Can you explain how I can tap into my home’s equity?

Looking to buy a car, consolidate your credit card debt, or furnish your house?

Then you may be tempted to tap into your home’s equity. There are two ways to do this: take out a home equity loan or establish a line of credit.

A loan is best if you need a fixed sum all in one lump payment. A line of credit may be best if you have multiple needs and want to draw out the money over a period of time.

Home equity loans may be cheap and tax-deductible but they put you at risk of losing your home. The trick is to let these type of loans build dreams, not debt.

Be sure to shop and compare if you do decide to tap into your home’s equity. Another option to financing a car or furnishing your home is to save each month for these large purchases. And, as always, avoid too much credit card debt to begin with.

Source: Should you cash in your equity? (1999, March/April). Family Money, 86-90.

Written by:
Sandra McKinnon, Consumer & Family Economics Specialist, University of Missouri-Columbia, University Outreach and Extension

Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri-Columbia, University Outreach & Extension

Last update: Tuesday, July 05, 2005