Borrowing Against Your Home's Equity: What You Need To Know

Paying off debt with a home equity loan or line of credit is an option for consumers with equity in their homes.

With a home equity loan or line of credit, you borrow against the amount of equity you have. A loan is a fixed amount, while a line of credit is more like a credit card.

These loans seem simple, but one key factor must be remembered - your home is the collateral. If you can't pay back the loan, you will lose your house. However, there are many other things to think about. Before you take out that loan, consider this point:

• If you use the loan to pay off credit card debt, but don’t change your spending habits and run up those cards again, you could end up much deeper in debt than you were before the equity loan.

The bottom line? There are some good reasons to take out a home equity loan. But you must do your homework, know the facts, and be realistic. Your home isn't a giant credit card - it’s the roof over your head. And after all, that's not something you want to jeopardize.