With economic conditions worsening, the best thing to have is an emergency fund that is liquid and can be accessed easily. But the reality is that not everyone is diligent with their finances. For those who have a lot of equity built in their home but are cash-poor, it may make sense to obtain a secured line of credit while they are still employed. The line of credit should only be used in a strict emergency when cash is running low and obtaining one should not be used as a substitute for building a rainy day fund. Banks used to offer secured lines of credit at prime but these days prime plus 1% is typical. There may be fees involved in setting up a line of credit and discharge fees to close it. Note that tapping a secured line of credit in an emergency is not without risk — typically these loans are callable at any time.
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