Home Equity Lines of Credit

Home equity loans are often mistaken for home equity lines of credit, but they are not at all the same thing. There are some common traits that they share, but they are still different.

Home equity lines of credit are revolving accounts and are similar to credit cards, whereas home equity loans are simply loans of a set amount. Home equity lines of credit are not set amounts; they can be used as sparingly or as often as one would like. Of course, there are limits to the line of credit, and going over can generate large fees.

Home Line Of Credit

They are easy to use; they often come with a credit-like card, where you can use the equity in your home. In a sense, it resembles a secured card, because it is secured by the equity in your home, but it functions like a credit card in all other respects. You still owe monthly payments, get penalized for being late, have to pay interest, etc.

Home Equity Lines of Credit

Equity lines of credit and equity loans are comparatively similar in that they both are forms of second mortgages; they both use the equity in your home as collateral. With both, you put your home at risk if you default.

Home equity lines of credit can be very useful for productive purposes, but they can also be very damaging, dangerous things. If you have excellent control over your spending habits, they are great ways to have access to emergency money.

If you do not have good control over your spending habits, however, they are very bad things to have. Unfortunately, more people are in this group than the group that has excellent control over its finances. Since this group cannot control its spending habits, credit cards are often maxed out, and so are the home equity lines of credit.

What people in this group have done is take a great source of emergency money and turned it into something that is eating them alive. If you find yourself in this group/if you have a maxed-out lines of credit, you should pay it off as soon as possible. This is more of a priority than credit cards, because your home is at risk. With credit cards, your credit is the only thing you are risking.

In conclusion, home equity lines of credit are a form of revolving credit which use the equity in your home as collateral, and they are powerful devices that can be used for the benefit and/or the destruction of the user.

Home Equity Lines of Credit