If you are having problems getting out from under debt and you own your own home, debt consolidation through a home equity mortgage might be a consideration for you. Using this method, you will end up paying one creditor every month instead of a handful or more of them.
Home Equity Mortgages
A home equity mortgage is determined by subtracting what you owe for your home and the market value of your home. An example of a home equity mortgage is this: You have a home that is worth $120,000. You still have $50,000 to pay off. The mortgage you get will be worth $70,000. With that, you might be able to pay off the original mortgage and have $20,000 to pay off personal loans, credit cards and other debt. In this type of debt consolidation, your house is used as collateral.
As with any type of loan, there are many different companies who would love to do business with you. Some of them are reputable and some are not. Before you take out a a "second mortgage" as home equity mortgages are often called, look into their business practices. Check consumer information sites and the Better Business Bureau for any complaints filed against them. Ask questions in forums regarding debt consolidation and home equity mortgages. See if you can talk to anyone who has done business with a particular company before you sign on the dotted line.
Before you make any commitments, make sure you know how much your interest rate will be. If your interest rate would be higher than you are comfortable with, you should find a company that offers better interest rates on their loans. If you have difficulty with impulsive buying or living above your means, you should find a service that specializes in credit counseling. This kind of service can go a long way toward helping you stay out of debt.
Using a home equity mortgage to consolidate your debt may go in one of two directions: You might get a better deal and pay it off quickly or you might lose your house. Put a good deal of thought into your debt problems. Your first priority should be to figure out how you got in this position in the first place.
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