How to Stop Borrowing Against Home Equity

Borrowing against home equity to improve your home or lessen your debt burden on occasion is acceptable. When the borrowing becomes frequent, however, it can lead to a problem. Stop borrowing against home equity and stop taking the risk of losing your home by making the following changes.

Instructions

Difficulty: Moderately Challenging

1. Get rid of your credit cards after you have used your home equity for the purpose of debt consolidation. The reason you keep borrowing for this purpose is because you are paying off your credit cards and then charging them up again.
2. Assess your home improvement "needs" versus your home improvement "wants." Borrowing against home equity for things your home needs, such as a new roof or furnace, is justified. Borrowing against your equity because you "want" to transform your basement into a state-of-the-art media room is not justified.
3. Comprehend the consequences of continuing to borrow against your home equity. A home equity loan or line of credit creates another monthly payment. If you miss that monthly payment, you run the risk of losing your home.
4. Consider other types of loans. If you are considering borrowing against your home equity to pay for your children's education, look into to student loans instead. Also, if you are looking to consolidate your debt, consider getting a debt consolidation loan instead of borrowing against your home.

Tips & Warnings

• If you have mounting credit card bills and think that a home equity loan is your only option, try first to cut down other expenses. Some ways to cut expenses are stop eating out, drive less and take coffee from home instead of buying a cup on your way to work. Cutting out unnecessary expenses will make it easier for you to make your monthly credit card payments.
• If you still can't meet all of your debt obligations and must file for bankruptcy, you cannot include any debt that is secured by your home. If you paid off credit cards with a home equity line, you are still obligated to pay those debts after bankruptcy because it is considered a "secured" loan.