Equity can be our best friend and our worst enemy.
It is very comforting to confirm the calculations showing one’s net worth, title or equity in collective assets.
However, this financial freedom comes with the temptation to borrow more against it, especially for things like home renovations. The fact is that one has to be careful to ensure that those renovations and ‘improvements’ will in fact increase the value of the property, making borrowing against the equity a good thing to do.
If the renovations and improvements do not increase the value of the property, it becomes another case of ‘throwing good money after bad’ – and this doesn’t just go for real estate, but also vehicles, boats, and other high value personal property.
Another case in which one must be careful borrowing against asset equity is for emergencies or to pay off revolving credit and/or everyday bills. The likelihood is that once the bill is paid, the balance will only increase to the same level or worse unless the problems that got one there are addressed.
In the end, if it’s decided to still go ahead and borrow against assets, one of the best ways to do it is through a secured personal loan or title loan, where it’s possible to take advantage of lower interest rates and little or no fees.
Watch out for those store-front ‘money market’ or ‘payday loan’ stores. They can be deadly traps, getting one into a cycle of depending on these short term, high interest, high cost loans to make it through from payday to payday.
For those with poor to bad credit, using the title loan companies may be a good way to rebuild one’s credit after a rough patch as long as the borrower is careful to use it wisely, only to improve their financial circumstances.