| Before making any decisions to take out any loans it is | | | | The lump sum payment from the home equity loan |
| a good idea to be an informed consumer; this is | | | | can be used, also, for home improvement projects that |
| especially true when it comes to taking out loans that | | | | can, in turn, increase the value (and the equity) of your |
| use your home as collateral for the loan. It is very | | | | home. There are no restrictions on what you can |
| enticing when you learn that you have access to | | | | spend the money on; from paying off debt, paying off |
| potentially tens of thousands of dollars. However, there | | | | medical bills, buying a new car, or installing a pool in |
| are several key facts that you need to be aware of. | | | | your back yard. Compared to a regular loan from a |
| What It Is | | | | lender, it can be relatively easy to get a home equity |
| A home equity line of credit (HELOC) is a loan that | | | | loan. In general, lenders feel quite confident that you will |
| uses your home as collateral to provide to you access | | | | make the repayments on time simply because your |
| to the equity built up in your home over the time you've | | | | home has been used as collateral. |
| lived in it. You build equity in a home by making on-time | | | | ConsWhile it can be easier to obtain a home equity |
| payments towards your mortgage balance, and by | | | | loan than it is to obtain a standard loan from a bank, |
| maintaining the home to ensure its market value | | | | you need to seriously consider if a loan that uses your |
| increases over time. | | | | home as collateral is a good choice for your family and |
| ProsMany people carry credit cards in their wallets; | | | | your current financial situation. If your income situation |
| these credit cards come attached to huge interest | | | | changes will you still be able to make the required |
| rates that can make it seem impossible to ever pay | | | | monthly repayments? |
| off the balance on credit cards by making the | | | | Oftentimes homeowners will use their home equity |
| minimum monthly payment. A home equity loan can | | | | loan towards the starting up of and running of a small |
| provide you with the ability to immediately pay off | | | | business; this can be a great investment if the |
| those high interest credit cards and be free of the | | | | company is successful. However, in the current |
| non-tax-deductible interest you pay on them. Interest | | | | economic climate it can be a very big gamble. If your |
| paid towards the home equity loan is completely tax | | | | business fails and you are unable to meet the |
| deductible; this is a much better use of your money | | | | payment requirements of the HELOC, you are at risk |
| than sending it all in full to a credit card company. A | | | | to losing your home. Be sure to shop around either |
| home equity loan can be used to pay for college | | | | online, or in your community for low home equity loan |
| tuition; the interest rate and other terms you receive on | | | | rates. A lower rate can be the difference in suceeding |
| the HELOC can be a lot better than those you would | | | | with the investment or going into foreclosure. |
| have received from a tuition loan provider. | | | | |