structuring of interest rate is subject to prime lending rate, stock market, inflation, demand and supply in the loan market, and other aspects.

Your credit rating, loan to value ratio, period of loan (short-term or long-term), quantum of down payment and location of residence are also considered when a lender submits a quotation. Some of these may leave scope for bargaining. The possibility of curtailing or eliminating certain cost factors like commission (higher the rate, more the commission to the consultant), do exist. With some companies, the costs are lower because of their sheer efficiency. Also, discounts are available from lenders in certain specifics.

Therefore it is advisable to shop around a bit and compare the cost breakdown to decide the best buy. A lower interest rate alone may not tell the whole story. It need not always mean the cheapest loan and could even be a ruse to attract your attention. You can approach agencies sponsored by U.S. Department of Housing & Urban Development (HUD) for free counseling if necessary.

Low interest rate may sometimes present a strange situation. For instance, a 15-year Fixed Rate Home Equity Loan would certainly bear a lesser interest than a 30-year loan for the same amount. But your monthly repayment would be considerably higher in the former case. You could possibly opt for a 30-year loan and invest the difference between the monthly installments more beneficially elsewhere. This should be kept in focus when you try to decide on the type of loan. The important thing is what suits you best and the rate and terms offered by different lenders for that specific loan.

There is something you can do to obtain better terms from the lenders-improve your credit rating. Getting advise is easy.

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