Debt Consolidation with a Home Equity Loan
What is a Debt Consolidation Home Equity Loan?
A debt consolidation home equity loan can allow you to continue to be a homeowner, while keeping creditors at bay and avoiding bankruptcy. It works by paying off your current debt with one large loan secured by your home, leaving you with one payment that should be significantly less than the sum of your current individual payments.
A debt consolidation home equity loan can lead to an advantageous situation for the lender as well because the loan gives the lender a lien against your home.
Even if you are currently experiencing trouble making your monthly debt payments, a lender can still be interested in making a consolidation home equity loan to you because your house can be used as collateral.
Applying for a Debt Consolidation Home Equity Loan
In order to apply for a debt consolidation home equity loan, you will be required to fill out a loan application. For a home equity loan to be approved, you must have a minimum level of equity in your home. If you have only been in your home for a short period, you may not have enough equity to qualify for a home equity loan.
You may need to have your home reappraised if it's been awhile since your home was valued. Market forces may prevent you from having enough equity to qualify for a debt consolidation home equity loan.
Choosing a Lending Institute for Your Consolidation Home Equity Loan
There's a misconception that you need to get your debt consolidation loan through the lender who holds your mortgage. While that is certainly an option, you should take time to shop around for the best interest rates and terms, and compare the many options that will be presented to you.
The interest on your debt consolidation home equity loan can be tax deductible. In most situations if you add your first mortgage and your debt consolidation into one loan and it does not exceed the appraised value of your home, the interest paid should be fully tax deductible. Talk to a tax advisor to see if you qualify for this benefit.
With debt consolidation you can avoid bankruptcy, keep your home, and salvage your credit rating too.