Home equity loan or line of credit
Home equity lines or loans often are touted as a quick and easy way to get out of debt. By leveraging your residence’s value, the pitch goes, you can get money to pay off other bills and a tax break, too.
But borrowing against your house can backfire. The biggest risk: You could lose your home if you default on the loan.
“Some hardship occurs and now they have double the debt and if it’s secured by their home, they could lose it,” says Diane Giarratano, director of education at Garden State Consumer Credit Counseling in Freehold, N.J.
And while equity loan interest generally is tax deductible, it could be limited in some situations. Even when it does provide a tax break, Cambridge’s Viale says “that doesn’t mean it makes fiscal sense.”
Giarratano agrees. “Banks will tell you how much you can borrow,” she says. “That doesn’t mean you should borrow the total amount, but that’s what people do.”
Still, a home equity line of credit or loan to pay off creditors can work for some debt-burdened homeowners. Just be sure to do your homework to guarantee that the home equity dollars and cents make sense. This Bankrate calculator can help your determine whether borrowing against your home’s equity is a wise mo
