With many Americans shouldering more debt and wages stagnating, home equity is being used as a lifeline to make ends meet. In fact, a recent survey reveals that 1 in 3 homeowners earning less than $30,000 a year and 22 percent of millennials agreed that tapping into home equity is okay to cover their everyday bills.
Because many Americans have little savings, home equity often is also used to cover gaps when costly home maintenance is needed or when funds run short for other unexpected expenses. Some even look to home equity to consolidate high interest credit cards or pay off student loans in an effort to keep up.
- When home owners choose to tap into their home equity to pay off credit cards, for example, they are transferring their unsecured debt to a secured loan which can result in the loss of their home if they fail to make the required payments.
- As more Americans tap into home equity to get by, the cost of home equity borrowing has gone up. Home equity lines of credit, or HELOC, interest rates are at their highest since the 2008 and many come with fees.
- There is always a possibility that the value of a home can decrease while a borrower still owes money on the first or second mortgage. This can put a borrower underwater, owing more than what the property is worth.
If you are in a difficult financial situation, and considering a home equity line of credit, it is worthwhile to discuss chapter 7 or chapter 13 bankruptcy options with an experienced Illinois bankruptcy attorney before taking out a HELOC to cover unsecured debt. Contact the Peoria Illinois Bankruptcy Law Offices of Charles E. Covey for assistance today at 309-67-8125.