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Think Twice About Using Your Home as Collateral
If you need money to pay bills or make home improvements, and think refinancing, a second mortgage, or a home equity loan is the answer - consider your options carefully. If you can't make the required payments, you could lose your home as well as the equity you've built up. Don't let anyone talk you into using your home to borrow money you don't really need.
Not all loans or lenders are created equal. Some unscrupulous lenders target elderly and low-income homeowners and those with credit problems. These lenders may offer loans based on the equity in your home, not on your ability to repay the loan. High interest rates and credit costs can make borrowing money using your home very expensive.
Consult with your attorney, financial advisor, or someone else you trust before making any loan decisions. Non-profit credit and housing counseling services can also be useful in helping you manage your credit and make decisions about loans.
Early Warning Signs
Avoid any lender who:
tells you, or requires you, to falsify information on the loan application. For example, the lender tells you to say that your loan is primarily for business purposes when it's not.
pressures you into applying for a loan or applying for more money than you need.
pressures you into accepting monthly payments you can't make.
fails to provide required loan disclosures or tells you not to read them.
misrepresents the kind of credit you're getting. For example, calling a one-time loan a line of credit.
promises one set of terms when you apply, and gives you another set of terms to sign - with no legitimate explanation for the change.
tells you to sign blank forms - the lender says they'll fill them in later.
says you can't have copies of documents that you've signed.
You can take some steps to protect your home and your equity. Here's how.
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erase, fix, or repair bad credit.
