The United States is one of the wealthiest in the word when it comes to household equity. Regardless of the very turbulent housing market during the last few years, it still remains very strong with its base demographics. Also, home equity is one of the most common resources among home-owners that need a significant amount of money, and that could ordinarily not find it anywhere else.
Home equity loans are very common nowadays, with the equity pulled from homes being used as a real substitute for credit. Paying off debt is one of the leading reasons for taking out an equity loan—instead of drowning in a pool of credit card, medical and other debt, using money from a home equity loan can take a large—if not completely wipe-out—chunk out of your debt. Think of all the interest charges you will be spared once you pay-off the credit cards.
The line of credit alternative
One thing to understand is that home equity loans do not come only in one flavor; they can also come in the form of equity lines of credit. The former item, the line of credit, is basically like a credit card; you are evaluated by the bank for a credit limit, and then given special checks or a debit card.
With the standard home equity loan, a much larger sum is almost always involved—major life purchases are used with these—like tuition costs, complete house renovations, and debt consolidations. They are fixed-term and generally carry a 10-15 year repayment plan.
If you do nothing else, do not let this caveat go unnoticed and unconsidered—a recent statistic showed that thousands of home-owners who had received home equity loans for the fiscal year 2009 went into foreclosure or came close to it. Always opt for the line of credit unless a life-altering or one of the most expensive purchases you will have to make comes upon you, and be careful when getting loans using your home.