Obtaining a home equity loan makes it possible to payoff credit cards,
finance a home improvement project, etc. In fact, one of the benefits
of homeownership is being able to tap into your home’s equity for large
expenses. Many lenders offer great rates on home equity loans and lines
of credit. Yet, homeowners should beware home equity loan scams that
place them at risk of losing their home.Understanding Home Equity BasicsA home equity loan is essentially a personal loan that is secured by
your home’s equity. The amount you are able to acquire will vary. For the
most part, you are able to obtain a loan up to the amount of your
home’s equity. However, lenders will usually review your credit and income
to ensure that you qualify for the requested amount.Home equity loans are beneficial because the funds may be used for a
multitude of purposes. If you are looking to payoff credit card balances,
a home equity loan will help you achieve this goal. Nonetheless,
exercise care when applying for such a loan. Because your home serves as the
collateral, failure to maintain regular payments will result in
foreclosure. Sadly, some lenders are betting on your inability to repay a home
equity loan.Common Home Equity Loan ScamsLenders use an array of fraudulent schemes to steal your equity. For
starters, there are lenders who cleverly convince homeowners to borrow
more than they can afford to pay.Moreover, a lender may encourage homeowners to exaggerate their income
in order to qualify for a larger amount. Instead of having your best
interest in mind, these lenders knowingly position their clients for
defeat. Hence, when you can no longer afford the payments, the lender
forecloses.If applying for a home equity loan, it is important to read the loan
agreement carefully. If possible, have the contract reviewed by an
attorney. Some home equity loans involve a large balloon payment at the end
of the loan term. The typical homeowner cannot afford to pay this
amount. Regardless of whether you maintain timely payments, the home equity
lender may claim your home if you are unable to make the final payment.