home equity

6 reasons (5 good, 1 bad) to spend your home equity

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Maybe: Use equity for emergency fund
Maybe: Use equity for emergency fund | Glowimages/Getty Images

Maybe: Use equity for emergency fund

A HELOC or home equity loan can be a handy alternative to keeping a large sum of money in a low-rate bank account for emergency savings.

However, one downside of this strategy is that a major life catastrophe can trigger a path to home foreclosure.

"If someone has an emergency and taps the money, but then loses their income and then is in default, they've put their home at risk," Tilp says.

What's more, Moore suggests, a HELOC as an emergency fund can also be too big a temptation to borrow.

"When (a HELOC) is very easily accessible and the interest rate looks good, it can maybe be too easy," he says. "By having it, you're more likely to use it, which is the good and the bad."

RATE SEARCH: Do you have a lot of equity in your home and a good reason to tap it? Check out rates at Bankrate today!

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