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HELOC as Emergency fund

Recently I posted about the potential for the Roth IRA to serve double duty, as a retirement account, but also as an emergency account if needed. I received a number of emails regarding this strategy, and also questions regarding the use of a HELOC (Home Equity Line of Credit) as a source of emergency funds.
I think that there are risks to this strategy, yet it can work for some. For those with steady, high, income, a HELOC can pay for the new transmission, or unexpected home repair. There’s risk for those who find that easy source of money too tempting, and will look at the $10,000 home theater system as ‘only’ $50 per month, and dig themselves into a hole.
It’s also come to my attention through a blog called Blueprint for Financial Prosperity that some lenders are calling in their HELOCs with little or no notice. So read this as a warning, if you have any lines of credit in place, to check the fine print, and if you are applying for new credit, ask in advance so you are absolutely sure of your rights and the bank’s right to reduce or cancel your line.

JOE

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