Carrying a heavy debt load is not good for one’s credit score, so trying to get rid of it is smart. Credit-yogi.com is here to suggest a home equity loan to pay off debt,
Phoenix, AZ -- (SBWIRE) -- 05/30/2013 -- Home Carrying a heavy debt load is not good for one’s credit score, so trying to get rid of it is smart. Credit-yogi.com is here to suggest a home equity loan to pay off debt, and to offer some insight about the process, such as: equity loan to pay off debt, and to offer some insight about the process, such as:
- Equity-based Loans
- Benefits to Homeowners
- Advantages for Financers
Home Equity Lines of Credit (HELOCs)
A HELOC is one type of home equity loan to pay off credit card debt. The difference between a line of credit and a regular loan is that the LOC works like a giant revolving credit card. It has a “draw period” of 5 to 15 years and can be utilized at any time during that period. A HELOC has a variable interest rate, making it less expensive to obtain. The money from it can be used for anything, from home improvement projects to college tuitions.
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Home Equity Loans
When someone has a lot of debt, taking out a home equity loan to pay off debt may be his best option. This loan is based entirely on the equity one’s home. The loan is disbursed in one lump sum and comes with a fixed interest rate. This can make it more costly than a HELOC, but the borrower will always know exactly how much his payment will be, making it easier to budget for. Like a HELOC, the money from an equity loan can be put toward any expense, including debt repayment.
A major benefit of a home equity loan to pay off credit card debt is its easy accessibility. Its interest is generally higher than that of one’s original mortgage, but is considerably less than that of a credit card. Additionally, any interest paid on a home equity loan is tax deductible. When a person consolidates his debts into one equity loan, he gets one single payment, a reasonably low interest rate, and those tax benefits, ma king this an advantageous choice for debt repayment.
Because a home equity loan to pay off debt is the equivalent of a 2nd mortgage, lenders love to approve them. The lender not only gets the interest from the first loan, but now acquires it from the 2nd one, increasing his “take.” If the homeowner defaults on the loan, the lender keeps all the money earned on both loans. Overall, these loans are a financer’s dream product.
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