How To Choose A Home Equity Line Of Credit

If you're reading this, you probably realize it's time to get that home equity line of credit (HELOC), but may not understand how they work or what's involved. They are really pretty simple, but quite flexible. I hope this article helps you choose the one that's right for you.

There are various reasons for getting a HELOC, and each reason may require different features, so there is not one perfect HELOC out there that will fit everyones needs.

If you are establishing your HELOC for emergency purposes only, and intend to pay it off quickly if you use it, dont pay much attention to the interest rate, but be sure you find a HELOC with no annual fee, and no closing costs.

Many people will get a HELOC to consolidate debt. This is a great tool for that, because the interest rate is usually lower than your typical credit card, and its normally deductible on your tax return.(check with your accountant or tax adviser) In my experience, people with credit card debt who consolidate using their home end up paying less each month and paying their debt off much soon than if they had kept the debt on their card. If you have a substantial amount of debt, say more than $25,000, find a HELOC with a lock option. Lets say you have $40,000 of equity in your home. You may get a HELOC of $40,000, take a draw on it to payoff your credit cards of $25,000, lock in the balance at a fixed rate and payment, then have $15,000 available in case of an emergency. As you pay down the balance, it will become available to use.

You can do the same thing for a car purchase or remodeling project as well. In most cases, the features of the HELOC are more important than the rate. If you get a fantastic variable rate, but do not have the option to lock the rate, you may end up paying more in the long run. I recommend searching for the bank with the best features first, then compare rates second.

Also, beware of teaser rates. You may be quoted what seems like a phenomenal rate to start with, but that rate may adjust in three or six months.

The application process should be simple, and if your credit is holding up, they do not usually require a lot of documentation. It will take two weeks to a month, though, and there is a three-day rescission period, so you will not get your money immediately upon approval.

No matter your reason for wanting or needing a HELOC, remember, you still need to maintain self control. You do not want to end up with more debt and no way out. You can get a HELOC that will use 100% of your homes equity. If you use the whole thing, then have a financial setback, you have no cushion, and no way out.

Brenda Kolic is a successful banker with over ten years experience. If youd like to learn more about credit, try the links below.

For more information please visit my blog: http://dansbigleap.blogspot.com/2007/06/brendas-article-about-home-equity-line.html

or http://dan195.thebestbizreview.com

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