How To Use Your Home Equity Loan to Consolidate Debt
If you've got a wallet full of credit cards, and monthly payments on them that total more than 25% of your monthly income, chances are that you've considered debt consolidation loans or some other means of taming your credit card debt. But did you know that a home equity loan is another way to get the money that you need to pay off your creditors, reduce your monthly payments, and get out from under the weight of all those monthly payments?
A home equity loan is essentially a second mortgage taken out with your house as the collateral. Because the loan is secured, you'll have a much more favorable interest rate. And those lower rates will translate to a lower monthly payment overall. You'll wind up with one creditor, one monthly payment, and more money in your pocket each month.
There are some definite advantages to taking out a home equity loan or line of credit to get out of debt, and one very big danger. By trading your unsecured loans (your credit card debts) for a secured loan, you are putting your house on the line. Why? Because if you don't make the payments, the lender has the right to take your home from you and sell it in order to collect on the loan. But if you've got at least 20% equity in your house, and are certain that you'll be able to meet the monthly payments, then taking out a home equity loan to pay off your debts may be a good choice for you.
Once you've decided that a home equity loan is an acceptable risk for you, you'll have a few other decisions to make.
All home equity loans are not created equal! There are two types of loans, and you'll need to decide which one is right for you.
A flat home equity loan is a standard loan for a fixed amount. The amount will be limited by the amount of equity you've invested in your house. If you use up the entire amount of your loan and need more money, you'll have to apply for another loan.
A home equity line-of-credit is usually the better choice. With this type of loan, you will be able to write 'checks' against the amount of the line-of-credit, which may be as much as 125% of the value of your home. For example, if you obtain a $10,000 line of credit secured by the equity in your home, and use $2,000 of it to pay off an outstanding credit card balance, you've essentially only borrowed $2,000, and that's the amount on which you'll pay interest.
When looking for your loan, it's essential that you shop around--not only for the best interest rates and terms, but for a company that you can trust. Ask for referrals from your bank, friends and coworkers. In addition, you can check them out on the Internet.
You will need to determine the value of your home so will know how much money you will able to borrow against it. It's a good idea to get a current appraisal of your home, and always smart to have it appraised by several different companies.
Finally, in order for you to get the most out of your home equity loan, you will need to choose the lender that offers you the best interest rates. Remember that fees and other charges can vary widely from company to company, so make sure you do some comparisons.
Once you've been approved, you can use all or part of your home equity loan to pay off your current unsecured debt. Keep in mind that you'll only STAY out of debt if you avoid the temptation to run those credit card balances up again!
Related articles for debt consolidation home loan
1. Debt Consolidation Mortgage Loans - Decoding the complexity
2. Should you consider credit and debt consolidation?
3. How to get a Debt Consolidation Loan
4. Credit Card Debt Consolidation Loan
5. Debt Consolidation Company: Friend or Foe?
6. Considering Debt consolidation mortgages?
7. Should You Consolidate Debts?
8. Debt Consolidators
9. The Case for nonprofit Debt Consolidation
10. Choosing a Smart Debt Consolidation Firm
Premium articles: debt consolidation home loan
11. Debt Consolidation Loan for Bad Credit - A Primer
12. The best strategy to erase credit card debt
13. Debt Consolidation Versus Debt Negotiation
14. Can You Negotiate with Your Credit Card Company?
15. Free Information About Consolidating Debt
Related articles: debt consolidation home loan
16. Debt consolidation before Bankruptcy is a good option
17. Understanding debt consolidation program
18. Debt Consolidation And Your Credit Rating
19. Cheapest debt consolidation loans till payday - Using Cash Advance Loans in an Emergency
20. Why chose a debit debt consolidation loan?
Recommended Reading : debt consolidation home loan
21. How To Use Your Home Equity Loan to Consolidate Debt
22. Bad credit debt consolidation loans
23. Debt consolidation - More Options for Reducing Credit Card Costs
24. Debt consolidation using home's equity
25. Debt consolidation help and how to get it
Related books for debt consolidation home loan: N/A
Related resources for debt consolidation home loan: N/A
Related free information for debt consolidation home loan: N/A
Related tips for debt consolidation home loan: N/A
Related forums for debt consolidation home loan: N/A
Wyoming, Wisconsin, West Virginia, Washington DC, Washington and Virginia, Vermont, Utah, Texas, Tennessee, South Dakota, South Carolina, Rhode Island, Pennsylvania, Oregon, Oklahoma, Ohio, North Dakota, North Carolina, New York, New Mexico, New Jersey, New Hampshire, Nevada, Nebraska, Montana, Missouri, Mississippi, Minnesota, Michigan, Massachusetts, Maryland, Maine, Louisiana, Kentucky, Kansas, Iowa, Indiana, Illinois, Idaho, Hawaii, Georgia, Florida, Delaware, Connecticut, Colorado, California, Arkansas, Arizona, Alaska, Alabama.