Your home is a valuable asset. You can tell the home equity folks know this by the numerous ads aggressively promoting home equity loans and home equity lines of credit. They suggest you put your home asset to work. But is it a good idea for you? And, if so, which should you choose?

The advertisements are seductive, but remember "all that glitters is not gold." Both loan options use your home as collateral for a loan. There’s nothing basically wrong with this idea other than the fact that you may be greatly risking your most valuable asset.

A home equity loan is a lump sum advance in the form of a second mortgage on your home. You borrow a specific amount for a certain period of time and pay back the balance with interest in installments.

A home equity line of credit, on the other hand, is a lot like a having another credit card. The lender agrees to lend a specific amount of money over an agreed period of time and the borrower can draw against this line of credit whenever they want.

Both programs use the equity in your home as collateral. Therefore, since the loan is secured, you usually get a lower interest rate than with a credit card. This is the main reason home equity loans are being touted as a great way to consolidate debt. Another benefit is that interest paid on these loans could be deductible on federal and state tax returns.

Sounds good doesn't it? But, in many ways, the disadvantages can outweigh the advantages