Just found out my credit union approved me for a home equity line of credit up to 50k. I'm new with all this. How can I creatively use this type of loan to my advantage? In other words, how can I make more money?
I don't pay a mortage. I helped my mom-refinance last year. She has bad credit, so I co-signed for her. After I did that, my credit union approved me for the loan.
2006-09-01 05:08:02 · 7 answers · asked by do it movin' 1 in Business & Finance ➔ Personal Finance
A HELOC is like a mortgage, except that the equity doesn't get pulled out all at once. It stays on the house until you need some or all of it. Usually your bank will issue you a check book, and every check you write on it will pull out equity. Does that make sense? There's usually a minimum on the amount of the checks you can write (anywhere from $100 to $1000 minimum per check).
Honestly, owning your home outright is one of the best financial moves you can make. If you don't need a HELOC, you probably shouldn't get one. At least, it won't really benefit you financially more than not having one. Some people love the convenience and security they offer. You would have $50,000 available to you at a moments notice if you needed it. Of course, interest rates are usually higher than on traditional fixed rate loans. On the other hand, you would only be paying interest on the money you actually need to use. . .
There are plenty of pros and cons.
2006-09-01 05:18:51 · answer #1 · answered by Anonymous · 1⤊ 0⤋
well, first off, to assume that you can make more money from a loan is a bit unwise. I used to work for Chase in the HELOC dept....I saw people get these things and they had NO CLUE what they'd gotten themselves into...Of course you know that it has to be paid back. The only "crooked" thing I've seen people do is try to float the money. See, heloc is given to you via checks only, and there's a min amount you have to spend at one time. (you can't stop at the market and buy a loaf of bread with them). People take some of these checks, deposit them into a personal checking account, and then use that same money to pay the finance charge at the end of the month. Essentially paying for borrowed money with borrowed money. But again, in the end, it all has to be paid back...You can only write checks for a certain amount of time, then it's cut off.
2006-09-01 05:36:37 · answer #2 · answered by Anonymous · 0⤊ 0⤋
You should only use borrowed money for things that appreciate in value (like a house) or things that help you make money (like an inexpensive car to get to work). For anything else, you just end up losing money on interest payments.
In theory, you can come out ahead by investing the borrowed money at a higher rate than the interest you're paying, but to beat the going rates for a HELOC, you'd have to put it in risky investments like stocks. Then you're betting your house on the stock market--not a good idea.
2006-09-01 05:26:04 · answer #3 · answered by rainfingers 4 · 0⤊ 0⤋
Your credit union is full of sh__t. They approved you for line of credit on Home Equity that does not belong to you. Nonsense!
2006-09-01 06:48:32 · answer #4 · answered by svikm 3 · 0⤊ 0⤋
i do no longer see many dangers. Its a tax deduction and that's a flexible line of credit. you merely could desire to be clever with it. i understand some those that have one, and have used it as a relentless source of money to pay off their credit enjoying cards, and then they repeat the approach, and that they are never waiting to pay the domicile fairness line down.
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2006-09-05 04:29:30 · answer #6 · answered by Anonymous · 0⤊ 0⤋
You can always buy an investment property. Payoff a vehicle if your still financing one.
2006-09-04 19:51:19 · answer #7 · answered by V 3 · 0⤊ 0⤋