Friday, August 26, 2005

Put a Lock on your HELOC...Pay Early-Pay Often

Home Equity Lines of Credit provide easy access to cheap money, but they are a credit treadmill designed to entice you with low monthly payments, your HELOC can become a perpetual debt that never gets paid off unless you pay down the principle.

The fact that you can make small monthly payments on a rather large debt makes it easy to justify a new kitchen or hot tub but use your HELOC wisely.

With most HELOC's carrying an interest free period of 10 years, it is easy to tap into it along the way and make no real impact on the principle you have borrowed.

Unless you have been paying down the principle along the way, at the end of your interest free period,you may be facing a large spike in your monthly payments to cover the principle.

Alternatively, you do like many others and roll your HELOC into a new one and continue on this endless cycle of debt.

To avoid this, always be mindful you the principle you have borrowed and pay MORE than the monthly payment.


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