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Taking Out A Home Equity Loan For Credit Card Debt Consolidation? Wait!
So you’ve reached the point where you know you need help with your credit card debts, and you’ve decided it’s time to pay them off with a home equity loan.
Wait! There are other options. You don’t need to risk the home you’ve worked so hard for, in order to get rid of those credit card balances.
Hector Milla Editor of the “Credit Card Debt Free” website — http://www.CreditCardDebtFree.org — pointed out;
“…A home equity loan can be a great tool for certain purposes, For example, if you are planning on rehabbing your home, it makes sense that the cost of the work should be secured by the underlying property. After all, you are going to increase the value (that is, the equity) of the home when you do the work, so it should be reasonable to take out a loan against that equity to pay the cost…”
However, taking out a home equity loan to pay off outstanding debts, such as credit cards, can be a much riskier proposition. For one thing, nothing about the underlying budgeting situation has changed – you have simply shifted the debt from unsecured loans in the form of credit cards, to a loan which is secured by your home. That’s great for your creditors, since they now have something major to take from you should you default. But it’s not so good for you.
To understand this better, you’ll need to understand the two types of debt: secured and unsecured. Secured debt is a loan like a mortgage, which as an underlying piece of real property as collateral. If the loan goes bad, the lender has some kind of recourse: he can foreclose on the home.
Unsecured loans do not require collateral. They are made based on a promise to repay. This does not mean the creditor has no recourse; he can go through all of the usual debt collection techniques, such as hiring a collection agency and reporting to the credit bureaus. But he does not have a claim on your home.
“…Understanding the options that are available to you is vital before you engage in debt consolidation. Taking out a home equity loan to pay off your credit cards means creating a second mortgage on your home. Even with the best of intentions, this can create a disastrous situation unless very carefully managed. If you have trouble paying the new debt, as you had trouble paying the old ones, the consequences are much greater. If you’re thinking about it, think again…” H. Milla added.
Further information about trusted and reputable companies for credit card debt settlement by visiting; http://www.CreditCardDebtFree.org