Yesterday, we took a look at the advantages of a home equity loan and a home equity line of credit. For today’s purposes, we’ll lump them together as home equity loans. Home equity loans can be quite useful in some cases. They can help you get the money you need for home improvement projects, and the interest is often tax deductible. And in some cases (and these you have to evaluate very carefully) home equity loans can be used for other expenses.

But in order to use home equity loans to your advantage, it is important to remember a few things about them:

*They last for a long time. Rather than get a 30 year second mortgage, consider whether you could get a shorter term, such as 20 years or 15 years (or even 10!). You’ll even likely end up with a lower interest rate.

*Don’t take out the entire amount. Carefully consider your needs. Home equity loans are big commitments, and your home ownership is on the line. Don’t get carried away and take the full amount the lender will give you. Instead, take out as little as possible.

Remember that taking out home equity loans for things like cars and even small amounts of debt can be a problem. Consider how much your credit cards would cost if you paid them off, spread out over 30 years.

Tags: home equity line of credit, personal finance, financial planning, finances,
home equity loan, home equity loans, second mortgage