The Home Equity Loan Trap

In Uncategorized on August 13, 2010 at 4:02 pm

The default rate on home equity loans is higher than all other types of consumer loans, according to the American Bankers Association. Home equity delinqencies exceed the defaults on auto loans, personal loans and credit cards. Lenders wrote off $30 billion in home equity loans in 2009.

Some people think they don’t have to worry about the banks collecting on these loans. I think that is a big mistake. Its true that the banks seldom foreclose on home equity loans. But the banks can still obtain a judgement and garnish wages and bank accounts. Or they can sell the account to one of many companies that buy bad debts and try to collect them.

A bankruptcy is the best way to protect yourself on these debts. In some cases, people can get rid of the home equity loans by filing a chapter 13.

  1. Improve Your Credit Score

    One thing to improve your credit score is to maintain your credit report. Make sure all the minimum payments of your credit getting paid on time for at least last 12 months. If you are planning to buy new home in the future, please don’t take new loans for it as because it will harm you credit score rating. You can continue your fist loans by adding up your amount of credit and set the monthly payment at affordable cost. This will boost your credit score in the future as long as you can maintain your monthly payment on time.

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