Life can throw you plenty of curveballs, and some of them can be financially destructive.  If tough times hit, you'll need to consider a solid option for making ends meet.  Try a home equity loan.

Everyone loves to be the object of a surprise party.  You're not responsible for buying the food or party favors-all you're supposed to do is have a good time. 

Life holds plenty of other surprises, but unfortunately, many of them have nothing to do with partying.  Suppose you suddenly lost your job, or a family member suffered a non-insured medical emergency-would you be able to make ends meet? 

Most people don't have the cash on hand that would allow them to ride out a financial crisis.  In that case, homeowners can turn to a home equity loan or home equity line of credit (HELOC) for relief.

Ready at a moment's notice

HELOCs are probably the best loan to use for an emergency fund.  Unlike a credit card, these are lines of credit based on the collateral in your house.  You pay interest only on the balance you carry.

Most financial institutions allow you to maintain a HELOC with a zero dollar balance. You can then use the loan only in the event of an emergency by writing a HELOC check whenever you need it.   The alternative--home equity loans-are fixed-rate, fixed-term loans that must be taken in a lump sum, and don't have the HELOC's cash-on-demand flexibility.

Low to maintain, easy to use

Financial institutions today have become extremely competitive when it comes to soliciting loans.  They often won't charge you closing costs on a HELOC, and you'll pay little or no usage fees.  (However, with the current problems in the mortgage market, you'll need a good credit history to get the best terms.)  Your interest rate will be based on the Prime Rate, which, over the last few years, has been in the 5 to 8 percent range.  When you combine that rate with the tax-deductibility of a home equity loan, the cost of this loan is relatively cheap.

You can make interest-only payments on a loan, which equals 1 percent of the balance.  Be sure to pay back more in principal when you regain your financial footing.

Using a HELOC as an emergency fund works well for most people; but it does have its limitations.  First, it's not advisable if you have a HELOC that's already maxed out.  As the recent decline in home values has illustrated, you can very quickly tap all your equity and find yourself unable to qualify for a new loan if you have to refinance.

You can't control everything that happens in your life, but you can take some steps to prepare for the unexpected.  Taking out a HELOC now before the unexpected occurs later will save you enormous headaches down the road.  It can help take the sting out of some of life's nastiest surprises.