Home Equity Loans
May 31st, 2011
When credit card bills and other poor financial planning disasters have taken their toll, it might be time to consider debt consolidation. This is essentially paying off multiple debts with a single lower interest debt.
One of the most popular ways to acquire a low interest debt is to take out a loan on using collateral, for most individuals this is usually the home. This is called a Home Equity loan. This type of loan requires that the home have a certain amount of equity. It also requires a good credit score, which the debtor with an already existing debt may not have.
The problem with the home equity loan has more to do with the debtor than the loan itself. Now that the home is on the line, there is a risk of foreclosure once payments become unaffordable. If the spouse or parent with good rating has agreed to take the loan on behalf of the debtor this could leave two individuals with bad credit instead of one. In any case, the home equity loan as an option for debt consolidation loans is probably not a good one.
Entry Filed under: Finance