subject: Is a debt consolidation home equity loan the right choice to pay off debts? [print this page] During the present economic crisis, many of us are going through debt stress which has a bearing effect on the quality of life. Debt incurred may be for different reasons like job loss, illness or unknown expenses which cause sleepless nights and high blood pressure.
Many experts give us a suggestion of debt consolidation loan to get out of debt. What is debt consolidation loan? In general, people incur debt in several reasons and at different point of time form different sources. For example: education loan chase, mortgage loan from bank of America and credit cards from discover etc. where debtor have to pay all the creditors monthly without any delay can lead to undergoing pressure. Consolidating all these debt can help decrease pressure of repayment to different creditors where in this strategy; you combine all the existing debt under one single loan by debt consolidation agency. Here in this process you have to pay only one payment to debt consolidation agency as a distinct loan. There are several advantages of using this strategy and they include:
Only one single payment to debt consolidation agency.
Monthly payments are reduced.
Threatening calls from collection agencies and stress of debt is eliminated as those are handled by debt consolidation agency
Help you in budgeting and ways to keep you out of debt.
Lower interest rates when compared to rates you were paying to different lenders.
When you probably missed payments on debt, it would hit your credit score which may cause you high interest rates but one must effectively negotiate to get best interest rate possible. Hiring the services of best debt consolidation agency will help you achieve this.
Debt consolidation can be achieved in many ways. But before assess your debt whether it is an unsecured debt or secured debt and look for pros and cons of each debt consolidation methods before availing it.
Take a personal loan which is unsecured, where there is no need of assurance. This is a best option to consolidate your debt but remember that as it is an unsecured debt, risk is borne by creditor and therefore to cover the risk associated with lending he may increase the interest rates.
Transferring all credit card loans to a single credit card is another way of consolidating credit card debt but before doing so one has to understand the interest rates on different cards and fee associated with it carefully.
Debt consolidating with home equity loan is another option to consolidate all your debt. Here as the consolidating loan is secured the interest rates may be low but remember that when you default, you may risk of loosing home. Therefore, it is not advisable that you consolidate unsecured debt with home equity loan. Loans not secured with property are considered as a best way to consolidate your debt. However, you might have to face higher interest rates and instalments with unsecured debt.
Is a debt consolidation home equity loan the right choice to pay off debts?
