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Originally Posted by mathjak107
helocs can be a real problem for emergency source of funds. im still trying to figure out how most people can afford to pay a loan back at the same time they are in a cash crunch. i think there are very few situations for most where counting on the heloc as the same has having had your own real cash will be a better idea... the only people who should do this are those that have the money and dont really need the loan but do so out of convience more than necessity. if you have lots of assets and can liquidate them in a heartbeat to pay the loan back then i can see it
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The problem with your own funds as "emergency cash" is: where do you put it? No matter how you look at it, this money would be lying fallow somewhere and, after all, you may never need it. I believe this has to do with something called "opportunity" cost.
In any event, "emergencies" take many forms not all of which shut off income (cash flow) forever -- including that worst of all emergency, a HD TV on sale. Most HELOCS allow you to determine your own repayment schedule (after, of course, some very minimal amount). This allows one time to recover from any emergency without it turning it into a Disaster. As "LiveItUp" just said, without leverage we would all be digging ditches... until we died.
Having said all that, it is good to keep in mind that you are placing your home at risk with a HELOC and act accordingly. "Never forget the Dragon when you live near one."
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