There are many perks to owning your own home, not the least of which is the ability it gives you to borrow against the equity you’ve got in it. You can literally use the house you live in to help get you out of negative financial situations in which you may find yourself.
Many people, for instance, use home equity loans to consolidate their debt load. If you find yourself being overwhelmed by too many bills every month and feel like you’re not making a dent in paying them down, debt consolidation may well be the answer and using your home equity to make that debt consolidation a reality may be the best answer of all.
But Why is That?
Better interest rate: Because you are putting your home up for collateral, you’re going to get an outstanding interest rate on your loan. It can actually be a mere fraction of what you would have to pay in interest on just about any other type of loan. Compared to the rates you’re paying on your credit cards, for instance, the difference will probably astound you.
You’ll be going beyond minimums: One of the problems with high-interest rate credit cards and other bills is that debtors are often managing to only pay the minimum requirements. All this does is prolong the agony of being in debt. A home equity loan for debt consolidation will provide clarity and allow you to actually make some headway paying down the debt with the ultimate goal of paying it off.
Only one bill to worry about: It can be overwhelming to think about owing money to a host of different creditors. The consolidation wraps it into one neat package and simplifies the payment process for you – all at an affordable rate, mentioned above. It’s basically a victory for order over chaos.
Naturally, before you commit to any sort of debt consolidation program, you should strongly consider speaking to a financial consultant to more fully understand how the process works. Debt consolidation can be the ideal way to get out from under, but, if not done right, it can put you in a worse spot than the one in which you started. You must understand that if you don’t go about it right and you’re using a home equity loan to finance your debt consolidation operation, you could lose your house!
That’s why you shouldn’t go the debt consolidation route unless you understand these points:
Don’t just consolidate; eliminate! Getting your debt consolidated is a very important first step, but it is only just that: a first step. Now the hard work begins: Eliminating the debt is the crucial second step. You must envisage yourself as a debt-free person and work toward making that vision reality.
Go the extra mile to eliminate your debt: Apart from getting a home equity loan to consolidate your debt, what else are you doing to make the debt go away? Have you been able to separate necessary spending from desired spending? Have you considered working overtime, or getting a part-time job to help accelerate eliminating the debt?
Get yourself a budget:Just because you have consolidated your debt doesn’t mean you can keep spending the way you were when the debt was piling up. A debt consolidation loan is only a part of the solution. The rest comes from hard work, proper budgeting and living by that budget.
Know the debt consolidation process: It took a while to accumulate your debt, but it’s probably going to take longer to get rid of it – even with your home equity debt consolidation loan in place. Knowing that this is not an overnight cure is half the battle. It’s a long, uphill climb, but consolidating your debt is a fantastic first step on the long road to debt recovery. The trick is not to get frustrated during the process. If you stick to it, you will be rewarded with an indescribable feeling of triumph.