E Loan

Reloading Home Equity Loans

Home equity loans are appealing to people who have fallen into a downward spiral of spending and borrowing. The cycle of getting a loan to pay off debt and free up credit that is then use to make additional purchases is called “reloading.”

Reloading leads to accelerated borrowing that can result in homeowners getting upside down on their home loans, e.g. owing more than the home is worth. The loan is no longer fully secured by collateral and if the borrower’s income goes down or the home’s market value plummets, the owner could face foreclosure or bankruptcy.

People who consolidate their credit card bills or car loans into a home equity loan are transferring unsecured debt to secured debt and putting their home in jeopardy.