by Harry Barber
By using the equity in your home, you can gain more leverage financially and potentially consolidate most, if not all of your debts. By shifting your debts from several high interest credit cards to one low interest loan, you can save a lot of money and lower the amount of money you are spending to pay off your debt each month. When you consolidate with a home equity loan, you are effectively going down from several payments a month to just one payment a month. So as you can see, consolidating does sound really good when the benefits are highlighted, but before taking out a home equity loan, make sure you are informed about the following:
You could end up paying more in interest over the life of the loan.
While the interest rate on a home equity loan is much lower than the interest rate on a credit card, if you take a long time, such as 30 years, to pay off your home equity loan that little bit of interest can add up to quite a lot over all of those years. Instead of ?rolling with the punches?, use your extra savings each month to pay off your home equity loan, and it could be satisfied in a Guinness-worthy period of time.
You property could be seized.
This may not be too common, but these things can happen. This is because credit card companies, of course, don?t have any power to take away your house, but mortgage lenders do. Your home can definitely be repossessed if you miss a few payments due to unexpected financial crises, such as those caused by illness, unemployment or accident.
You might get a hankering to use your credit cards again.
Having a zero balance on your credit cards often leads to the temptation of using them again for purchases. While such an arrangement absolves you of your debt to the credit card company, you aren?t exactly home free with regard to your purchases. So try to rein it in and avoid the desire to charge up that plastic like you used to, because you will be saddled once again with high-interest debts on your credit cards, as if paying for your home equity consolidation loan wasn?t enough.
Tags: banking, Credit, debt consolidation, debt relief, Finance, Finance and Banking, finance and credit, finance and loans, financial planning, Loans, personal finance, Wealth Building
Source: http://loansandcredit4all.info/finance/fact-guide-to-using-home-equity-as-a-debt-consolidation-tool
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