(NC) An estimated three million Canadians have one, and they have emerged as the single largest contributor to the growth of household debt in Canada.
Yet many consumers do not appear to fully understand how they work.
No, we’re not talking about credit cards or car loans. We’re talking about home equity lines of credit or HELOCs.
According to a 2019 survey by the Financial Consumer Agency of Canada, many people appear to lack awareness of the terms and conditions of this widely sold financial product, exposing them to the risk of over-borrowing, carrying debt for extended periods and uninformed decision-making.
HELOCs are a secured form of revolving credit. The lender uses your home as a guarantee that you'll pay back the money you borrow. And, as you pay your HELOC down, you can borrow it again, up to a maximum credit limit.
Most major financial institutions offer them with a mortgage as a combined product, which is sometimes called a readvanceable mortgage. Many use them for...