Home Equity Lines of Credit in Toronto – Dangerous Debts
Over the last several years, we have seen increasing numbers of people in the Greater Toronto Area who have substantial home equity lines of credit – seeking insolvency help.
Unfortunately, what some people do not realize, is that a home equity line of credit loan is just like a mortgage, if you fail to pay it, the financial institution that issued the loan, may have the right to take possession of your home.
Dangers of Home Equity Lines of Credit
There are a number of dangers that some home equity line of credit borrowers experience:
- Easy ATM access to loan funds and flexible repayment options – makes it easier to overspend.
- Gambling with the equity of their home on investments. ‘Putting home equity to work’ is a concept that can have a devastating impact on families whose home equity is lost to bad investments.
- Starting with home upgrading projects that quickly become an easy way to finance an unrealistic life style.
- After paying off high credit card debts with a home equity line of credit – running the cards back up and taking out a second or third home equity line of credit.
Whatever the reason for taking out a home equity line of credit loan, the reality is, if housing prices drop (a very real possibility), or interest rates go up (a certainty), or you lose your job – the chances of losing your home may have increased.
An important fact to always keep in mind when you are dealing with your bank or financial institution – they are not your friends. They are selling products and services. They do not offer you a home equity line of credit as a gesture of good will. They offer it because they will make money on it – and they have the security of knowing that if you do not pay them back, they can seize and sell your home to get their money.
Step Away from the Edge
If you have a home equity line of credit, pay it off as quickly as you can.
It is always wise to practice sound money management and avoid unnecessary debt.
