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Home Equity Loans - How To Use Your Homes Equity 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!
To view our most recommended home equity lenders visit this
page: Recommended
Home Equity Lenders
Carrie Reeder is the owner of ABC Loan Guide, an
informational website about various types of loans. The site has
informative articles and the latest finance news.
 MORE RESOURCES updated Thu. February / 09 / 2012
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The first time you purchase a home is an exciting
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Home Equity Loan - With
a Reverse Mortgage, Your Home Pays You!
The home equity loan has become quite popular in the last
five years, and Americans have tapped into the equity of
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home improvement and debt consolidation are the most common
reasons for borrowing against a home's equity.
First Time Buyers Fail
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Almost two thirds of first time buyers accept the first
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Perhaps you're a homeowner in need of some quick cash.Maybe
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FHA Mortgage: When Your
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There has been so much fraud discovered in the FHA program
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from someone who would logically be concerned about housing
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Refinance Your Mortgage
to Rebuild Credit
Refinancing your mortgage is one way to rebuild your
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Be Prepared when Seeking
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When you're looking for a mortgage, whether it's a first
time loan or you're taking advantage of an opportunity to
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