Home Loan Debt Consolidation vs Home Equity Loans

Home loan debt consolidation can be the answer to financial woes. Especially in times of economic downturn, with significant job losses, it's not surprising people are finding themselves having trouble making their loan payments.

If you find yourself having difficulty meeting your debt obligations, it's important to know that there are options other than bankruptcy. Home loan debt consolidation and home equity loans are two options that should be explored. Let's have a look at the differences between home loan debt consolidation and home equity loans.

One Payment

A home loan debt consolidation allows you to consolidate all your debt into one single payment. This helps to reduce the amount of cash necessary every month to meet your debt obligations, leaving you to contend with making just one payment, often at an interest rate that's much better than what's seen on your individual debts. However, you will be paying for a longer period of time meaning you will likely pay more interest overall.

With home loan debt consolidation your credit score also gets a boost, because each individual account shows paid in full, and you get an opportunity for a healthy financial future.

Use the Equity in Your Home

A home equity loan is similar to a home loan debt consolidation, but it involves borrowing against the equity in your home. The more equity you have in your home the more borrowing power you will have. Home equity loans tend to have much lower interest rates than home loan debt consolidation offers.

Plus and Minus

Home loan debt consolidation and home equity loans both consolidate debt and offer you a single payment but with a home equity loan should you default your home is the security, and that means you could lose your home. Debt consolidation that doesn't involve your home is a much safer bet, but it's also more difficult to obtain.

You are already having difficulty meeting your financial obligations, there is always the possibility that you could find yourself unable to meet your home equity loan obligations and that means you would be at risk of losing your home.

However, many times a home equity loan increases your payment so marginally that you hardly notice the difference, especially since you've lost all the other payments you had each month. This could be the solution to getting your finances back on track.

If you're having trouble meeting your current payment obligations consider home loan debt consolidation to help you get back on your feet.