Home Equity Loans

• Home equity loans allow you to borrow funds against the equity in your home --- the portion of your home you've already paid for. You can then use these funds to pay off other creditors and make monthly payments on the home equity loan. A home equity loan uses your home as collateral for the loan, meaning that if you fail to pay it back, your lender can repossess your home.
  
  

Predatory Lending Schemes

• The Federal Reserve Board says that consumers must watch out for predatory lending schemes when considering taking out home equity loans. Predatory lenders often target low-income or elderly debtors, offering them loans with unreasonable interest rates or for far larger amounts than they need. The Federal Reserve Board suggests steering clear of any lender that tries to pressure you into signing, encourages you to falsify information to get a bigger loan or wants you to take out a loan that far exceeds the amount you need to borrow.
  
  

Home Loans and Rights

• You have the right to consult a housing counselor in your area for issues related to home loans. Counselors can often help you work out a payment plan if you're falling behind on your mortgage payments or home equity loan payments. If you choose to take out a home equity loan, you also have the right to inspect the final loan paperwork a day before signing, and the right to cancel the loan within three business days of taking it out.
  
  

Alternatives to Home Equity Loans

• If you're having financial difficulties, you can often make your monthly debt payments more manageable by contacting your creditor prior to defaulting on a loan. You can also get help from a credit counseling agency. The Department of Justice has a list of federally approved credit counselors on its website. These counselors also fulfill the credit counseling requirement if you choose to file for bankruptcy.
  
  The Federal Reserve Board says that you may be able to get emergency assistance from your local housing authority or social services department. Contact the social services agency for your state for more information about these programs.