Is the home equity loan becoming a viable option again for homeowners? The housing boom led to a run on these loans against the value of a house, but recent years saw some homeowners left with little to no equity to borrow against. Now – as home values get stronger – it seems things are shifting once again. If you need money to make some renovations on your home or consolidate debt, a home equity loan can help. Interest rates are often lower than credit cards and unlike credit card interest, home equity loan interest is often tax deductible.

Rising Prices Bring Equity Back

A combination of rising demand along with fewer available homes has lifted prices. The nascent housing recovery has meant that many people are once again seeing value in their homes. Lenders, which shied away from these loans after the housing crisis, are beginning to market them again and new contenders are taking the stage. In April 2013, Discover Financial Services announced that it will offer home equity loans starting in the second half of the year. The company is expecting to make fixed-rate equity loans between $25,000 to $100,000 available to homeowners.

The rise in home equity loans is particularly strong in areas where home prices are rising quickly. Owners once again have more equity in their homes and it has been rising steadily since 2011. Lenders however, are still recovering from being burned. A recent Seattle Times article pointed out that during the third quarter of 2012 alone, according to federal estimates, banks wrote off $4.5 billion in defaulted equity loans.

Hesitancy On Both Sides Remains

Getting a home equity loan these days is a little trickier than it was in the past; lenders remain cautious and if you have missed a payment or two, or your credit is a bit shoddy, you may face difficulties. Lenders are also keeping an eye on market trends in particular areas to make sure that any bumps in price aren’t an anomaly. They are also loaning less on each individual home than they did in previous years.

There is still fear on the other side of the lending equation as well. Some owners are hesitant to put their hard-won equity at risk and worry that if home values fall again they may be caught in a tough spot. But as both lenders and borrowers learn to trust each other again these loans will continue to increase in popularity as long as prices continue to rise