A deed of entrust, including your home equity loan or line of credit (HELOC), is recorded for public record upon closing a loan, which means anyone, including a scam artist, can take a look at that record at your town hall. They can find out how much you borrowed and glean other personal information they can then use to rip you off.
Since a home equity loan or HELOC represents a large chunk of money, it's important to safeguard it from crooks. Here's how:
Be wary of anyone that comes knocking on your door, especially after you've received a home equity loan or HELOC, and says something like, “I was driving by and couldn’t help but notice your driveway needs work." Too often, such people want a cash down payment — now — then vanish. Keep in mind, too, that in-demand contractors simply don't have the time to scout around neighborhoods looking for work. In fact, the opposite is usually true: you have to wait until they can fit you into a packed schedule.
Even if they show up to work, unscrupulous "contractors" will overcharge you, perform unnecessary or substandard work, use inferior or inadequate products, and in many instances, fail to perform any of the work specified and paid for in the contracts.
Follow standard best practices when contracting any kind of work on your home, whether or not you have a home equity loan or HELOC or you're self-funding the project:
Be Cautious of Contractors Who Contact You First
Not every contractor with a sales pitch is out to scam you, but many are, so you need to be on guard. If they seem legit and it's a renovation that's been on your list, check their references thoroughly and contact the Better Business Bureau to see what other customers have to say.
Resist High-Pressure Sales Tactics
A new roof or driveway can be yours at a deep discount if, and only if, you sign the contract right now or pay a cash deposit today. But remember: a conscientious, reputable contractor will never badger or pressure a potential customer this way or deeply discount a quality job backed by years of experience.
Ask for Referrals
Look for referrals from neighbors, friends, your social media network, and family for specific projects for which you've already planned. Were their contractors dependable? Did they perform the work as contracted? If any problems arose, were they dealt with promptly and professionally? Has the quality of work held up over time?
Always ask for a contractor license number and check it with your state's licensing board to ensure it's current. Also ask to see identification and insurance coverage. If they can't show you this information, move on.
And get them in writing. These estimates should include as much detail as possible, especially prices, specific materials/products to be used, and a timeline for the project's completion.
You've worked hard to build equity in your home; be sure to use it wisely.
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