Home Equity Loans
A debt consolidation loan is a loan you can borrow and use to repay other loans. Home equity loans and debt consolidation loans are often synonymous. A home equity loan is the same thing as a debt consolidation, except that it explicitly means you are borrowing against your home, and not some other asset.
Turning Unsecured Debt into Secured Debt
Home equity loans convert your unsecured debt to secured debt by using your home as collateral. These loans are a legitimate way to consolidate your credit card debt - but only if you're willing to risk losing your home if you can't make the payments.
What is it Worth?
Home equity loans can be worth up to the value of your home, but some loans will only let you borrow a percentage of the value depending on the lender, state laws, and the status of your credit. A home equity loan reduces the future equity available in your property.
What are the Costs?
Most home equity loans will involve fees, though most will differ depending on your lender. You could face appraisal fees, title fees, closing fee, a penalty for early payoff and other charges.
Should You Consider a Home Equity Loan?
To qualify for a home equity loan (also sometimes referred to as a second mortgage) you typically need to have equity in your home, a good credit score and the ability to repay the loan. This should generally be a debt relief option to pursue when you can afford to repay the loan and understand that you could lose your home if you default on the loan.
Some debtors like this option because there is only one monthly payment and often at a lower interest rate. However, the ability to make one monthly payment can also be found in other debt relief options that don't convert unsecured debt into secured debt, including debt settlement programs, chapter 13 bankruptcy, some debt management plans and consumer credit counseling programs.
For more information about debt settlement, contact Debt Shield for a free, no obligation consultation. Call 1-888-397-7546 or complete an online form.
