Home Equity Loans - Pros and Cons Some wise heads say that it is awfully unwise to pay one debt with another because the result almost always is a third and bigger debt. Still, if you are struggling to make the ends meet or you need hard cash for some other purpose, then a home equity loan could be a solution, although a temporary one in most cases, to your financial troubles. It is best to weight the pros and cons of drawing a home equity loan, so as to help you make the right decision. In general terms, a home equity loan is a second mortgage on your house that you sign to pay off over a fixed period of time. The equity in the borrower’s home serves as collateral. This loan may serve various purposes such as paying medical bills, doing major repairs at home, or supporting your child in college. Here are some of the good things about these secured loans: first, home equity loans in the United States and Canada are still an affordable financing tool; second, as the interest rate of a home equity loan is almost always fixed, you will know exactly how much you pay each month; also, home equity loans are just perfect if you want to finance some major project that will boost the equity of your home like, say, install solar panels on the roof, put some external wall insulation system to warm up your house or replace the old window joinery with some new and more energy-efficient one; of course, you may also use a home equity loan to buy the boat or the private airplane you have always wanted (regardless of how wise this purchase is); last but not least, a home equity loan can help you out of a big credit card debt. As to the disadvantages of drawing a home equity loan, let's just have a look in its abbreviation – HEL. Does it ring a bell already? Well, add just another L at the end and that’s exactly where you will get, if one day you find yourself unable to pay off your HEL. If you have already missed a few installments, chances are that a well-dressed gentleman will soon show up at your doorstep with a grim, give-me-the-keys expression on his face and a big sheet of paper in his hand, on which it is written in large letters “FORECLOSURE”. In this line of thought, a home equity loan is not for you if you are seeking a career change or if your company is experiencing financial difficulties, which may unleash pay-cuts and lay-offs. The home equity option is definitely not for you, if you income is low compared to your monthly expenses. Depending on the way you handle it, a home equity loan could be your heaven or your hell. If you are unsure if this option is for you, talk to a bank representative or get in touch with a loan advisor for expert assistance.