Consumer advocates warn that the products offered often exploit those borrowers, leading them into further debt. They charge more than what the lender needs to protect itself from increased risk. Some companies in this industry create the very problems we hope to solve. As competition in the lucrative subprime industry has increased, lenders have created new, higher risk products to capture market share. This allows homeowners to borrow more than their home is worth.
Companies market it as a substitute for credit-card debt.
A credit card secured by a borrower's home equity. First Alliance Mortgage Company heavily markets this product to high-risk borrowers. The card costs consumer much more than most other credit cards and subjects borrower's home to the risk of foreclosure. Credit cards lend themselves to more casual purchases than a home equity line of credit, usually used for debt consolidation or home improvements. A good credit card can be a useful financial tool.