One option for home owners is to use equity in their homes as the basis for consolidation loans.In order to do this, your house needs to be worth significantly more than the remaining balance of loans against the property.
Debt consolidation loans can make debt burdens more manageable, but they will only help you improve your credit in the long run if you stop taking on new debt.
For example, a debt consolidation loan may help you pay off your existing credit card balances.
With those balances zeroed out, you may feel the temptation to start using those credit limits again.
So, if you are unable to make your loan payments, the lender may foreclose on your home.
This is why some people prefer to use unsecured personal loans, despite their higher interest costs, for consolidation loans.
Whatever type of debt consolidation loan you decide upon, be sure to shop around for the best loan terms. The lowest interest rate for the size and type of loan you choose is one thing.Another important consideration is a monthly payment that fits into your budget and allows you to pay off your debt within a reasonable period of time.For one thing, interest on mortgages, which include home equity loans, is often as cheap as a borrower is likely to get.For another thing, interest on mortgages is generally tax deductible, which can further reduce the effective interest rate you are paying.The potential drawback of using home equity to make existing debts more manageable?Like any mortgage, a home equity loan is secured by your home.