Is Using A Home Loan To Consolidate Debt A Bad Idea

To handle your finances properly, a great way is to utilize your home equity for consolidating your debts. You may save huge amounts of money by transferring your debts from many high interest credit cards to one particular low interest loan; thus the money that you are paying every month for your debt will also be lowered.

It’s also a great benefit if by consolidating with your home equity loan you have to just worry about one payment every month. Although consolidating is a very good idea but before taking a home equity loan you must know three important things.

Over the life of the loan you might have to pay more interest

As the interest rate on the loan for home equity is much less than the credit card interest rate, if you take a long-term loan say for 30 years and pay your loan for the home equity then over these years that little interest may add up to a lot more amount.

So it’s better to be wise and take the extra money that you save every month and pay off the home equity loan in record time.

You might also have to lose your home

Although it does not happen always but there are possibilities. For missing your payments a mortgage lender may take your house but the credit card company cannot.

For example, if you lose your job or you’re going through some financial constraint for which you miss one or two payments for your home equity loan then your house could be in danger.

It is natural that you might be tempted to use your credit cards

You could be tempted to use your credit card more when your credit card statement is having a zero balance. The fact that you are not in debt to the credit card company does not mean that you are not still paying for the purchases you made on that card. Do not make the same mistake again of adding up money in your credit card; then again you will have to pay off a bunch of high interest debts on top of the consolidation loan for your home equity.

John Wiley is a debt consolidation expert who has put together an entire website full of resources and countless articles to help you escape debt!

If you're looking for resources on low interest debt consolidation, then please visit the site that John has put together personally at: http://www.low-interest-debt-consolidation.com

You'll find over 500 articles and many debt consolidation resources that have been compiled for over 1 year.

http://www.low-interest-debt-consolidation.com

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