When I got my driver’s license at the age of 16, I repeatedly asked my parents to borrow the car. As you might imagine, back then, our views on “borrowing” were markedly different. For me, having access to a car was the fulfillment of a dream and freedom. For them, it represented a tremendous responsibility and potential danger.

A lot has changed since then (I have my own car now and kids of my own who plead to drive it), but borrowing hasn’t. Borrowing is and will always be a responsibility that gives us the freedom to reach our goals – whether it’s to buy a home, pay for college, or even manage debt.

That’s especially true of one type of borrowing – home equity borrowing. With the freedom to leverage the equity in one’s home to borrow for ANY purpose, home equity borrowing is an attractive way for people to get the money they need to reach their goals. But like newly licensed drivers, home equity borrowers won’t always have someone in the passenger seat telling them how to use it. It’s entirely up to them to proceed cautiously and avoid dangers, including the biggest one – losing their homes.

A few years ago, during the housing economic crisis, many people learned this lesson the hard way. They took out home equity loans to buy things they didn’t need, and lived beyond their means. Some lost their homes to foreclosure, while others still remain trapped living in homes that they can’t sell because they now owe more than their homes are worth #underwater mortgages. In these cases, the very benefit that made home equity attractive – the freedom to use it for any purpose – became their biggest downfall.

As a leader at a financial institution that’s heavily involved in home equity borrowing, I can tell you that home equity is still a solid way to borrow. It offers lower rates than those available with other types of credit as well as potential tax savings (consult your tax advisor) that can make it a very smart way to accomplish your goals and dreams for life. For example, home equity financing is a great vehicle for making home improvements to increase the value of your home, arguably your greatest asset. It also presents a “smart” opportunity for parents to provide a child with a higher education and brighter future. Other responsible uses of home equity borrowing include using it to consolidate debt or start a business.

There’s no question that if you’re fortunate enough to have equity in your home (a luxury that many people don’t have today), you have access to a powerful vehicle that can help you reach your goals. The most important thing to note, however, is that your ability to effectively use that vehicle to get where you want to be is your responsibility. You are after all, the one in the driver’s seat.

Suggested Links:

http://www.bankrate.com/finance/home-equity/what-home-equity-debt-is-1.aspx

http://banking.about.com/od/loans/a/homeequityloans.htm

http://www.nasdaq.com/personal-finance/read-this-before-borrowing-against-your-home.aspx