Related Financial Services - The following Debt Consolidation Loan Directory listings of companies are offered to assist you with gaining control of your personal finances and the management of your money. Also, feel free to review the rest of the sub-directories on DebtConsolidationLoan.com to shop for other finance products, such as credit cards and mortgage refinancing.

• Debt Management Counseling - Too many credit bills for you to handle with your budget? Compare different programs and find the one that is the right match for your individual situation.
• Debt Consolidation Programs - Learn more on how consolidating your credit card debts can work for you and potential pitfalls that you need to avoid. Also, review a list services that offer to help people lower their bills into fewer payments or even one payment.
• Personal Debt Consolidation Loans - Looking for a personal loan to consolidate your credit cards? These loans are usually unsecured, meaning you are not required to provide collateral. Approval is often based upon factors as your income, credit and job history.

A Shopper's Guide to Bank Products and Services

Home Equity Products: How to Borrow Safely

SEE ALSO: Questions You Should You Should Ask Before Getting a Home Equity Loan

As home values rise in many markets, Americans are increasingly tapping the equity in their houses to borrow money using either a home equity loan or a line of credit. The equity refers to the difference between what you owe on a house and its current market value. For instance, if you owe $100,000 on your mortgage but your home is worth $150,000, your equity is $50,000.

Why are home equity products so attractive? They offer homeowners great flexibility to finance major expenses, including home improvements and college tuition. They usually have a lower interest rate than credit cards, and the interest often is tax deductible (check with your tax advisor). But these loans also come with risks. The most important thing to remember is that your home is collateral for the loan. "That means if you run into repayment difficulties, you could lose your home," cautioned Richard Brown, the FDIC's Chief Economist.

So, before you put your home at risk, you should learn more about how these loans work and what can go wrong if they are not used carefully.

The "traditional" home equity loan (HEL) is a one-time loan for a lump sum, and typically at a fixed interest rate. The loan is repaid in equal monthly payments over a set period of time.

A home equity line of credit (HELOC) is very different because it works like a credit card. You receive a line of credit from which you can draw money. As you repay the principal, your available credit goes up again, just like a credit card. Typically, the interest rate on a line of credit is variable, meaning that it is tied to an index and will change with movements in interest rates.

With both types of home equity products not only could you lose your home if you can't repay the debt, but you also are at risk if there is a drop in the value of your home. Although the housing market has done extremely well in recent years, there is always a chance that real estate values will go down.

"Home equity borrowers need to be aware of the trend of home prices in their area," said Barbara Ryan, an Associate Director in the FDIC's research division. "If prices go down, you could owe more on your home than it is currently worth, which means you cannot sell the house without taking a loss."

HELOCs often come with extra-low interest rates for an introductory period, such as six months, but these are variable rates that could go up during the life of the loan. When deciding whether a line of credit is right for you, ask yourself if you can afford the increased monthly payments after the introductory period ends or when interest rates rise. You'll also have to decide if you are comfortable with a fluctuating monthly mortgage payment or whether a fixed interest rate and stable payments are better for you.

Also remember that you are drawing out the money you have invested in your home so you should think carefully about what you do with that money. "It's generally best to invest in another asset of long-term value, such as a home renovation or college tuition, instead of paying for a car or a vacation," added Brown. "The flexibility these loans give you can be dangerous because if you're not disciplined about how you use the funds, you could end up paying a lot of money over a long period of time for something you no longer own or that didn't add any value to your existing assets."

Fortunately, you have specific rights if you're using your home as security for a home equity loan or line of credit. Federal law gives you three business days after signing the loan papers to cancel the deal—for any reason—without penalty. You must cancel in writing. The lender also must return any fees or, finance charges you had paid. This right doesn't apply if you are refinancing or consolidating existing loans without borrowing additional money.

For more information, see the brochure Putting Your Home on the Loan Line is a Risky Business, which is available on the FDIC Web site at www.fdic.gov/consumers/consumer/predatorylending.

FDIC Consumer News is published by the Federal Deposit Insurance Corporation

FDIC Consumer News is produced quarterly by the FDIC Office of Public Affairs in cooperation with other Divisions and Offices. It is intended to present information in a nontechnical way and is not intended to be a legal interpretation of FDIC or other government regulations and policies. Mention of a product, service or company does not constitute an endorsement.

Find current and past issues of FDIC Consumer News at http://www.fdic.gov/consumernews. Refer to this same index to locate the issues that are specially formatted for being reprinted in any quantity.

To receive an e-mail notice about each new issue of FDIC Consumer News posted on the FDIC Web site, with links to stories, follow instructions posted at www.fdic.gov/about/subscriptions/index.html.

Last updated on 5/17/2005

Make the correct decisions when shopping for banking, debt consolidation and related financial services. Educate yourself!

The Debt Consolidation Loan Directory has a growing library of free informative / educational financial resources for consumers shopping for many types of services related to the management of your money, such as consolidating credit card debts, fraud alerts and car insurance. There is no better way to make decisions regarding the management of your personal finances than to read and understand how they work. Please feel free to visit our consumer resource library for more information.

• Cell Phone Banking - New cell phones are constantly evolving and becoming more sophisticated. This includes adding the capability of handling online banking through your phone. This FDIC article discusses some of the possibilities and precautions you should take when using your phone for banking purposes.
• How to Protect Yourself with FDIC Insurance - Read up on what qualifications are necessary and how to determine if your deposits are covered by FDIC insurance.
• Direct Deposit Safer than Checks? - The US Treasury Department reports that a majority of surveyed consumers mistakenly believe that paper checks are safer than direct deposit.
• Consider the Fees! - Learn what to look for and examine the details of each banking account offer for possible fees, such as: inactivity, minimum balance and ATM withdrawal fees.

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