Four Signs Your Home Equity Loan is in Trouble

The delinquency rate among home equity loans has experienced a recently frightening increase. Overly aggressive lenders may have caused the problem by relaxing their loan guidelines. But borrowers are also to blame, particularly when they fail to see the signs of financial trouble.

If you're driving and you see a brightly-colored road sign, you know that you better be on guard. Signs indicating a lane merge, a school zone, or a deer crossing are all warnings that you need to lay off the accelerator and pay closer attention.

Home equity loans have their own set of warning signs. They may not be as obvious as those eye-catchers on the road, but they're every bit as urgent. They crop up whenever you're exhibiting bad financial habits. Fail to heed them, and you could find yourself in serious trouble.

1. The bare minimum

A typical home equity line of credit stipulates that you have to pay only a minimum of 1 percent of your loan amount every month. Unfortunately, this generally covers just the monthly interest. If you find that you can pay nothing more, then you've pushed your budget to the maximum. Ideally, you'd like to make larger payments each month to whittle away at some of the principal.

2. Chronically tardy

Do you find that you're waiting until the absolute last minute to pay your bills, or even worse, not making payments at all? That's a rock solid indication that you're about to suffer a financial rockslide, and you need to take immediate action to get your financial house in order. Get help-whether it's from friends, family, or a credit counseling agency. Failing to make payments on time-especially car payments or mortgages-can have disastrous effects on your credit score.

3. Borrowing from Peter to pay Paul

With the availability of credit cards and home equity lines of credit, it's incredibly tempting to use these tools to pay off a debt. The problem is, you're not paying off anything-merely juggling you're debts. If you find yourself borrowing from one lender to pay another, watch out: You're on a slippery slope, and a delinquent payment is probably going to cast you into a free fall.

4. Paying off loans more slowly

If you can remember the days when you used to pay off debts quickly, you may have stumbled onto another warning sign. When you can't pay off credit card balances or home equity mortgages as fast as you used to, it may be time to take a careful look at your spending habits. Create a budget: Is there some area in which you're overspending? Take a look at what you need to get your repayment rate back on track.

These four prominent warning signs are surefire indicators that your home equity loan could be in serious trouble. Put on the brakes and call your lender. Many of them have great resources and programs to help you steer clear of financial hazards.