If it sounds too good to be true, it probably is.

Today, Americans are bombarded with offers to help them get out of debt the easy way.

“Borrow up to 125% of your home’s worth.”
“Pay off your high-interest credit cards and take that Mexican vacation you’ve always dreamed of.”
“Stop those annoying credit collection calls once and for all.”

The advertisers will promise anything to get your business.

For many American homeowners, a home equity loan is the way to go. The interest rate is usually lower, the interest is tax deductible and the loan is amortized over five to 15 years, meaning the monthly loan payment is much lower than you are probably paying now for your high-interest debt.
(See below for more information.)

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The catch is that lenders offering home equity loans greater than 100% of the value of your home charge interest rates that are much higher than a standard consumer loan. What’s more, the loan is not tax deductible (as most home equity loans are) because it exceeds 100% of the value of your home.

Here are the facts:

Interest on any part of a loan that exceeds 100% of the value of your home cannot be deducted from your taxes.

Lenders offering home equity loans greater than 100% of the value of your home charge interest rates that are seven or eight percentage points higher than a traditional mortgage or loan (twice what you would pay for a regular mortgage or home equity loan).

Unbelievable interest rates are just that – not to be believed. Most will required a large “balloon” payment several years later.

Advertisers target homeowners with poor credit because they know those customers are more likely to accept high interest rates.

Many people who take a high-interest home equity loan to pay off debt do not learn from their mistakes and simply re-accumulate the debt. Before long, it is the house that goes.

Although houses are worth more today, Americans have less equity in their homes than at any time in history. This is directly related to the number of people who take out home equity loans to avoid bankruptcy.

Do some serious calculations and show restraint before borrowing beyond the equity in your home. Miss payments and it could be much more than your credit rating at stake, it will be your home.