Home-equity loan payments to take bite out of consumer spending

HELOCAnother bill is coming due from America’s decade-old borrowing binge as payments jump on a number of home-equity credit lines taken out during the boom. Economists worry the new burden could reignite loan-payment troubles and dent consumer spending at an iffy moment in the economic recovery.

At issue are home-equity lines of credit, known as Helocs, which allow homeowners to tap their equity to fund home improvement, college tuitions and other expenses. Those loans typically let borrowers make interest-only payments for the first 10 years before requiring principal payments as well.

That reckoning will come this year for an estimated 817,000 borrowers owing more than $23 billion in Helocs, more than double last year’s level, according to estimates by Equifax, the credit-reporting firm, and the Office of the Comptroller of the Currency. An average of about $50 billion in loans will reset in each of the next three years.

Information from The Wall Street Journal

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