"When you do need them, you may have trouble qualifying," says Parr, a principal with Financial Advantage Inc. in Columbia. "If you've lost your job and want to set up a credit line, you don't have proof of income."
But doing so requires discipline, experts say. These credit lines should never be used as a first resort in emergencies if you can tap savings. Consumers need to guard against taking on more debt than they can handle. After all, with a home equity loan, your house is on the line as collateral and the banks could foreclose.
"This is not a time to be relying on borrowed money," said Greg McBride, a senior financial analyst with Bankrate.com.
Home equity lines work in much the same way as a credit card, allowing credit up to a certain limit that must be paid back once you start using the line. In some cases the interest paid is tax-deductible.
But know that the low interest rate you get when you open the line could rise; it is variable and tied to the prime rate.
Parr cautions those who can qualify to use lines of credit wisely. A homeowner can benefit from, say, finishing a basement or updating a kitchen. "But if you use your equity line for a Super Bowl ticket or dinner, those events will be long gone, and you'll be paying on it a long time."
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