Of special concern, millions of homeowners have taken out new loans against their dwellings, raising the risk of foreclosure. Mortgages accounted for 80 percent of the $3.5 trillion in debt assumed by consumers over the past five years.

With interest rates that are typically lower than many credit cards, a home equity loan can be the best way to finance a large purchase or cover an unexpected expense. But home equity loans and credit lines are more expensive than first mortgages, and may be more expensive than other financing options such as an auto loan or subsidized student loan.

And there’s more: You’ll also be required to carry private mortgage insurance (which typically tacks an additional 0.8% to your balance) on the amount of the loan that exceeds 80% of your home’s value, but doesn’t yet exceed 100%. (In other words, you’ll owe PMI on 20% of the secured part of your loan.)

The loan is secured over your home, and therefore, the interest rate will generally be lower than for other types of credit that may be available. This makes them a good option for paying off higher interest debts, so long as you don’t rack them up again, or taking on a larger project such as a house extension.

It is often a good idea to use a home equity loan to renovate your house, as the house value increases as a result, and often by more than what you pay to renovate it. You can also receive a tax credit on the interest paid on the loan.

Before you sign, read the loan closing papers carefully. If the loan isn’t what you expected or wanted, don’t sign the loan. Either negotiate changes or walk away. You also generally have the right to cancel the deal for any reason – and without penalty – within three days after signing the loan papers. The lender must return any money you’ve paid to date.