Home Equity Loan – Is It for You?

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A home equity loan can be a great source of extra cash. But, first consider the warning from the Federal Trade Commission – “Borrowers beware!”A home equity loan is a second mortgage in which you pledge your home as collateral. Borrowing money this way can help you get extra cash for home improvements, debt consolidation, college educations or investments. And the interest you pay may be deductible on federal and state tax returns. Sounds good, doesn’t?But, all that glitters isn’t gold. When you put your home – your most valuable personal asset – to work like this, you’re also putting it at great risk and you could end up losing the “family farm.”Home equity loans are only recommended for homeowners with stable incomes sufficient enough to cover monthly payments and for people with no intention of selling their home before the second mortgage comes due.But exploitive lenders are not promoting home equity loans to people who are good credit risks. These scammers are going after the elderly, minorities and those with low incomes or poor credit ratings. And, no matter how attractive they may sound, second mortgages are not for the vulnerable or the desperate.Unscrupulous lenders may act like they’re taking a gamble on a risky investment, but when you hold it up to the light of day and take a good look, they have nothing to lose. This means they can offer you any deal you want – even if it’s not to your advantage – to entice you to refinance or piggy-back a second mortgage.These guys always win. If you pay your loan back on time, they make money. And, if you miss a payment or are unable to sell your home at a price high enough to cover all of your mortgage debt, they make money. That’s when the sharks come in for the kill. They put you into foreclosure, take your home and all of the equity you may have in it.But there are ways you can protect yourself. To begin with, never allow the promise of extra cash, easy loan approval or lower monthly payments cloud your judgment, especially if the offer is being made by a stranger. And never let someone pressure you into making a decision and signing a contract. If it’s such a good deal, it can wait for you to check it out with a knowledgeable friend or family member, your local Better Business Bureau or even the Federal Trade Commission at 1-877-FTC-HELP.Also, never sign an agreement without reading it first. Better yet, get a second opinion. Check all documents first with someone you can trust who knows about mortgages and real estate.The best way not to be a home equity loan victim is to deal only with established lenders you absolutely know you can trust. And never bite off more than you can chew. If you follow this advice, there’s a good chance you can keep your “home sweet home.”