5 Reasons to Not Use Your Home Equity Line of Credit .

5 Reasons to Not Use Your Home Equity Line of Credit .

5 Reasons to Not Use Your Home Equity Line of Credit .
5 Reasons to Not Use Your Home Equity Line of Credit .



In many areas of the United States, home values ​​continue to rebuild, the swelling available to home equity households in 2015, homeowners put $ 156 billion from Home Equity Line of Credit (HLOC) The biggest dollar was the bubble burst.


 The average HELOC setting was $ 119,790. HELOC rates are turning eagerly to their home equity as a source of cheap money to meet their needs once again, with an average of 4.07% up to April 11, 2016.


Although home improvements are at the top and the best reason for taping home equity, many homeowners can forget the hard lessons of the past by taking money for any reason.


During the housing bubble, many homeowners with their HELOCs will value their home The extent to which they reached, they got stuck in the equity crisis when the house prices got crashed, causing them to be dropped above their debts.


 Home equity can be an important resource for homeowners, but it is also an invaluable resource that is easy to spend on using it efficiently.


HELOC can be a meaningful investment when used to improve the value of a home. However, when payments are made for those things which are otherwise not cheap through income or savings,


Pay for a holiday


At any time to pay for vacation or to use money for leisure and recreational activities, this means that you are living beyond your means.


Although it is cheaper to pay with a credit card, it is still a loan. If you can not usually control your expenses or you are heavily dependent on your lifestyle, then borrowing from home equity can only increase the problem.


With at least a credit card, you are only risking your credit; the share with home equity is high; That is, you'r home.


Car buying


With the rate of HLOC, the rates offered on auto loans are almost half, it is attractive to use affordable money to buy a car. 

Although it is true that the cost of your interest may be lower with HELOC, if your financial condition only allows you to pay only interest on the loan, then your interest cost may be higher for a long time.

 In addition, an auto loan is protected by your car. If your financial condition worsens, you only want to lose the car. If you are unable to pay on HELOC, you can lose your home.

Buying a car with HELOC loan is not a good idea as it is a weak property. With an auto loan, you pay a portion of your principal with each payment, ensuring that, on a pre-determined time, you fully pay off your debt, however, with most HELOC loans, You do not have to pay the principal, opening the chances of paying on your car compared to the useful life of the car.

paying Credit Card Debt



It seems that paying dear debt with cheap loans after all is a loan, however, in some cases, this debt transfer can not solve the underlying problem, which is the inability to live with your means.


 Before considering HELOC loan to strengthen credit card debt, honestly check that your credit card debt has become so inconvenient at first place, otherwise you can trade a problem for a major problem.


 The use of HELOC for payment of credit card debt can only work if you have strict discipline to repay the principle on loan within a few years.


Paying for college


Due to its low interest rate, you can make it logical to tap your home equity to pay for your child's college education.


However, doing so may cause your home to be in danger, your financial situation should change for worse if the loan is important and you are unable to pay the principal within five to 10 years, then you can take additional mortgage loan in retirement .


There is also the risk of going. Students are structured in the form of loan instalment loans, in which principal and interest payments and a certain period are required.


If you lack discipline to completely pay HELOC, student loans can be a better option.


Investing in Real Estate




When real estate prices were rising in the 2000s, it was common for people to borrow from their home equity or estimate in real estate investment.


As long as real estate prices were rising rapidly, people were able to earn money. However, once real estate prices started declining, people became owners of many properties, in many cases, their outstanding mortgages and HELOC were less valuable than loans.


Although the real estate market has stagnated, investment in real estate is still a risky offer because many unexpected problems can arise, such as unexpected expenditure in renovating an asset or sudden recession in the real estate market.


Especially if you are an inexperienced investor, you have to take the risk of real estate or any type of investment when leverage is used, especially in case of your home equity.



thanks for the time .

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