Home Equity Loans / Lines of Credit

I’m considering taking out a Home Equity Loan to do some repairs to my home. I’d love to hear pros and cons to this. What I want done will cost under $5,000. Would I be better off to charge this to a credit card, set up a payment plan with the company, or take the line of credit which is at least 10 times the amount I need, although the bank says it counts as a mortgage for tax purposes.

I appreciate any ideas or thoughts.


Are the repairs absolutely necessary? If not I would save up for them. I would not charge it or take a HELOC. When getting bids for the work be sure to contact at least 3 contractors. Then check them against your state’s registrar of contractors website to be sure they are licensed and bonded. Good luck!


Hard to answer for you specifically, but we keep an open line of credit in the form of an equity loan for emergencies. We’ve had the most recent equity line for almost 5 years and have never tapped into it so therefore it’s on paper only until we do use it, no monthly payments until we do. It can help improve your credit score if you responsibly make your payments.

I look for as fixed a rate as possible, which is tough to find in an equity loan these days. And understand if you default, the bank can foreclose on your home for a few missed or late payments.

Also, I recommend people read carefully all the terms of the equity loan. I dealt with fine line contracts in my career so read everything from A to Z in my personal adventures too. We found clauses that said if we defaulted on our equity loan, the bank could also seize any other tangible items we had loans on with that same bank. We had a car and a truck loan at that time. I questioned it with the bank loan office and manager who read the same clause but assured me that could not be true. I asked them for a definitive explanation of the clause, which took a week to receive back because the manager sent my queries to their legal department. The call from the legal dept. was exactly what I interpreted that clause to mean. We took out the equity line anyway because we were confident we had all bases covered.

I think equity loans contain more potential danger for consumers than primary mortgages.

I’d take one out in a NY minute over the interest rates on credit cards, but with awareness of the traps.


Thank you - that clarified some points for me.