Find Out If an Equity Line of Credit Is The Answer to Your
Financial Needs
by Robert Sawtelle
If you own your home you have a financial resource
available to you that can help you with your financial needs or concerns. What
is it? HOME EQUITY!
Equity is the value of your home minus the remaining
mortgage balance which is outstanding. While you live, eat and sleep in your
home worrying about debts or wishing you could refurnish the living room you may
be sitting on the cash that will grant your wishes.
Why Would You Want an Equity Line of Credit?
Unlike a typical loan which deposits a set amount of money
in your account and begins charging you interest and payments at a fixed rate
until repaid, a line of credit acts as a revolving credit (like your credit
card). You do not need to pay interest on the full amount you have access to --
you only pay for what you have used. Also, like a credit card, when the debt is
repaid you still have access to the credit.
 Using
an equity line of credit (also known as a Home Equity Line of Credit or HELOC)
gives you greater flexibility with the least cost. Not only can you access the
credit only as you need it, but your monthly payments will reflect only the
balanced used. The less used the lower your payment. Some lines of credit have
only the interest as the minimum payment which can be helpful when finances are
tight.
An equity line of credit is great when you don't have a
large fixed amount to spend in one place that will take many years to repay and
you want access to the credit without asking for a new loan when you have paid
it back.
What Can I Use the Equity Line of Credit For?
While you can no doubt find numerous uses for your line of
credit, here are samples of the more common reasons for obtaining an equity line
of credit.
Consolidate Debts
Using your equity line of credit to consolidate other debts
can not only eliminate the stress of multiple bills but can also give you a more
favorable interest rate or tax benefit.
Second Mortgage
Use your line of credit to pay off the existing mortgage for
better interest rates.
Add On, Update or Go Away
You may use your line of credit for renovating, buying new
furniture or a car, or taking a vacation with less interest payments than using
a credit card or store card making it a wise choice for large purchases.
When Should You NOT Use a Line of Credit?
Before succumbing to what seems like 'easy money' it is
important to evaluate the additional risk.
Some debts -- like student loans- have features that you may
not be entitled to if you switch them to an equity line of credit.
Other items like cars and vacations may seem like a good
idea to buy with your home equity line of credit, but with the ability to pay
only the interest you may find the motivation to pay off the debt is lacking and
end up owing for items that have lost their value or were consumable. Plan to
pay off the debt quickly for the most advantage.
Second mortgage (or refinancing) may or may not be a good
idea depending on interest rates and your repayment terms. While lines of credit
take advantage of current low interest rates you may find that your regular
loans protect you better from fluctuating rates if you will not be paying the
loan down in the next few years.
Using your finances wisely can give you great relief and
freedom. Before taking on any financial obligations it is important to
understand the risks as well as the benefits.
 About
the Author: Robert Sawtelle is an author, teacher, and researcher. If you would
like more information for DEBT RELIEF send for his FREE newsletter at the top of
this page. You may contact Robert at
RobertSawtelle@digitaldataplease.com
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