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Is a home equity credit line for you?
If you need to borrow
money, home equity lines may be one useful source of credit.
Initially at least, they may provide you with large amounts of cash
at relatively low interest rates. And they may provide you with
certain tax advantages unavailable with other kinds of loans. (Check
with your tax adviser for details.)
At the same time, home equity lines of credit require you to use
your home as collateral for the loan. This may put your home at risk
if you are late or cannot make your monthly payments. Those loans
with a large final (balloon) payment may lead you to borrow more
money to pay off this debt, or they may put your home in jeopardy if
you cannot qualify for refinancing. And, if you sell your home, most
plans require you to pay off your credit line at that time. In
addition, because home equity loans give you relatively easy access
to cash, you might find you borrow money more freely.
Remember too, there are other ways to borrow money from a lending
institution. For example, you may want to explore second mortgage
installment loans. Although these plans also place an additional
mortgage on your home, second mortgage money usually is loaned in a
lump sum, rather than in a series of advances made available by
writing checks on an account. Also, second mortgages usually have
fixed interest rates and fixed payment amounts.
You also may want to explore borrowing from credit lines that do not
use your home as collateral. These are available with your credit
cards or with unsecured credit lines that let you write checks as
you need the money. In addition, you may want to ask about loans for
specific items, such as cars or tuition.
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