How to consolidate debt using a home equity loan

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How to consolidate debt using a home equity loan
A home equity loan is a loan based on the difference between what your current home value is and what you currently owe on your house. There are also mortgage companies that will loan a little over the equity you have in your home. They can usually do this safely because most homes appreciate in value over time.

If you have credit card debt at a high interest rate, or even at an average rate, you may want to consider getting a home equity loan to consolidate your credit card debt for a few reasons.

1. Having the credit card, but not being maxed out, or having the credit card paid off will boost your credit score. The amounts you owe make up about 30% of your credit score, that could be a huge difference if those accounts are paid off.

2. You can have a lower payment because of the lower interest rate you can get with a home equity loan. If having a lower payment helps you be able to make the payment on time, that will boost your score tremendously.

3. Lowering your payment will lower your debt to income ratio, which will help you when you go to get any other kind of financing in the future.

4. A home equity loan is usually set for about 5 years before it is paid off. Sometimes, making the minimum payments on your credits will never pay them off.

As you can see, there are some great benefits to consolidating your debt with a home equity loan. Its definitely something worth considering if it will lower your rate and lower your payment.

Carrie Reeder is the owner of http://www.abcloanguide.com, an informational website about various types of loans. To view our list of recommended home equity lenders online, visit this page: http://www.abcloanguide.com/homeequityloan.shtml

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Stay debt free this Xmas and year long

Xmas can be a financially stressful time for many people and that takes the fun out of the festive season. The funny thing about Xmas is it occurs every year and at the same time every year! So with a little bit of planning you can take the stress out and stay debt free.

Here are my Top 10 tips to get you on you way:

Tip1. PLAN Write a list of the friends and family members you wish to give a present to. Next decide on your total budget for Xmas presents. Next to each name add a maximum dollar value for the gift and ensure the total does not exceed you budget! If you have ideas for gifts start listing them now - it will help your shopping trips be more focused.

Tip 2. STICK TO THE PLAN When you do your gift shopping stick to the plan - avoid impulse buying. That stereo might be a great "bargain" but if it is over your budget you need to keep walking.

I am sure you have great taste in gifts - do you ever buy a gift for someone and buy it for yourself as well? You will get plenty of gifts for Xmas - no need to buy for yourself as well.

Tip 3. START NOW Rather than waiting until 2 weeks before Xmas and spending all your money in a short period of time start buying now. It is much easier to afford one gift each payday than 10 all at once. Find a good hiding place in your cupboard!

Tip 4. USE LAY-BY Credit Cards are easy and convenient but if you struggle with debt over Xmas leave them at home! Interest rates on unpaid monthly balances are an unnecessary cost. If you have started shopping early you can pay a small amount each payday off your lay-by without going into debt. Keep you spending manageable.

Tip 5. HAVE A SAVING PLAN Have a separate bank account for Xmas savings. Many banks have accounts that earn "bonus" interest if you make a deposit and no withdrawals in a month. Many of these accounts have no bank fees. You can arrange for set amounts to be automatically transferred to that account each payday. If you don't see it you can't spend it! If you are comfortable banking online there are also good "virtual" accounts with Credit Unions that pay around 5%pa and allow you to transfer money out of account with no penalty.

Tip 6. THINK OUTSIDE THE SQUARE It really is the thought that counts so think outside the square. People love gifts that have a personal touch to them. - make Xmas chocolates, cookies, jam etc to give to friends - give a gift voucher for 10 hours of babysitting - make a donation to charity in their name - give a voucher for 5 lawn mowing afternoons (to be provided by you)

Tip 7. INVOLVE YOUR FAMILY Discuss your plan to stay debt free with your family and discuss ways that the whole family can be involved. There are no rules - find something that works for your family and keeps Xmas fun. One popular idea is to not buy gifts for all the adults in the family - just the kids. The adults each select a name and buy a gift for that adult on behalf of the whole family. Xmas is about love and sharing not about how many presents you receive. You will probably find other family members feel relieved to be able to reduce their Xmas spending too.

Tip 8. ANOTHER COFFEE? Start becoming aware of what you spend on "little extras" each week - coffee is my favourite place to start. Buying just 1 coffee a day can cost you $10 - $15 per week ... buying lunch each day at work can cost you at least $25 per week. I think you get the point. If you are serious about keeping out of debt this xmas start taking your lunch to work or having instant coffee .... put the money you save into your xmas account. You will love how quickly this adds up!

Tip 9. LEAVE THE PLASTIC AT HOME That's right - leave the Credit Card at home! If it is not in your wallet you cannot charge Xmas shopping to it. It is so easy to accumulate debt without even being aware of it - once you do it snowballs into something much greater than you can handle and becomes a weight to begin the New Year. Use cash or you debit card - you can't spend money you don't have.

Tip 10. BE COMMITTED You have a choice. If you are 100% committed to being debt free for Xmas then you will make it happen. It takes focus, desire and discipline not to take the easy, convenient and expensive way out of Xmas shopping. 'Those who want to succeed will surely find a way, and those who don't will find an excuse' "a thousand paths to tranquility" David Baird

Linda Anderson is a Certified Professional Coach working with Small Business Owners and Professionals in Australia, New Zealand and the USA. Linda helps her clients succeed in business and in life by creating strategies to overcome their obstacles to success. Linda brings this passion for challenge, new experiences and adventure to her coaching. You can visit Linda at her website - www.a2acoaching.com


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How to consolidate debt using a home equity loan
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