In the midst of this economic crisis, a growing number of HELOC borrowers are going to credit counseling agencies to get help with their debt. Unfortunately, some are surprised to find that their HELOC debit card is not the same as a credit card and their outstanding balance cannot be renegotiated or reduced in the same way. (Yikes).

The Miami Herald recently gave advice for a borrower who was surprised the counseling agency couldn’t work with his debt:

“Unfortunately, that ”credit card” balance was not borrowings from a credit card company. It was most likely a ”debit” card attached to an equity line. Your relative was spending down his home equity, and that’s a travesty. It should have never been so easy to access the accumulated value in one’s home. But we know that now.

Most credit counseling services are good at helping the clients assess their situation and prepare a realistic budget. They then work with the credit card companies to consolidate the client’s credit card debts and have a payment plan that will actually pay off the cards in a period of time. This is not the case with home mortgages, and that, my dear, is what this home equity ”credit card” is.”

A HELOC debit card can be handy. But, remember, every purchase reduces the equity in your home. Don’t pay back the balance and you may be forced to sell or face foreclosure.

photo credit: Andres Rueda

See Also:

HELOC Foreclosure

5 Financially Sound Ways to Use Your HELOC

Tags | Heloc, HELOC foreclosure, home equity line of credit