Using Home Equity
There is an effective way to consolidate all your outstanding high
interest debts into one single debt with an attractive interest
rate if you own a home with equity that has accumulated over the
years. You can accomplish this by securing a home equity line of
credit. Basically you are using the equity you have built up in
your home to secure a bank loan which you can then use to pay off
your other debt.
The home equity line of credit offers an extremely attractive
situation in paying off your other debts. First, the interest
rates on these loans are usually well below the rates charged by
credit cards making an immediate savings on the interest charges.
All your non secured (credit cards, car loan, student loan etc.)
debt can be consolidated into a single payment with an interest
rate charge in the single digits. In addition, the interest you
pay on the home equity line of credit is, in most cases,
deductible on your taxes effectively making the interest rate a
couple of points less than what is written.
There is a reason that this option was not mentioned before you
began your guerrilla debt reduction plan. A problem with this type
of loan is that many in credit card debt use a home equity line of
credit to wipe out their credit card debts, but then immediately
turn around and begin putting debt back onto the credit cards.
What ends up happening is that they get themselves in double
trouble with new credit card debt as well as a home equity line of
credit that must be paid off. Worse, this time their house is on
the line since it has been pledged as collateral in securing the
home equity line of credit. That means if you default on paying
this debt, you will end up losing your house. Until you have begun
your guerrilla debt reduction plan and have kept with it for a few
months to make sure your committed to paying off the debt (and
even after), you should approach this debt reduction tool with
caution and carefully consider if is appropriate for your
situation. Next we will look at a few other consolidation
options...
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. THIS IS IN NO
WAY GIVING ANY LEGAL ADVICE OR REPRESENTATION. THE INFORMATION
CONTAINED HEREIN WAS COMPILED FROM VARIOUS ARTICLES. FOR ANY LEGAL
ADVICE OR REPRESENTATION SEEK YOUR OWN LEGAL COUNSEL.
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