Home Equity Loans Are Passé

--By Priya Jestin, Staff Writer

Time was when just about everybody worth his home, took a home equity loan. These loans were the most popular means for homeowners with a mortgage to borrow. The main attraction was the low interest rate and the tax-deductible nature of the interest. While these loans are still good, they may not be the best solution to your problems.

While the housing boom was on, these loans made very good sense. However, now, interest rates on short-term home-equity lines of credit have sharply increased. And this, at a time when the housing market is at its lowest ebb.

This leaves homeowners with a very small cushion to fall back on should they be unable to repay the money they borrowed. If you plan to take a home-equity loan, first determine when you will need the money and how soon you will be able to repay it. This will help you get a better deal.