A home equity line of credit (HELOC) uses your home as collateral. The value accumulated in your home is used by the lender to back the loan. This loan is very similar to other collateral secured loans, but different in one fundamental way. Instead of providing a lump sum of money, a line of credit is created from which the home owner may withdraw funds. Of course a maximum amount of money is available, similar to a credit card. The borrower pays interest monthly based on the outstanding amount of money actually withdrawn against the available line. Depending on the loan, the interest rates will vary, based on terms of the loan. The interest paid on HELOC loans is tax deductible in the same manner as mortgage interest is deductible, although there is a cap at the first $100,000. The borrower must be aware that drawing against the equity built into a home, thereby reduces the principle accrued. If the home owner intends on selling the home prior to repaying the loan, he must be aware of the home market and that less profit will be available. Home owners may be able to tap into accrued home equity in order to deal with the prolonged economic crisis.
Home equity lines of credit are an available avenue to acquire cash as one of the possible types of loans for the unemployed. Although drawing against the value of the home, using the house as collateral, it is possible to acquire funds that may not be available through other credit routes. That makes HELOCs very attractive sources of cash when you are unemployed.