Auto Club Offers Tips for Choosing a Home Equity Loan.

LOS ANGELES--(BUSINESS WIRE)--April 16, 1999--

Increasing numbers of consumers are taking advantage of today's low-interest rates and using home equity loans and lines of credit to pay for spring remodeling, tuition, debt consolidation and virtually any other major expenses, according to the Automobile Club of Southern California.

The current low-interest rate climate has helped to boost home-equity borrowing with the volume of home equity loans at large commercial banks jumping 62 percent from $42 billion in 1990 to $68 billion in 1998, according to the Federal Reserve Board.

"One attraction of a home equity loan is the possibility that you could deduct the interest paid on the loan from income taxes," said Barbara Wilson, Auto Club financial services product manager. "That makes home equity loans a preferable alternative to many other types of debt."

The Auto Club's financial services provider, AAA Financial Services, developed a series of questions and answers for consumers who are considering a home equity loan or line of credit.

1) Should I choose a home equity loan or a home equity line of

credit?

In the current low-interest climate, a home equity installment loan might be a smarter choice. A consumer can borrow the full amount at one time and get a fixed rate. As a result, the borrower can take advantage of today's low rates and know how much to budget for monthly payments.

A home equity line of credit allows one to borrow from a revolving line of credit with variable interest rates. The money is accessed by writing a check and only the portion of credit used is paid back. However, if market rates fluctuate, monthly payments may do the same.

2) Do the loans and lines of credit place restrictions on how I

use the money borrowed?

The loan and line of credit can be used for anything including home improvements, debt consolidation, tuition, purchasing a car or medical expenses.

3) How can I find the best interest rate?

Shop around to determine the variety of rates financial services companies are offering. Also, try to find a company that doesn't charge any application fee. Be sure to ask whether they charge a penalty for early payoff. If no penalty is charged, borrowers may be able to add some extra payments and retire the loan more quickly.

4) Should I seek a 5-10- or 15 year term?

The term of the loan depends on future financial strategy. For example, if you are planning to retire in 10 years, and don't plan to use the loan as a possible tax deduction at that time, you may only want a 10-year loan. Remember, the longer the loan, the lower your monthly payments.

5) What are the tax advantages of home equity borrowing?

Home equity loans and lines of credit offer good tax advantages because the interest may be tax deductible. To be certain how the deductibility of interest will affect your taxes, be sure to check with your tax advisor prior to applying for the loan or line of credit.

6) How long will it take to apply and get an answer?

Increasing numbers of lending institutions are allowing customers to apply for home equity loans and lines of credit either over the phone or over the Internet. The application process can take as little as 10 minutes. Many also have sophisticated technology that can deliver conditional approvals in a few hours via phone or over the Internet. Final approval takes 5-10 days while the house you offer for collateral is being evaluated. Once your application is approved, a few institutions will send the documents and checks through the mail, so the entire process can be completed without leaving home.

For more information, call AAA Financial Services at 800/680-AAA4 or visit www.aaa-calif.com/finance. AAA Financial Services offers a broad range of financial services to AAA members through PNC Bank, FSB, and its affiliates.

The Automobile Club of Southern California, the largest affiliate of AAA, has been serving members since 1900. Today, Auto Club members benefit by the organization's emergency road service, financial products, travel agency and trip planning services, highway and transportation safety programs, insurance products and services, automotive pricing, buying and financing programs and legislative advocacy. Information about these products and services is available on the Auto Club's Web site at www.aaa-calif.com.