When Richard DeMong's son needed capital for his business, he tapped his father's home equity line of credit after banks balked at financing his start-up.

"My son didn't have collateral or equity in a home, so I just made him a loan from my home equity line and charged him the same interest rate the bank was charging me," said Mr. DeMong, a business professor at the University of Virginia and national expert on home equity loans.

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