| If you own your home and pay a mortgage,
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| | access the funds when you need them, by
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| you probably already know that there are
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| | using convenient checks or credit card
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| certain income tax advantages for
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| | type instruments provided by the lender.
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| deductions such as interest payments made
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| | HELOC loans are a good choice for those
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| each month. And if you use a credit card,
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| | who want to borrow easily, with very few
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| you know that there are no such perks
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| | closing costs, and who want to borrow at
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| available, even though credit card
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| | their own pace, without using credit
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| borrowing usually means paying much
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| | cards, and are handy for purchases or
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| higher rates of interest, fees, and
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| | other outlays of cash that are relatively
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| penalties.
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| | small.
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| For some circumstances, especially when
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| | The common home equity loan - also known
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| attractive interest rates are offered,
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| | as a 2nd mortgage - is somewhat more
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| the credit card can be a superior choice.
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| | complicated to apply for, but it has its
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| If you happen to be one of the rare
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| | own rewards. Unlike a HELOC, the typical
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| consumers who can manage credit card debt
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| | home equity loan requires closing costs
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| by paying it off every month and not
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| | and fees related to originating the loan.
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| incurring fees, don't forget to factor
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| | So for a short-term loan, it may not be
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| the credit card loan option into your
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| | the less expensive option. For longer
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| decision. But overall, using home equity
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| | periods of borrowing, or for larger
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| loans to borrow money makes more sense
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| | amounts that will incur substantially
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| than racking up credit card debt, and
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| | more interest, however, it is a great
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| although there are a few special
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| | option. And many of the closing costs,
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| exceptions, most financial counselors
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| | plus the monthly interest payments, will
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| will encourage homeowners to tap equity
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| | be tax deductible for most homeowners.
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| for loans, rather than using the plastic
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| | These home equity loans or 2nd mortgages
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| in their purses and wallets.
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| | come with lower interest rates, which is
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| There are essentially two different ways
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| | a big advantage. One or two points of
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| to borrow with equity, and those are the
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| | interest can cost hundreds or thousands
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| home equity loan, and the home equity
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| | of dollars over a period of years. And
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| line of credit, or HELOC. A HELOC works
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| | whereas a HELOC will normally be an
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| much like a credit card, except that you
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| | adjustable rate loan - meaning that your
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| can usually pay it off over a much longer
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| | payments might increase if interest rates
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| period of time, and you can borrow more,
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| | keep going up - you can acquire a home
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| as long as you have the home equity to
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| | equity loan with a fixed rate, and keep
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| back up your line of credit. And interest
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| | that rate for the entire life of the
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| paid on HELOC loans is similar to credit
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| | loan. Weigh the pros and cons of each,
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| card interest, because it is normally not
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| | and then choose the alternative that is
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| tax deductible, and the rate paid is
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| | best for you.
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| higher than most mortgage rates. You
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