HELOC Debit Cards: Too Convenient?
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This is a guest post from Miranda Marquit, who writes on personal finances and debt consolidation. Her website is mirandamarquit.com.
There is some debate about the reasons behind the current economic slowdown (I’m not saying recession — yet). One of the reasons given is the easiness with which credit has been obtained over the last 15 years or so. Indeed, it has become increasingly easy to get access to borrowed money. And, even with the credit market crisis showing us that some measure of inconvenience is needed, access to home equity is becoming more convenient.
We can use plastic for just about anything now, and that includes the home equity line of credit (HELOC). One of the relatively new introductions into the financial system is the HELOC debit card. Instead of taking money from your home equity line at the bank, all you have to do is swipe a debit card, and it accesses your balance. But this might be taking convenience a little too far. Consider:
- With home values falling, some HELOCs don’t have the same balances they used to. A debit card, which doesn’t show you the balance at the time you take the money, could lead you to overextend your account more easily, tipping you into the realm of negative equity.
- Convenient access to the HELOC only encourages more debt.
- Many people don’t think about their purchases when they can just swipe a card.
And don’t forget that even though these HELOC cards are attached to a “debit” account, you are still dealing with borrowed money. It’s really closer to using a credit card than it is to using a debit account. Only this account is attached to your house. If you get in over your head and can’t pay, it could mean foreclosure.
Before getting a debit card to access your HELOC, carefully consider the situation. Is now even a good time for a home equity line of credit? Especially one that’s so easy to access?
Debt management can help you get back on track with your debts before they spiral out of control. Seek debt advice to give you a clear end date to your debt problems with the help of an IVA or other debt solution.
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lenders were all too keen to accept loan and credit card applications just as most people were not prudent enough when making loan applications.
Since the “credit crunch” attitudes have changes, lenders are being more selective about who they give loans to. There is some evidence this will lead to a change in the way the economy operates as opposed to a possible recession. Attitudes to money and credit will change as will HOW we spend money.
I didn’t even know these things existed. It’s just scary to think about how many more people are going to get themselves in trouble with their homes now due to this new bad idea.
Bad idea for the homeowner, not for the greedy banking industry who wants to take your house from you and is constantly coming up with new ways to do it these days.
NOT Good! I didn’t know about these things either. My paid for house is the one thing in my portfolio entirely sacred to me! Nobody gets near it. What will they think of next!