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Residential real estate property values are slowly rebounding across all the states in the United States including Georgia. According to reports, homeowners drew at least $156 billion just from home equity lines of credit (HELOC) back in 2015. This movement is considered to be the largest financial increase since the height of the housing market back in 2007. The average HELOC in 2015 was $119,790. As of recently, homeowners are now converting the ownership of their property to a source of cash.
Home equity is considered to be quite a valuable resource for a lot of homeowners, but it's also something that can quickly get squandered. Owners often use it to fund some renovations. But using it for other reasons which aren't needed can turn it into bad debt. Here are some of the situations when not to use your home equity as the primary source of funds.
Using Funds to Pay for a Vacation
When you use debt to fund your vacation or entertainment and leisure activities, it is generally true that you're trying to live beyond your capability. Although it is considered to be much cheaper than paying it using your credit card, borrowing money from your HELOC can make matters worse. When you're using your home equity as a source of funds, you're putting your home at stake.
Getting a Car
Since your home equity rates are almost half the rates that are offered by most auto loan companies, it is quite tempting for some borrowers to use the funds and get a car. Although your home equity interest is a lot lower, if you're only allowed to make interest-only monthly payments on your loan, then there's a high chance that the home mortgage interest cost increases over time.
Using Equity Rates to Pay Off Credit Card Debts
It probably makes a lot of sense to use a cheaper debt to pay a more significant debt. However, this wouldn't address the borrower's underlying issue, which roots from his lack of self- control. So before you even try to consider using your equity credit to pay your existing credit card debt, then you might just want to reflect on it first and see what's the real cause of your financial problem. Knowing the underlying causes of your debt will give you valuable insight, especially if you're trying to build your credit score to apply for a home mortgage.
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