• Home equity loans are as risky as a house of cards.high cost of housing image by Pix by Marti from Fotolia.com
  
  Borrowing from your home's equity can be a simple way to free up cash for major expenses like remodeling or medical bills. It can also be risky. Know the risks before you get into a contract that can cause you more financial trouble down the road. Talk over the terms with your lender and always understand the fine print.
  
  

Equity Losses

• Establish a revolving line of credit and temptation can strike later. Home equity lines of credit were intended for important reasons, as the loss of equity has to be repaid with interest. By making the house the equivalent of an ATM that spits out money, home owners can quickly use up equity for casual purchases, leaving them financially vulnerable later.
  
  

Market Crashes

• Lose protection against market crashes. Falling home prices can make a home worth less than what a buyer spent to originally acquire it. Building equity can help offset those losses. Pay for the drop in price out of your own pocket if you have already used up your equity when it comes time to sell.
  
  

Monthly Payments

• Fluctuating payments make it difficult to predict your monthly bill. Pay different monthly amounts on an equity line of credit due to a variable rate interest loan that changes over time. Large increases can make it difficult to make your payments.
  
  

Final Payments

• Repay the entire loan at the end of the term. A home equity line of credit can result in a large balloon payment due if only interest and partial principal were paid during the life of the loan. Fail to pay and you can lose the home.
  
  

Foreclosure

• Borrow from your home and you risk losing it all. Failure to make payments or to fully repay the loan can result in foreclosure. Think carefully before opting for a home equity line of credit to fund some personal goal that is not worth the risk.