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Saving, Managing Debt, and Budgeting

Home Equity

What is the downside of using a home equity loan?

Some people use home equity loans to buy cars and clothes, fund vacations, or purchase second homes. This may lead to major financial problems in the future, if not correctly managed. Often home equity loans are given to people with terms that allow them to pay only the interest on their line of credit each month. This means the borrower never pays off the principal of the loan, and could end up paying a notable amount of money in interest payments. This is often written in the fine print of the loan documents, and is concealed from borrowers to make the loans appear more attractive.



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