Home Equity Loan Debt Consolidation

If a person is already neck-deep in debts, it would be wise to merge all his debts that carry high interests and choose to go in for a home equity debt consolidation loan.

Home equity is the difference that is built up out of the appreciation in the value of a house when the principal amount on a mortgage has been paid up minus what is still owed to completely pay off the mortgage.  Home equity is the amount a person would receive if he chose to sell the house at that time.

This loan (the built up equity on a home) can be used to pay off the existing small unsecured loans and high interest on debts like credit card outstanding payments, utility bills like gas, electricity etc., car payments and student loans.

A home equity debt consolidation loan would ensure you pay only one, and a smaller interest on the loan taken against the home equity instead of the several amounts owed to different creditors which would collectively be a far higher amount.

Options for Home Equity Loan Debt Consolidation:

There are two options available.  The home equity line of credit (HELOC) where the lending company advances a loan against a person’s credit limit.  This amount is available to the person by check or credit card and the interest is only charged on the amount taken.   HELOCs are usually availed on long term loans like home improvements or student loans.

The other option is the Home equity loan (HEL). This loan involves using the home equity to get a second mortgage.   A lumpsum is taken from the lender to repay off a number of creditors all at once, and the person owes a smaller interest to the lender.

Some advantages of taking a home equity debt consolidation loan are:

• Interest rate is lower as compared to the collective rate of different loans
• Having a bad credit ranking does not deter qualifying for the loan
• Tax deduction may be available on home equity loans
• Improved credit rating due to timely payments

Getting a home equity debt consolidation loan mortgage:

One need to contact companies offering home equity debt consolidation loans.  Ideally, some research and verification on the company’s credentials before signing with it would help.  A home is a person’s biggest financial investment and it would be a big risk having to lose it because of an unwise choice.

This entry was posted on Monday, April 26th, 2010 at 9:57 am and is filed under Debt Consolidation Loans, Home Equity Loan Debt Consolidation. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.