Prepare for Unforeseen Disasters with a HELOC

The last few years have yielded many heart-wrenching scenes from areas ravaged by hurricanes. For those fortunate enough to have been spared nature's wrath, pictures of people displaced by these storms have reminded us that there are times when you may need access to cash in a hurry.

Enter the home equity line of credit (HELOC), which can be an ideal form of emergency funds for people who simply don't have the luxury of saving for a rainy day fund. Here's what makes the HELOC a more affordable alternative:

A readily available line of credit. A HELOC is different than a fixed-rate home equity loan. Instead of giving you money in a lump sum, a HELOC offers a line of credit, available whenever you need it. You pay no interest on a balance until you actually tap the funds.

You can secure it before you really need it. The beauty of the HELOC is that you can open one up right now. It's a wise idea to get one set up before you're in a crisis. As the Yogis say, "Avoid the danger that has not yet arisen." That way, when the going gets tough, you'll have the cash readily at hand.

Great flexibility and competitive rates. HELOC rates are variable and tied to the prime lending rate. More often than not, this rate remains relatively low, although it has experienced an uptick as of late. The interest paid is also tax-deductible, which is another big benefit. And if you find the rate is climbing to an uncomfortable range, you can always refinance the funds into a first mortgage or a fixed-rate home equity loan.

Nothing can prevent a disaster, but there are steps you can take to ensure that you're ready if one occurs. By securing a flexible HELOC while all is well, you can make life easier if things should happen to take a turn for the worse.