The Police, the reunited pop-rock superstars, are known for a song called "De do, do, do, de da, da, da." Homeowners, whether they can sing or not, might consider a slightly different lyric if they're thinking of a debt consolidation or home improvement loan: "The do, do, dos, the don't, don't, don'ts" of home equity lending.

Mind the "Dos"

1. Clean up the house before an appraisal. The size of your home equity loan or HELOC depends on how much the appraiser considers your home to be worth. Simply by cleaning up your house, doing some cosmetic enhancements, and even painting a few rooms, you can help boost your home's value.

2. Consider the credit union. When you shop for a home equity loan, take a look at credit unions. They generally waive closing costs for members, and have extremely competitive rates.

3. Consolidate your debts. The home equity loan is a great way to pay off those credit card bills and reduce the interest payment on your debt. Your interest payments may also be tax-deductible.

Those pesky "Don'ts"

1. Don't take out a bigger loan than you really need. Borrow only the amount of money you truly need. Tapping a little extra cash "just in case" will only cost you unnecessary interest dollars in the long run.

2. Don't say yes right away. Even if the first financial institution you visit (online or in person) gives you a great offer, make sure you shop around. Get a good idea of what's on the market in order to find the right deal.

3. Don't automatically take title insurance. When it comes to home equity loans, title insurance protects the lenders, not you. If it's not required, avoid it.

The Police made millions off their mega-hit. You may not save millions by applying the dos and don'ts of home equity loans, but chances are good that you'll find a better loan. That financial bit of good news will definitely have you singing a happy tune-because there'll be no monetary sting.

Published on March 29, 2007