5 Ways To Consolidate Debt Using A Home Equity Loan

[Sep 4, 2009.]

 

If you have lived in your home a long time, chances are you have built up some equity.  When does it make sense to use that equity for debt consolidation? Consider these 5 way to consolidate your debt using a home equity loan or home equity line of credit (HELOC). To find the lowest rates available for a home equity loan, follow this link.

1. Credit Cards - Today's credit cards are becoming more and more expensive. {related article}  Interest rates can increase if you miss even one payment.  As short term credit gets tighter and more expensive, home equity loans are looking better than ever.  Consider the interest rates you are paying on your credit cards and then compare those rates to the low interest rates currently available on a home equity line of credit.  You  may find that consolidating your credit cards using your home's equity can save you thousands in interest over time.


2. Auto Loans - In many cases, the financing available on a brand new vehicle carries a very low interest rate.  In some cases even 0%.  But, new cars are very expensive and are sure to depreciate significantly.  Consider using your home equity line to buy a used vehicle.  You will likely save a lot of money on the purchase price and also on the interest rate.  Financing for used cars can be much more expensive than for new cars.  But, make sure you pay the balance off in the normal time for a car loan or you will end up paying more. 


3. Student Loans - Sometimes just having several bills to pay can be a hassle.  Before you consolidate several student loans through the student loan companies, compare the interest you would pay if you used your home's equity instead.  Home equity loan interest rates are as low as they have been in many years.


4. Home Repairs - Chain stores like Home Depot and Lowe's offer credit to pay for many of the things you need to improve your home.  However, their store cards are still revolving credit cards and may be more expensive than your home equity loan.  Compare the interest rate you will pay using a store credit card to pay for home improvements versus using the credit available on your HELOC.


5. Tax Liens, Judgments and Garnishments - If you owe money to the IRS, if you lost a lawsuit and there is a judgment against you, if you were late on child support payments, you may find it cheaper to use your home equity loan to pay these debts.  IRS liens especially can be very expensive because they accumulate not only interest but penalties.  Compare the interest you pay on these items to the low rates available on home equity loans.

If you do not currently have a home equity loan and would like more information, follow this link to find the lowest interest rates available.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.