“Borrow From Yourself” LOL

I saw an ad by a bank that headlined “Borrow From Yourself.” It was an ad for a home equity line of credit.

How deceptive!

If you truly borrow from yourself, you would take money from your own source — your own savings account or investment account.

You would pay back yourself.

You would choose to charge yourself interest or not. If so, the interest would go to yourself. LOL

When you take out a home equity line of credit (HELOC), you are securing the loan on your house. You are using some of your precious home equity to take a loan FROM THE BANK.

Who do you make the payments to? The bank.

Who collects the interest charged? The bank.

Dear Bank: Stop running deceptive ads that make homeowners think your loan is borrowing from themselves.

By the way, HELOCs are up 12% this year. Why? Because of advertising. It is not because more homeowners need more HELOCs. People are falling prey to ads like this.

Banks and credit unions are desperate for loans now that interest rates are up, and refinances are no longer happening. They can only get a limited amount of purchase loans, which are also becoming more scarce.

So in their desperation for business, they are advertising HELOCs like crazy. Don’t fall for the ads!

You don’t need to gobble up your precious home equity to get money for something you really cannot afford right now.

WARNING! What’s more, if you have an open HELOC — even if the balance is $0 — you cannot qualify for the lowest interest rate when you want to refinance. You must actually close the HELOC entirely first, if you want the lowest interest rate.

WARNING #2! Watch for prepayment penalties on the HELOC. In California, prepayment penalties are the norm, and some of them are horrible! Such as the California credit union that charged $2,000 prepay penalty to close a HELOC with a $0 balance.

In WA state, it is illegal to put a prepayment penalty on a HELOC. Find out the law for your state before signing for a HELOC.

Always ask, “Show me where it says there is no prepayment penalty.” Don’t take their word for it, because there have been plenty of liars who have deceived borrowers who didn’t read all the verbiage before signing.

Thanks for reading and being diligent for what you believe and what you sign!