Like many people these days, you may be having problems with your monthly bills. As economic times get hard, interest rates rise. This makes your credit card payments go up. Not only do the payments rise, but you pay less on your balance. This makes it much harder to pay them off. What was once manageable debt, can become a huge burden. If you combine that with other economic factors, you may be looking for a way to consolidate loans. Borrowing against your home equity is a good way to do that.
A good way to combine some of your debt is with a secured loan. One of the best sources of collateral is your home. In fact, it may be the best source of collateral you can use. How much equity is in your property? Equity is the amount your house is worth after subtracting what you owe on it. For example, you may owe $70,000 on a $100,000 home. Your equity is $30,000.
Why not go to your current mortgage holder? This may be the easiest source for money. You already do business with them. They are familiar with your property. They have a vested interest in it. The application and process may be easier than going to a new lender. You may or may not have to pay for an appraisal. This can make closing costs lower.
It is also a good idea to shop interest rates. Other banks or loan companies may have better deals. In any type of borrowing, interest rates are important. You want to get your payment as low as possible.
Suppose you owe about $20,000 on a card card. Maybe you owe that on four different accounts. Your payments could be $200 each month, per card. That comes to $800 every month. Suppose you decide to get a home equity loan. Your interest rate may be eight percent. You may get a deal with $490 payments over four years time. This can save $310 a month on your monthly payments. This will work with any type of loan. It does not have to be credit card debt.
This type of arrangement will pay your debts off in four years. This is a very good way to eliminate things like credit card debt. It will also free up equity when you pay off the balance. This means you can borrow on your equity again, at a future date. You may wish to buy a new car or make home repairs. You can also fund a college education if you need to.
If you go the home equity route to pay off debts, just be careful to pay off the debts and not charge them up again, or you could wind up losing your home.
Preparing a debt management plan is just the first step in living within your means. Paying off outstanding obligations or finding a way to consolidate loans will help to reduce debt.