Tax Advantages
The annual interest charges on a
home equity loan or credit line may be fully deductible if you itemize your deductions, an important factor that distinguishes these loans from other forms of consumer credit. Because the collateral for the loan or credit line is your
home, interest rates are significantly lower than other consumer loans or credit cards.
Potential Risks
When considering this type of loan, remember that your house is the collateral. Failure to repay can cost you your
home. Also, think carefully about the items you plan to buy with your loan or credit line. Depending on the equity you have in your
homeand its market value, your financial institution may make as much as $100,000 available to you. If tempted to overspend, a home equity loan with a lower, set amount may be better than a flexible line of credit.