Make sure your solution is not a future problem

On behalf of Furr & Cohen, P.A. posted in chapter 7 on Wednesday, June 15, 2016.

There may be very few things that cause as much residual fallout as being in debt. Financial burdens have a way of manifesting in emotional, physical and relationship issues. If you are a homeowner and are considering taking out a home equity line of credit, you should thoroughly research the costs and repayment terms associated with the loan and what they mean now and what they might mean later.

There are different phases of a loan. There is a phase during the loan and a period at the end of the loan.

If you have a variable interest rate on your loan, you could see your payment increase or decrease even if you do not borrow any additional money. This is due to the interest rates potential to increase and decrease. You should be familiar with how much of a variation that can be in a worst-case scenario so you know what you could actually expect. You will also want to find out whether you are paying just interest or if you are paying down some of the principal balance as well. If you are paying down the balance on the loan, will there be a balloon payment at the end of the loan or will you have already paid that balance off? Also, familiarize yourself with late payment penalties and when default begins. This is good to know in the event of unforeseen accidents or job-loss that may result over the life of the loan.

Once you are at the end of the loan period, you will want to know what happens and maybe even prepare in advance of taking a loan for any balance that may remain at the end of the loan. Your lender may agree to finance the remaining amount only for a designated amount of time. This is particularly helpful if you run into hardship during the life of the loan and won’t be able to come up with a hefty final payment.

Another great way to safeguard when looking into a home equity line of credit  is to contact an attorney well-versed in bankruptcy and financial matters. Your attorney should be very able to point out any potential hazards and help you in making the best financial decision.