Advantages and Disadvantages of a Home Equity Line of Credit?

Let's talk about the Advantages first:

• easy access to available credit
• often lower interest rates than other types of credit (especially unsecured loans and credit cards)
• you only pay interest on the amount you borrow
• you can pay back the money you borrow at any time without a prepayment penalty
• you can borrow as much as you want up to your available credit limit
• it’s flexible and can be set up to fit your borrowing needs, and,
• you can consolidate your debts, often at a lower interest rate

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There are just a couple of disadvantages to be aware of:

• it requires discipline to pay it off because you’re usually only required to pay monthly interest
• large amounts of available credit can make it easier to spend higher amounts and carry debt for a long time
• to switch your mortgage to another lender you may have to pay off your full home equity line of credit and any credit products you have with it
• your lender can take possession of your home if you miss payments even after working with your lender on a repayment plan
• variable interest rates can change which could increase your monthly interest payments (your lender will provide advance notice of any change)
• your lender can reduce your credit limit at any time (your lender will provide advance notice of any change)
• your lender has the right to demand that you pay the full amount at any time
• your credit score will decrease if you don’t make the minimum payments as required by your lender

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