| Using Equity To Pay Credit Card Debt (debt consolidation)
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Using Equity To Pay Credit Card Debt
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Student Loan Consolidation Programs
Keeping in mind that the cost of college education is much higher than it used to be, by the time you graduate from high school you already need to consider applying for one or several student loans. Fortunately, taking up several student loans is not complicated as there is a student loan consolidation program available to you that will roll all your existing loans into a single one.
T... Read debt consolidation article
Debt Consolidation Credit Card
This is a must read for anyone with several credit cards and sources of charges. Debt consolidation credit card guidelines are not as cumbersome as it may seem at first glance.
This moment it is all-too-simple to fall into the trap of debt. The everyday person in the USA has about 5 credit cards that they use consistently! That's a lot of debt!
Credit card consolidation will ... Read debt consolidation article
Using Equity To Pay Credit Card Debt
You can borrow against the equity in your property by taking a home equity loan or line of credit. It's important, however, to make sure you weigh the pros and cons to make sure this strategy is right for you. Otherwise you may end up with more debt than you started and with additional risks that you could have avoided.
A Lower Rate
One of the biggest advantages of a home equity loan is that the interest rate will likely be lower than the rate you pay on credit cards. Plus, home equity financing is tax deductible. For many people, these two factors create significant savings. It has been proven that by exchanging credit card debt with home equity debt you can save thousands of dollars on interests over the whole life of the loan.
For some people, however, home equity interest rates may be higher than those for student loans or promotional vehicle loan rates. If you choose to go with a home equity line of credit rather than a loan, you may have an adjustable rate that could increase according to market conditions. Nevertheless the interest rate will always be lower than that of credit cards.
Lack of Discipline
If you have trouble keeping those credit cards in your wallet, you'll most likely have the same problem with a home equity loan, especially if you choose a line of credit. You could be paying for impulse purchases years later. Most home equity loans have to be repaid in 15 years, and since most have very low minimum payments that are just interest plus a tiny amount of principal, you may come up short when the loan has to be paid off.
Risk of Repossession
Don't forget that your home equity loan or line of credit is secured with your home. So, unlike with consumer debt, if you can't make the payment and default on your loan, the lender can take legal action of repossession against your property. These loans come with so advantageous terms because the lender knows that he will recover his money one way or another.
Summing Up
Only if you know that you will change your credit behavior using the equity on your home to pay off your credit card debt makes sense. Otherwise, once your credit card balances are cleared, you'll start building up more debt and you'll end up with the same problem that you had, aggravated by the fact that you may loose your property due to your lack of discipline. If you don't trust yourself and still want to use this method, then just destroy the credit cards and close the accounts so you can be sure you won't make the same mistakes again.
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Debt Relief
In order to fully understand debt relief there are some concepts that need clarification: debt management, debt counseling, debt settlement, debt negotiation and debt consolidation. And, the difference between debt and debt exposure is also important to fully understand and manage your finances.
Debt Counseling
A Debt Counseling agency will instruct you on how to improve your debt situation by teaching you how to budget, how to stick to a budget, how to spend efficiently, how to use different credit sources to finance yourself cost-effectively and many other tips and tricks necessary to keep a healthy financial life.
Debt Management
In this case, instead of explaining you how to do it, or while you are explained how to do it, an agent will take care of your finances and control your spending, budget, credit cards payments, loan payments, bills, etc. You'll loose a lot of freedom but you can be sure that your finances will be taken care of in the most efficient way by professional accountants and agents.
Debt Negotiation
Debt Negotiation is a step forward. Not only will the agent manage your payments but he will also get in touch with your creditors and agree with them new repayment programs to suit your budget. By negotiating your debt you may obtain up to a 60% debt reduction eliminating excessive interest rates, administrative fees and other costs.
Debt Settlement
Debt Settlement involves legal counseling, and the aid of professional lawyers to reach an in-court settlement or out-of-court settlement with your creditors. If your debt has been handed over to collection agencies, chances are that this solution will have to be implemented. Sometimes debt settlement is used as a synonym of debt negotiation. However, to be precise, the term settlement is best used when some legal action has been taken or a threat of using legal action has been issued.
Debt Consolidation
Debt consolidation refers to the replacement of all outstanding debt payments with a single monthly payment. This can be obtained either by the use of a loan (debt consolidation loan) or by making a single payment to a debt consolidation agency that will take care of negotiating with your creditors and repaying your debt on your behalf.
Difference Between Debt and Debt Exposure
Debt exposure is the incidence that debt payments have in your overall expenses compared to your income. Short term debt, even if the interest rate is low will increase your debt exposure considerably while long term debt even if the interest rate is higher, due to being spread over longer period of times, will not affect your income/spending ratio significantly. Thus, debt refinancing and debt consolidation, even if they increase your overall debt, can reduce your debt exposure by spreading your debt over longer repayment programs.
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Using Equity To Pay Credit Card Debt
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