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By
Charles Essmeier
Most Americans tend to live on a paycheck-to-paycheck basis, and the typical
household has nearly $10,000 in credit card debt. Adding to that is the fact
that Americans are saving money at the lowest rate in history. We spend what
we earn, when we earn it, and there’s little or nothing available when a
disaster or an emergency strikes. How can the average American make sure
there will be money available for that “rainy day” emergency?
One possible solution would be to open a home equity line of credit. The
equity in a home is the difference between the value of the home in the
market and the amount owed on the mortgage. Rising real estate prices across
the country have left Americans with record amounts of home equity, and
record numbers of homeowners are borrowing against the equity in their home.
There are two main types of home equity loans; the traditional loan and the
line of credit. The traditional loan lends a fixed amount of money that is
repaid at a fixed interest rate over a fixed amount of time. This is ideal
when the money is borrowed for a specific purpose, such as a home-remodeling
project.
The home equity line of credit, on the other hand, gives the borrower great
flexibility. The amount of money is capped at a certain amount, but the
borrower writes checks to use the money when they need it. The borrower only
makes payments when he or she actually writes a check to use some of the
money, and the interest rate on the loan is adjustable. The line of credit is
the perfect source of funds for that “rainy day” emergency. The costs of
obtaining a line of credit are minimal, and the paperwork is much less
involved than the paperwork associated with obtaining a primary mortgage. The
beauty of a line of credit is that there are no additional costs if the money
isn’t used. The homeowner is under no obligation to use any of the money, but
he or she can simply sleep soundly, knowing that it is available should an
emergency arise in the future.
Americans, as a group, tend not to save much of what they earn. But even poor
savers who own their own homes can prepare themselves for unexpected
financial emergencies by taking out a home equity line of credit. One never
knows when an emergency will strike, but it is always a good idea to be
prepared to face one.
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro
Marketing, a firm devoted to informational Websites, including End-Your-Debt.
com, a Website devoted to debt consolidation (http://www.end-your-debt.com/
>debt) information and HomeEquityHelp.net, a site devoted to information on
home equity loans. (http://www.homeequityhelp.net/>)
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