Home Equity Debt Consolidation

If you are in need of some extra cash for some home improvement projects or to pay some unexpected bills, a home equity line of credit may be a good option.

A home equity line of credit is a means of getting access to a large amount of cash for a relatively low interest rate.  Generally, these types of loans have lower interest rates than other types of loans, but you need to beware that some lenders of a home equity line of credit have hidden fees, closing costs and annual fees. 

These types of loans are becoming very popular
for many different situations, and as long as they
are used wisely a home equity line of credit can be very useful.

In addition to some fees, there are different options provided for repayment that include balloon payments where your payments are small at the beginning and gradually increase, or you can opt for higher monthly payments that stay the same throughout the life of the loan.  Be aware that a home equity line of credit requires you to use your home as collateral, so do not get into a repayment plan that will put you in a position that you are unable to make payments.

Most home equity lines of credit have a variable interest rate, so keep this in mind when signing your papers to close on the loan.  While rates are low now, be aware that interest rates will keep rising.  This means that if you have a variable interest rate on your loan, your payments will keep rising as the rates keep rising.  If you can get a fixed rate you will most likely end up in a much better position with your payments and will not end up with any surprises.  When in doubt, seek out financial debt consolidation advise. 

There are many different uses for a home equity line of credit.  When we purchased our home, we received a special loan that allowed us to use our home as collateral, even though we had not paid for any of it yet.  This equity line was used for our down payment on our home purchase which allowed us to avoid having to pay the private mortgage insurance each month.  We also were able to secure a few thousand extra dollars to have on reserve in case we needed it within the next few years.  We have a variable rate, but the initial loan was a fairly low amount.  Since rates keep rising, though, we are now looking into refinancing with a fixed rate.  I wish we would have done so in the first place, but beggars can’t be choosers when purchasing a home!

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