FMOOD 0124: Considering a HELOC? - a podcast by Tom Merlino | Tom is inviting you to follow him on his journey to get out of debt and get into prosperity.

Are you considering a HELOC (home equity line of credit)? A HELOC is a borrowing instrument that allows you to use the equity in your home to borrow against. My wife and I talked about this and did some research, and this is the information that I found on the subject that I want to share with you today.

 

Personally, I think that the scariest thing about a HELOC is that your house is on the line. If you don't make the payments, your house is in serious jeopardy. Some folks ignore this risk and focus on the benefits of a HELOC, a couple of those benefits being lower interest rates than a straight personal loan as well as tax deductions at the end of the year. After looking into this, I feel that the benefits simply do not outweigh the risks when it comes to a HELOC.

 

Also, if you are using a HELOC to consolidate credit card debt, you are likely turning unsecured debt into secured debt. The credit card companies get their money, so they're happy. However, if you fail to pay the HELOC, you have your home securing the loan. You could actually lose your home over what used to be your credit card debt. That doesn't sound like a wise move.

 

A HELOC typically has a variable rate attached to it, so interest rates could rise and take your HELOC payment up with it. I personally do not like an unpredictable circumstance when it comes to managing money. Of course, you can pay more than your minimum payment due, but if you're doing that already, why not just use cash? Why put your house on the line in the first place?

 

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