A home equity line of credit can be the best or worst of loans. A home equity line of credit is similar to a home equity loan, but instead of getting the money in one lump sum, you are qualified for a maximum amount of money that can be borrowed against your home's equity.
The borrower can then write a check for any amount of money up to the maximum amount approved. No interest is paid until the money is actually borrowed, and then the interest is only due on the amount borrowed, not on the entire line of credit available.
The benefit to this type of loan occurs when you are not sure how much money you will need. For example, you have a small business. From time to time, you have the opportunity to buy products at greatly reduced prices from distress sales. You have to act immediately when the opportunity presents itself, but you do not know how much money you will need for any given purchase.
If you borrow money and wait for the opportunity to arise, you will pay interest on the amount you have borrowed. When the opportunity finally comes along, you may need much less than you borrowed. If you apply for a loan when the opportunity arises, the opportunity may disappear before the loan goes through.
Another good use of the loan is purchasing another property. You can take advantage of distress sales by offering to purchase the property immediately. Other buyers may have to make offers contingent on getting a loan.
You are, in effect, a cash buyer. You can almost always get a better deal when you buy this way. Investors usually have a line of credit available. When they come across a profitable venture and the seller needs the cash right away, they are in a position to act.
The previous examples show the best use of this type of credit line. Unfortunately, many borrowers use the credit line to their disadvantage. Instead of using the credit line to make money, they use it to create debt. Furniture, automobiles, travel, borrowing by relatives, and so on can all be financed with the credit line.
You have to take a realistic view of your monetary discipline. One way to do this is to look at your credit card use. Go over your purchases for the past few years. Are there several impulse buys that you now regret? Are you making minimum payments or not bringing down your balance because there is always something else you want to buy? If so, stay away from a credit line.
If you cannot handle a credit card with a ten or twenty thousand dollar limit, imagine the trouble you will get into with a one or two hundred thousand dollar limit.
Our website is not responsible for the information contained by this article. Webworldarticles.com is a free articles resource thus practically any visitor can submit an article. However if you notice any copyrighted material, please contact us and we will remove the article(s) in discussion right away.
This article was sent to us by:
Agnes Barnes at
05022010
1. Do not fear your finances just start making a change
All articles in this directory are property of their respective authors. Additionally, read our Privacy Policy
© 2010 WebWorldarticles.com - All Rights Reserved. Partners: Gunblade Saga