Home Equity Loans – The Double Edged Sword
Home equity loans can fix short term cash flow issues. If you need a large sum of money for things such as a child going off to college, a wedding, or home repairs, accessing the equity in your home might be an option, but buyer beware. Let’s examine why.
Two initial problems immediately come to light. First, you must own a home; so renters are out of luck. Secondly, you must still have equity in your home, which disqualifies many homeowners in our current economic situation.
If you are lucky enough to have a home and equity then you can continue to look at the pros and cons of the home equity loan option.
Pros:
- Gives you quick access to a large amount of cash
- Competitive interest rates
- Loan is usually tax deductible
- You can use the money for anything
Cons:
- If you don’t pay it back, bank can foreclose on your house
- Doesn’t work well for unexpected financial need
- Is not a good quick fix, and can stretch out your debt
Of all of the cons, the one that sticks out the most is the risk of foreclosure. The question you must ask yourself is, “Is this purchase really worth the risk of me losing my home?” Often times the answer to that question is “no.”
Additionally, some people may turn to home equity loans to consolidate other unsecured debt. Using a home equity loan to regain control of credit card debt is almost never advised. If you are having trouble paying your bills each month and you are thinking of consolidating them into a home equity loan, speak with a debt relief law firm first to find out if there are other options that will not put your home at such great risk.
A law firm such as Harold Shepley & Associates can provide you with information regarding your situation and how you should move forward. Contact them today to find out more information on your options of debt relief.
January 19, 2012 Posted in Debt, Home Equity Loans Tagged home equity loans, loans, Pennsylvania Leave a comment
