According to national surveys, the average household carries a credit
card balance of approximately $8,000. Because of high finance fees, many
people find that it is difficult to reduce their consumer debts. While
bankruptcy is a tempting option, it is important to explore other
alternatives for eliminating debts.
Benefits of a Debt Consolidation Loan
One approach for eliminating or reducing debts involves acquiring a
debt consolidation loan. Although debt consolidation loans will not
miraculously eliminate your debts, these loans make is possible to reduce
your debts faster.
Credit cards have high finance fees. Hence, it is difficult to pay down
balances. In most cases, the minimum payment barely covers the finance
charges. This makes it difficult to reduce the credit card balance. If
you obtain a debt consolidation loan, all your credit balances are
lumped into one loan. Furthermore, debt consolidation loans have reasonable
interest rates. This enables you to become debt free within a few
years.
Using a Home Equity Loan to Reduce Debts
There are various ways to obtain a debt consolidation loan. Individuals
with good credit may qualify for a personal debt consolidation loan.
Moreover, if you own a home, it may be possible to get approved for a
home equity loan. Home equity loans are ideal because the rates are low
and the terms fixed. Usually, homeowners are able to repay the money in
five to seven years sometimes less.
With a home equity loan, your equity works as the collateral. If your
homes equity is $10,000, it may be possible to obtain a loan up to this
amount. The funds can be used for anything. For the most part,
homeowners use home equity loans to payoff credit card debts. Other uses for a
home equity loan include home improvement, college expenses, etc.
Disadvantage of a Home Equity Loan
Home equity loans are very useful. However, it is essential to use the
funds wisely, and borrow only what you can afford to payback. Home
equity loans create another monthly bill. If using the money to payoff
credit card balances, avoid accumulating additional debts. Increasing your
total debts may create a financial burden. If acquiring a home equity
loan, avoid over extending yourself. Failure to repay a home equity loan
will result in foreclosure.
View our recommended
Home Equity Line of Credit lenders.
Carrie Reeder owns ABC Loan Guide, an online resource with information about Mortgage Brokers
Online and Mortgage Refinancing.
