In many large cities, home values are dropping rapidly. A recent Wall Street Journal article reports that homeowners are responding to tougher times by relying on their credit cards and home equity lines of credit (HELOCs):

“While tighter lending standards have cut off all but the most credit-worthy borrowers from auto loans and home loans, many people are turning to credit cards and tapping more of their home-equity lines of credit to dig themselves in deeper. And lenders, once eager to lend to those with even spotty credit records, are trying to rein in borrowing by cutting consumers’ available credit lines.

Average balances on credit cards and home-equity lines of credit are growing rapidly, rising 9.5% and 8.1%, respectively, in the first quarter from a year earlier, according to new data from Equifax Inc. and Moody’s Economy.com.”

Not surprisingly, those withdrawing the most from their HELOCs tend to live in areas where home values are most rapidly declining.

If you plan to rely on your HELOC for necessities this year, you may want to withdraw money now before your lender has a chance to freeze or limit your line. Strategic Withdrawals to Avoid the HELOC Freeze can show you how to take out money for the future without paying much in interest.

Tags | Heloc, home equity line of credit