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More What About Debt Consolidation Home Equity Loan

by EddieLamb

A debt consolidation home equity loan is a combination of two type of loans, the debt consolidation and the home equity. When used together they can be a powerful tool to help you free up some monthly cash. If you want to roll your auto loans, credit cards, and non secured debt together and get a lower payment, then you might be in the market for one of these loans.

The first half of this hybrid combo loan is the consolidation loan. This is a type of loan that works to reduce your monthly payment for a certain amount of debt to a lower figure than you are currently paying. For example if you had a total of 9 loans including credit cards and a car loan. The total debt was 15000 and the monthly payment was 500. 00. You could consolidate this amount for 5 years and the payment would be 275. 00. This happens because the term is longer.

The equity loan on the other hand is a loan secured by the equity your home has built up. With enough equity in your home, you can be approved for one of these loans quite easily. This is because the collateral will be your home. Equity works like this, if the home has a value of 200,000. 00 and you owe 100,000. 00, the equity is 100,000. 00.

However most equity loans are only up to 70% of value. That makes the value of your home as far as the bank is concerned for the loan, $165000. 00. So you would be able to get a loan of $20,000. 00. This loan would be for a term of 5 to 20 years and could considerably reduce your monthly outlay. The same$14,500. 00 borrowed above, borrowed on a ten year debt consolidation home equity loan, and would have a payment of $152. 00.

With debt consolidation you will pay less but usually for a longer period of time. If you are in desperate need of lower payments in order to survive, this can be a good deal and save your credit.

One of the pitfalls of the debt consolidation loan is credit qualification problems. If you have already been experiencing a hardship before you finally applied for the loan, this can cause you to pay a much higher interest rate or in some cases, not be able to qualify for the loan at all. The trick is to apply for the loan if you see the trouble coming, not after you have been in the middle of personal financial hardship for 5 months.

This type of loan can be a great thing for your situation and could save much stress and hardship. Just know that by using the equity in your home for a consolidation loan can continue to hold up a large chunk of your equity in your home for a long while. If the values fall you may end up owing more than what your home would appraise for.

Talk to a financial loan professional before you make any decision like this and just use good common sense.

About the Author:

What precisely is a debt consolidation home equity loan aka bad credit home equity loan? This is kind of a combination between two types of loans, both the age old debt consolidation loan and the well-known famous Home equity loan.