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Memphis homeowners returning to rewarding but risky equity loans

In 2008 the housing market bubble collapsed. Homeowners who borrowed against their homes lost equity and owed more money than the homes were worth. As a result, they faced the possibility of foreclosure and repossession.

Recently, Memphis bankers have been seeing renewed interest from homeowners in home equity lines of credit. The Federal Reserve has kept the interest rates low on home equity loans, providing an incentive for homeowners to enter the market, or to refinance their home loans.

With better interest rates, banks are seeing a renewed interest in home equity loans. Some consumers are seeking loans with variable interest rates because of their low rates. Other consumers prefer the stability of a fixed-term interest rate.

These loans are very beneficial to homeowners. They carry low interest rates, which are appealing to many homeowners. But while they are beneficial, they also carry many risks. When a homeowner's circumstances change, he or she may face difficulty repaying the loans and face possible repossession and garnished wages.

Consumers looking to avoid this outcome will often turn to Chapter 13 bankruptcy as a way out of their financial challenges. Using Chapter 13, a homeowner is allowed to come up with a payment plan to repay creditors. This type of bankruptcy allows the consumer to able to keep a house and car without fear of repossession and wages without fear of garnishment.

While people often think of bankruptcy as a negative thing, this is not always the case. Chapter 13 bankruptcy can be a positive solution as it allows struggling consumers to keep their possessions and get their finances back under control.

Source: The Commercial Appeal, "Memphis lenders see renewed interest in home equity loans," Jennifer Johnson, Sept. 23, 2012

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