Can I Use Loans to Consolidate Credit Card Debt?

Can I Use Loans to Consolidate Credit Card Debt

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Copyright (c) 2010 Liz RobertsPlanning on consolidating your debts? There are actually different ways to do this. However, a borrower's situation should be assessed first to know which is the best debt consolidation method for you. To help you decide, here are the two types of financing you can use for debt repayment - Home Equity Loans and Personal Loans.HELOC or Home Equity LoansAll kinds of unsecured debts such as credit card debt, medical bills, and personal loans can be consolidated by applying for a Home Equity Loan. This type of loan is secured using the collateral submitted to the lender. As the name implies, the amount of financing available will be based upon the value or the equity of the borrower's home.Like all secured loans, there is the risk of losing your property to your lender should you fail to keep up with your payment obligations. Once a notice has been sent, the house will be put up for resale and the proceeds will be used to pay off the borrower's balance.How does a Home Equity Loan differ from other types of secured loans?Once the borrower has been approved for HELOC, he/she can borrow cash from the lender at any time without having to re-apply for a loan as long as the equity limit has not been reached. You may start repayment after a particular period stated in the contract.Debt Consolidation Personal LoanPersonal loans can also be used for consolidating debts. Usually, these are loans secured by the borrower's property. If you are a homeowner and you are willing to submit your home as collateral, then you may consider this option.Once approved, the loan amount will be given in full, which the borrower can use to pay off all his/her existing debts with various lenders. Then, a borrower must abide by the debt consolidation loan company?s terms.Should I Use a Loan to Pay My Credit Card Debt?In some situations, consolidation loans is the best solution to free yourself from multiple credit card debt. The important thing to remember is that both a Home Equity Loan and personal loan are secured with collateral. Hence, there is always the risk of losing your property if you fail to keep up with your lender's repayment terms.With this in mind, paying off credit card debt through a loan is a very serious matter. Before you make a decision, consider if there are other alternative solutions that will not require you to put any of your properties on the line. If you feel that acquiring a loan is the only way, make sure that you will be applying for one from a reliable lending company and that you will be able to pay back the loan on time.

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