You’re Pre-Approved

Received an e-mail today informing me that I’m pre-approved.  This e-mail encouraged me to accept a home equity line of credit today.

The e-mail, from USAA, states in pertinent part

You’re pre-approved for a Home Equity Line of Credit (HELOC) with USAA Bank.  Your HELOC lets you use the equity in your home to take care of things you need:

* Make home improvements. Making repairs and improvements to your home may help maintain its value.

* Pay college tuition. Use your home equity to invest in your children’s education.

Benefits of a HELOC

There are many reasons why people consider a HELOC.   For instance, it offers lower rates than credit cards.  It also allows you to control when you use the funds, and the interest can be tax deductible.*  And when you need to access funds, simply use checks or online transfers.

Call USAA today and our service representatives will fully explain what a HELOC is, and the terms and payments, so you can determine if one is right for you.  Your offer expires August 13, 2010.

I’ll let the offer expire.

Hmm, I remember, just a couple of years ago, banks were limiting  or rescinding individuals’ HELOCs.

In the February 23, 2008 issue of The Washington Post Dina ElBoghdady wrote an article entitled “Homeowners Losing Equity Lines:  As House Values Falls, Some Banks Withdraw Credit.”

The first paragraph of the article states,

In one brief phone call, Nancy Corazzi’s lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago.

Who was that lender?  The lender’s identity is revealed in the ninth paragraph.

USAA Federal Savings Bank froze or reduced credit lines for 15,000 of its customers, including Corazzi, and will not reconsider its decision until “real estate values improve substantially,” the company said in a statement.

And USAA has told me I’ve been pre-approved for a HELOC.

I’m a USAA member.  In early 2008, just before the above Washington Post article was written, I called USAA about obtaining a HELOC.  I had received periodic pre-approval HELOC announcements from USAA.  When I called about obtaining a HELOC for my rental property, USAA told me it had stopped offering HELOC for rental properties in 2007.  Boy, was I bummed.

Luckily, my local credit union was willing to give me a HELOC for my rental property.  (Thankfully, I had e-mailed the loan officer who I had dealt with on two previous occasion inquiring about a HELOC for my rental property.   Before receiving his response,  I contacted my credit union and was told such loans are  not offered for rental properties.   When the loan officer responded to my inquiry and I told him I understand that HELOC’s are not offered for rental properties, he responded, who told you that?  He told me HELOCs are given for rental properties; the property owner however is charged a higher interest rate.)

Because my credit union offered me that HELOC, I was able to have my condo’s bathroom completely renovated and some cosmetic upgrades made to the kitchen.  I borrowed $25,000 at 8.99%.  I paid off that loan in one year, one month and one day.

When I receive pre-approved offers by e-mail or snail mail, I just chuckle.  I remember how I could not obtain a HELOC when I needed one from USAA.  , I’m in the mode of paying off debt, not acquiring more debt. Plus, a double dip recession may be around the corner and I need to live within my means.

Pre-approved HELOCs and credit cards just say NO THANK YOU.


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