Home equity loans can be very helpful in many ways. They allow you the chance to make home improvements, and can even help get you on a vacation. And a home equity loan can help you manage your debt more effectively. This is because you can use the value in your home to get a debt consolidation loan for a much larger amount than you could get without any sort of security.
Debt consolidation loans
A debt consolidation loan is one that you take out in order to pay off smaller debts with a larger loan. This results in a few advantages:
· One payment on your debt each month instead of several
· Lower interest rate with one payment, rather than several rates adding up to eat up most of your payments
· Usually a smaller monthly payment than the total of the minimum payments on several small loans
· A chance to begin re-building your credit score
While it is possible to get a debt consolidation loan without using equity, if you have a great deal of debt, you will be unable to get a loan large enough to pay off all of your smaller loans. Some will have to be left out of the consolidation. This is where a home equity loan can help.
Home equity for debt consolidation
When you have more than $8,000 in debt that you need to consolidate, it can be difficult to get a debt consolidation loan. This is because you have a rather large amount of money that a lender needs to loan you in order to pay off your smaller loans. Without some sort of security, lenders a reluctant to give a loan that you may default on, leaving them with a loss. A home equity loan to pay off debts, however, can solve this problem. You can use some of the equity in your home to consolidate your debts. You can get a loan the size you need when you take advantage of the equity in your home.
A word of caution
Before signing on the dotted line, however, make sure that you will be able to make the payments. Getting too big a home equity loan for debt consolidation can mean that you are unable to make the payments and you could lose your home. Make sure that you just take out what you need to consolidate your debts so that you don’t get in over your head.