What type of home equity loan is best?
There are two basic forms of home equity loan, the cash-out refinance where you receive a lump sum at closing and the home equity line of credit (HELOC). The cash-out refinance is simply a fixed- or adjustable-rate second loan on the property, while a HELOC is much like a credit card — you draw money as needed and interest is charged on the balance. As you pay down HELOC debt, more money is available to borrow up to the original credit limit. There is no “best” choice between a simple second mortgage loan and a HELOC. Instead, go with the option that makes the most sense given your finances and preferences. How can I avoid the debt monster? If your reason to get a home equity loan is to pay down consumer credit, that’s fine — as long as you do not go out again and rack-up more consumer debt for credit cards, car loans and other expenses. Combine home equity payments with a new set of hefty consumer bills and your financial position can get worse so plan ahead: Part of every home equi
