Banks Just Love Those Home Equity Loans

There are a number of great benefits to taking out a home equity loan; not least the opportunity to open a line of credit, pay existing debts or put your children through college, the list is endless. There are also positive tax benefits, if you’re unsure about this you should speak to your accountant before taking out a home equity loan. So in a world of greedy banks making billions of dollars a year, why do they like it when we take out a home equity loan?

The simply reason is that home equity loans are the “loan of the day”, they are very popular and as a result they make banks a lot of money. Another reason, and one that is perhaps more important, is that home equity loans are secured loans, secured on a tangible asset, your home. Therefore, there is less risk to the bank for lending you the money. This is great news for banks and its shareholders as they are making record profits with less risk. It’s a simple formula to the banks; they’ll lend you the money in return for an interest rate payment. If you fail to pay, they will take your property from under you and sell it, whatever happens they can not lose.

So as long as borrowers pay their home equity loan bills on time and they got what they wanted out of it, surely everyone is a winner, right? On paper, this certainly appears to be the case; however there is a growing concern that many people view the equity in their home as their spending money and are starting to fritter away, what in many cases is their only form of assets or savings. Experts argue that there needs to be more control on home equity loans and the reason for the loans.