Credit card debt can be all consuming and bleed into every facet of one's life. When the volume of debt becomes so overwhelming, debtors will look for alternative means to curb the high rates of interest certain credit cards invariable have. One such method is to refinance the unsecured debt with a secured home equity loan.
Using a Home Equity Line of Credit (HELOC) to consolidate unsecured debt (nee credit cards) is very common. HELOC's has an advantage over unsecured loans in that since a HELOC is a secured loan, its rate of interest will be much lower. That will save the borrower a significant amount of money over the long haul during a protracted debt repayment period.
The HELOC also offers a sense of structure missing from the unsecured debt. HELOC's have a fixed monthly payment plan that must be met. There is are established payments over an extended period of time as opposed to the ‘lenient' payment plans of credit cards which can result is the debt growing due to never really chipping away at the principle.
The caveat, of course, lies in the fact that the home equity line of credit loan requires one to put their house up as collateral. As such, defaulting on the loan may result in the borrower losing their home to foreclosure. This is a very grave concern that must be taken into consideration when applying for a HELOC.
The other caveat is that if the spending attitudes that resulted in the escalation of the credit card balances are not altered, the debt will return on the cards once again…in addition to the debt that is on the home equity loan. The home equity loan should be used as the starting point for a new method of gaining control on one's finances, not as the starting point for repeating the cycle of credit card debt all over again.
This is why a consultation with a knowledgeable professional is suggested when contemplating any type of bill consolidation. And, doing a little bit of one's own research oneself would not hurt the cause either.
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Credit card debt can be all consuming and bleed into every facet of one's life. When the volume of debt becomes so overwhelming, debtors will look for alternative means to curb the high rates of interest certain credit cards invariable have. One such method is to refinance the unsecured debt with a secured home equity loan.
Using a Home Equity Line of Credit (HELOC) to consolidate unsecured debt (nee credit cards) is very common. HELOC's has an advantage over unsecured loans in that since a HELOC is a secured loan, its rate of interest will be much lower. That will save the borrower a significant amount of money over the long haul during a protracted debt repayment period.
The HELOC also offers a sense of structure missing from the unsecured debt. HELOC's have a fixed monthly payment plan that must be met. There is are established payments over an extended period of time as opposed to the ‘lenient' payment plans of credit cards which can result is the debt growing due to never really chipping away at the principle.
The caveat, of course, lies in the fact that the home equity line of credit loan requires one to put their house up as collateral. As such, defaulting on the loan may result in the borrower losing their home to foreclosure. This is a very grave concern that must be taken into consideration when applying for a HELOC.
The other caveat is that if the spending attitudes that resulted in the escalation of the credit card balances are not altered, the debt will return on the cards once again…in addition to the debt that is on the home equity loan. The home equity loan should be used as the starting point for a new method of gaining control on one's finances, not as the starting point for repeating the cycle of credit card debt all over again.
This is why a consultation with a knowledgeable professional is suggested when contemplating any type of bill consolidation. And, doing a little bit of one's own research oneself would not hurt the cause either.