Line of Credit
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Be Wary of what you use a Home Equity Line of Credit for
You've seen the commercials and you've heard the incredible offers. A home equity line of credit seems like a great thing. The advertisements always show people sending their kids off to college and buying new cars thanks to their new line of credit. What lenders don't tell you in these feel good commercials is that these lines of credit usually come attached to a variable interest rate that cause your payment to shoot up at any given time.How long do you want to pay for something?
A home equity line of credit is designed to be much like a credit card, you can borrow as much or as little as you want and pay it back a little at a time. When making purchases with your home equity line of credit, keep in mind how long you want to pay for something. For example, you probably don't want to buy a car on a home equity line of credit and take longer to pay it than you actually own the car because the end result will be a lot of extra interest being paid when you could have gotten a low interest payment on a new car for a few years. Be sure not to use your line of credit for things you can get cheaper elsewhere or that won't pay off in the long run.
What should an equity line of credit be used for?
An equity line of credit should be used for things that will pay off in the long run like doing repairs on your home. Using the line of credit for something like this is really an investment in yourself and will pay off the next time you decide to refinance or sell your home. Paying for college is a noble thing to do for your kids, but carefully consider the total cost of going the equity line of credit route as opposed to the regular student loan route, you may save yourself a lot of time an money by just getting a student loan.