Debt Consolidation or Home Equity?
There are many people out there that are looking to consolidate
their debts and want to get a debt consolidation loan – but they
are not sure how to go about it. There are a couple of schools
of thought on the matter – with some being vehemently for the
debt consolidation and others backing the home equity option.
Before you choose either, you need to think about the kind of
debt you have, your ability to pay, and how much debt you have.
If you have enough equity in your home to cover your credit
cards, etc. leaving you with no outstanding debt – then a home
equity would work for you. You will meet with the bank or a loan
officer, and they will determine how much equity you have in
your home. This is the amount of money that you can borrow. It
is usually a lower interest rate than a straight debt
consolidation loan as it is a secured loan, and the interest is
tax deductible. However, if you get into trouble later and are
not able to pay back that home equity – they will take your home
instead. This means your credit cards have just been responsible
for the loss of your home.
A debt consolidation can be secured or unsecured. Many people
try to get an unsecured loan as they know that if they run into
trouble later they won’t have to worry about losing their home,
or car, or whatever they put up as collateral. It is a higher
interest rate, although will be lower than what you are probably
paying on your credit cards. The debt consolidation will simply
put all of your debt into one larger loan with one smaller
monthly payment.
It is up to you which one you go for – although many experts
recommend the debt consolidation only because the economy is the
way that it is and no one can count on having a job tomorrow.
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