Home Equity Loans

Home equity loans can be a great tool, but are only effective if they are used in the correct situation. Many people take out home equity loans to pay for major home repairs, college tuition, or other significant, relatively unchanging expenses.

What are Home Equity Loans?

A home equity loan is a loan that uses equity in the home as collateral. It is important to remember that the price of the home is not the same as the equity in the home. A home equity loan also causes your home equity to be reduced. Typically, home equity loans are only available to people who already have good to excellent credit. They are often called "second mortgages" because they are based on property value.

The Risk of Leveraging Home Equity

Unfortunately, many borrowers get into trouble with home equity loans because they use them to pay off credit card debt. This is a bad idea; not making payments on a credit card can cause less damage than not making payments on a home equity loan. In the latter case, you can lose your home. The same can not be said for credit card debt, as there is a limit to what a creditor can take from you, and your house could not be foreclosed upon.

Contact Us

Because home equity loans are often misused and can be potentially harmful in the long term, it is important to seek legal counsel before determining if home equity loans are a good solution for you. contact the Boca Raton bankruptcy attorneys of Eric N. Klein & Associates, P.A. at 561-353-2800 for an initial consultation.