Home Equity
Loans Can Be Used as Debt Consolidations
When it comes to getting a debt consolidation loan you have two
choices – secured or unsecured. An unsecured debt consolidation
means that there is no collateral against the loan and that you
are able to walk away from it basically if you do not pay it. If
you declare bankruptcy the loan will go away without them being
able to take anything from you. However, a secured debt
consolidation uses some kind of collateral – like your home, a
car, etc. in return for giving you a better interest rate on the
loan. However, if you default on the debt consolidation you will
lose whatever you put up as collateral.
With that in mind though, many people opt to use a home equity
loan as their debt consolidation. There are a couple of reasons
they do this – firstly because they know that they will get a
lower interest rate than if they are getting just a regular debt
consolidation loan as you are using your home as collateral –
and the home equity loan’s interest can be written off on your
taxes.
This means that the loan is saving you even more money than you
thought possible. You have this great new debt consolidation
loan that is helping you pay less for the money that you have
borrowed and the government is giving you money back for taking
out that loan. It is most likely the cheapest scenario you are
going to find out there, unless you find someone willing to loan
you the money interest free. You would be hard pressed to find a
bank that offered that kind of debt consolidation loan.
With that in mind, the debt consolidation people quite often
encourage those with high amounts of debt to get a home equity
loan as they understand how much better it will be for them in
the end. They will still get their money, so they aren’t losing
anything – but they also have the ability to offer you a better
deal on it thus saving you from putting out more than you need
to.
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