Home Equity Line Of Credit

Cons Of A HELOC

The first and perhaps most glaring negative aspect of a HELOC is the possibility of foreclosure. Those who use the full value of a HELOC usually find themselves owing more money on the house than what it is actually worth. If you are unable to repay the credit borrowed against, foreclosure proceedings can begin, and you can be left without a home.

Another con about a HELOC program is the interest rates can be variable and change virtually overnight. HELOC program interest rates are usually set based on the prime rate, and as this changes, so does the interest rate you are forced to abide by. This can cause what once looked like a great deal to soon become a financial burden. The best way to avoid financial stresses is to borrow only as much money as you need. By minimizing the amount borrowed in the first place, you are lowering the amount of interest you must repay and increasing the possibility of benefiting handsomely from the program.