Should You Get A Home Equity Loan?by Mary Ann Romans | More from this Blogger 03 Oct 2008 08:22 AM
If you will be using the money in order to make a significant improvement to your home that will increase it's value, then this is probably a good investment. A good example is if you remodel your kitchen or adding on additional square footage to your home. These things will generally add to your home's value, and you will get your money back. It is not a good idea to take out a home equity loan to pay for luxuries or splurges, such as a vacation, especially in today's economy. You could wind up losing your home, if you can't pay back the loan. Some people consider a home equity loan to consolidate high interest credit cards and other loans. The decision to do this must be taken carefully. It could be a good idea and help you get out from under high interest debt. But, if you wind up just charging up those credit cards again, you can find yourself in worse trouble. While home equity loans were once easy to get, but the current financial situation, things have changed. You may find that you don't qualify for a loan or that your home actually has negative equity in it. Consider a home equity loan almost as a mortgage. You don't want to put your home in jeopardy by taking out additional debt if you won't be able to make that payment. You could be forced to sell your home, lose it for nonpayment, etc. Mary Ann Romans writes about everything related to saving money in the Frugal Blog, creating a home in the Home Blog and caring for little ones in the Baby Blog. You can read more of her articles by clicking here. Related Articles: New Rule Closes the Loophole with the "Do Not Call List" Home Prices Are Steeply Falling Learn more about Mary Ann Romans  Mary Ann Romans is a freelance writer, wife and mother of three children. She lives in Pennsylvania with her husband, the kids and a 16-pound cat. Relevanthome tags baby | christmas | Kids | family | ideas | weight loss | holidays | parenting | relationships | children User Comments  ruthann8 (6378) 03 Oct 2008 10:34 AMI was always taught NOT to use a home equity loan to pay of credit cards. All you are doing is moving non-secured debt into secured debt, and then risk losing your home. Samual (11722) 03 Oct 2008 10:39 AMI wouldn't, it would be so much better if people lived by "can't afford, can't have", but far too many people either make mistakes buying something they cannot afford, while some people are greedy and don't care about how the outcome effects others. I can see how, if you are in a tight spot and you know in so many weeks the money will be there, then maybe it is ok to consider such a loan in the time being, but there is a lot of a , it wont happen to me attitude.  Mary Ann Romans (26886) 03 Oct 2008 10:52 AMRuthann, I think in most cases it isn't a good idea to pay off credit card debt with a home equity loan, but I can think of some instances where it might be a good move. Obviously, you want to avoid continuing to use those credit cards. A family that has mounting interest on their debt may only have a choice between paying off that debt or declaring bankruptcy, for example. If they are committed to getting back on track, the home equity loan may be able to save them from having to sell. Or the family might have that credit card debt due to one-time medical costs that aren't likely to be repeated. ruthann8 (6378) 03 Oct 2008 11:09 AMThere will always be expectations to rules, but I wouldn't advise anybody to use a home equity loan to pay off credit cards without first looking at other options. First people should call each credit card and ask for lower rates and close the account, not all credit card companies are nice about this but this should be the first step. And there are companies that can help you with this process. In most instances people who can't manage there credit cards will have a hard time managing a home equity loan. I just hate to see people lose there home due to credit cards. And like in your article, houses aren't worth what is owed on them, and when a family pays of credit cards with a home equity loan and continues to make bad financial decisions they get right back in a bad situation and they can't sell there home and end up declaring bankruptcy anyway. Maybe home equity loan should have a requirement of financial counseling! Mary Ann Romans (26886) 03 Oct 2008 11:12 AMSo true Ruthann! This is not a quick fix for people who routinely live above their means. Community Tags credit card, home equity loan, home equity line of credit, home improvement, loan consolidation Discuss this article
|
Home categories
More home tagsbaby | christmas | Kids | family | ideas | weight loss | holidays | parenting | relationships | children |
