Comments on: Reasons Why Your HELOC Can Be Your Emergency Fund

By: -> An Emergency Fund Will Help Reduce Your Risk Of Financial Catastrophe | Bible Money Matters

Thu, 23 Apr 2009 14:51:40 +0000

[...] Reasons Why Your HELOC Can Be Your Emergency Fund (I don’t necessarily agree, but interesting read) Related Articles From Bible Money Matters [...]

By: Emergency Funds and Tax-Free Savings Account

Emergency Funds and Tax-Free Savings Account — Wed, 09 Apr 2008 09:01:14 +0000

[...] my last post about emergency funds, I covered a number of good reasons why I prefer to use a line of credit for my emergency fund [...]

By: Thicken My Wallet » Blog Archive » Credit Proofing in Bad Times: Options and Tools

Tue, 08 Apr 2008 08:58:38 +0000

[...] (entrepreneurs). Have a source of money you can tap into. I know there is some debate between an emergency fund vs. a line of credit, the point is have one or the other or both before a crisis occurs. If you are an employee with a [...]

By: Your Emergency Fund Is So Big… | Prime Time Money

Your Emergency Fund Is So Big… | Prime Time Money — Fri, 04 Apr 2008 18:47:10 +0000

[...] Wait…what? That’s right, some believe you shouldn’t have much money in cash at all. Check out Lazy Man and Money who explains “Why I don’t have an Emergency Fund.” Lazy Man uses his HELOC as his emergency fund. I think if you look at the math of Lazy Man’s suggestion it’s a sound idea. However, for me, my heart tells me to have some “cash in the bank” for my rainy days. Another post on this method is Quest for Four Pillar’s Reasons Why Your HELOC Can Be Your Emergency Fund. [...]

By: Four Pillars

Four Pillars — Tue, 25 Mar 2008 16:48:29 +0000

Thanks for the comment James.

You’re correct that LOCs are not guaranteed but I think the odds of a LOC disappearing on you are related to your financial situation. If you are maxed out then you have a higher risk of losing your LOCs.
Another factor is the HELOC – in Canada these are legally registered so while I would expect a bank to be able to cancel it, it wouldn’t be very easy.

My point is that most people who have fairly good finances don’t have to worry about losing their LOCs or HELOCs.

Mike

By: James Carsey

James Carsey — Tue, 25 Mar 2008 07:26:13 +0000

There is an important problem with the HELOC-for-emergency not mentioned here. You are assuming the line of credit will always be available. In a credit crunch, what is happening now, is many sorts of credit are withdrawn and become unavailable. This could happen to your line of credit, it could disappear if the bank re-evaluates your risk as a borrower.

In fact in times of financial market turmoil, which is the sort of situation that my cause an emergency for you (loss of job, for instance) those same conditions could result in your line of credit being withdrawn.

So what would you do then, if you have zero cash and no available credit?

Terms of credit CAN and DO change. Nothing beats cash in the bank, that is your money. Do not assume your line of credit will always be there.

By: Richer by the Day » Why Cash is Still Relevant to Your Financial Plan

Richer by the Day » Why Cash is Still Relevant to Your Financial Plan — Mon, 24 Mar 2008 15:47:58 +0000

[...] subject, two were my inspiration for this post. In the first one, Mike from four pillars discussed why a HELOC can be used instead of an emergency fund. In the second one, the money gardener explains why he doesn’t need an emergency [...]

By: nobleea

nobleea — Thu, 06 Mar 2008 03:41:11 +0000

But that’s just it, you wouldn’t be going further in to debt since instead of putting your emergency funds in a savings/money market account, you had put it against your mortgage.

Saver: 200K mortgage, 20K savings account
Anti-debt-er: 180K mortgage, 0K savings account.

They both put aside the same amount for emergencies, the difference is in where you put the savings.

The overall debt level is the same. It’s just semantics.

By: susan

susan — Thu, 06 Mar 2008 02:38:07 +0000

Let’s see. I have a financial emergency and I get further in debt? Doesn’t make much sense to me!

I have 6 months cash combined in my savings account and a money market account. I can sleep easily.

By: Step 3: Fully Funded Emergency Fund | beingfrugal.net

Step 3: Fully Funded Emergency Fund | beingfrugal.net — Mon, 03 Mar 2008 13:37:51 +0000

[...] some people suggest that using a HELOC for an emergency fund is a good idea, I don’t like it. When you’re in the midst of an emergency, I don’t like [...]