Home equity loans, financial tool, or road to homelessness? For some, the home equity loans saves them hundreds of dollars each month, for others, it's the road to ruin.
Home equity loans are being offered all over the place, offering lower interest rates (7%-10%), no closing costs, and no fees, but what's the catch? If you don't repay them, they'll take your house, sell it quickly, and give you whatever is left after selling it for 10%-20% below market, paying the realtor 6%, the attorney's their fee, etc., etc., in other words, you probably won't see a time. On the other hand, you can borrow money cheaply, pay off your credit cards and payday loans, and start rebuilding your life.
These loans sure are legal, as long as you have home equity, you can get a home equity loan. Whether you should apply for home equity loans is another question. You can reorganize your finances, lower your monthly expenses, or simply pay for that vacation that saves your marriage... but you'll be paying back the loan for the next twenty five years. And if you sell your home, that those home equity loans gets paid back before you see a penny.
Home equity loans are right for some people, and not for others. If you are on top of your finances, and want to repay your debts faster, then the home equity loans offering 7% or 8% sound mighty nice. You might cut your repayment time from 10 years to 3 years with the same payments. However, if each month you are borrowing more money to stay afloat, you might consider bankruptcy as the solution instead.
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