Debt Consolidation Loan is just a consumer loan that you can use to pay off other debts. Just like mortgage refinancing, you are just trading one kind of debt for another.

One of the most common consolidation loan is home equity loan. Home equity loan is different from refinancing your mortgage because hoe equity loan will not affect your original mortgage. What you are doing is just borrow cash against your home equity.

Let me give you some example. Say your home is worth $150,000 and you still owe $100,000. That gives you $50,000 to borrow against. Nowadays, lenders will give you up to 125 percent of your equity, so you can easily borrow up to $62,500. However I don’t recommend you to borrow more than your home is worth.

Is this worth doing? Actually the answer is up to you. If you are paying interest rates of 15% or more on credit card balance. Then home equity loan maybe can help you to release from the credit card debts stress. Furthermore, interest on the home loan may be tax-deductible but credit cards’ are not. Anyway this is not the real question that you should consider.

The real question we should ask ourselves is, “Will this really conquer my debt?” If you use a home equity loan to pay down all your outstanding debt, then you are giving up what you have done in paying off your mortgage. Anyway mortgage debt is better than other outstanding unsecured credit card debt. However if you still then turn around and start using those credit cards emotionally, then you probably just jump back to the same problem. This is also why many financial expert don’t recommend us to use a home equity loan for day-today expenses or credit card expenses because we may lose our houses.

Please consider a home equity consolidation loan to repay debt only if you’re absolutely commit not to return to your former habits that bring you to the debt. You must know, home equity loan is not a joking loan where you are putting house on the risk. Please remember don’t borrow more than your house is currently worth. Lenders are assuming that your house will increase in value. That’s why they’re willing to lend you more than your house worth. But properties price can drop and you simply never know what will happen.

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