Tip of the Day

Be careful using Home Equity Line's of Credit.

• Rates are not fixed and can shoot up (shoot up as in the rates go up, not shoot up like heroin).
• 80% of people who consolidate credit card debt into a home equity loan run their credit cards back up. Don't kid yourself.
• It is way too easy to borrow against them.
• Just making the minimum payment will take 'forever' to pay it off.
• In a down real-estate market you can end up underwater.
• The lender can call your loan.
• Don't use your home as an ATM machine.

When the real-estate down turn hit in 2006-2008, lots of people had their loans canceled by their bank (yes they can do that, read your fine print). People had 30 days to come up with $25k, $40k whatever. Lots had to do a short sale and even worse, some got foreclosed on. Does that private school you just had to send your kid to seem worth it now? How about those new cars in the driveway or that trip to Disney World?

Another name for home equity borrowers is "renter" or "homeless".

Home equity loans can be a good financial tool if used properly, just be careful.