Due to the economic downturn, people at every social level are concerned about their financial security. Many people are finding themselves to have financial hardships for the first time in their lives. Being able to pay bills and keeping their heads above water has become a reality. People who find themselves unexpectedly unemployed may find it very difficult to have cash readily available to meet obligations. Even when unemployed, there are some options to attain a loan, one of which is a (HELOC) Home Equity Line of Credit.
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monthly based on the outstanding amount of money actually withdrawn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.