Due to the troubled economy, many homeowners are looking for sources of emergency cash. If you need funds to get you through the next few months because of unemployment or other circumstances, consider the source carefully.

Credit Cards: Using a credit card cash advance is an easy and quick way to withdraw a large sum of money. But, be sure to read your terms carefully. Many credit card issuers have been raising interest rates during the past few months. Others are cutting back on limits. Overall, credit cards have substantially higher interest rates than HELOC loans. Also, if you are just a little late on one payment, your rate could jump permanently. If you become delinquent on a credit card, the late fees can become outrageously high – sometimes even exceeding the original debt. Sometimes credit card issuers will work with delinquent borrowers. However, some people end up needing to declare bankruptcy to get out from under their snowballing debt.

HELOC Loans: Taking out a home equity line of credit instead of a credit card cash advance can be a smart idea. HELOCs generally have much lower interest rates and borrowers are often able to withdraw a larger amount. However, this option is more risky if you end up having trouble paying the money back. A HELOC is a secured loan that uses the homeowner’s property as collateral.  Don’t pay back your HELOC and you may loose your home.  Worse: in some states you may be liable for the remaining debt even after your home is sold as a foreclosure.

As you can see, there’s no right answer here. If you need some emergency cash fast, consider your circumstance and your expected financial stability over the next few months.

See Also:

HELOC Foreclosures

How a HELOC Works

Tags | credit cards, equity line of credit, Heloc, heloc loans, home, recession