Debt Consolidation for Homeowners
If you are looking for debt consolidation and you are a homeowner then you should know that you do have options that can see you pay off debt . You need to consider taking home equity loan or cash-out refinance. Let us have a look at each of them.
1. Home equity loan : In simple terms a home equity loan is a loan that you get by simply pledging your house as collateral. This type of loan is great for a person who wants to get a large sum of money. In fact, you ought to know that lenders love this form of debts because they have sure security, and they also know that it is harder for you to mess up your payment plans when you have your home as collateral.
Advantages of using home equity loan
With home equity loans, you can get to borrow large sums of money. More so, you can also qualify for a loan even when you have bad credit records. It is true that some payments on this form of loans may be tax deductible.
Why you need home equity loans
People need loans for different reasons; however, taking a home equity loan should be done with caution. You need to use this method if you want to secure huge loans for paying your childrens fees or when you want to venture into a business that will earn you high returns than the interest rates that you will incur with the loan. More so, you need to make sure that you really need the loan to avoid instances where you can end up losing your home as a result of not paying the loan in time. The second form of consolidating a debt is by taking cash-out refinance.
2. Cash-out refinance : You can decide to also pay off debt using this method. With refinancing, you might decide to take cash-out in addition to the existing mortgage balance that you have, which means that the new mortgage balance will be your current balance plus the desired cash-out amount. In layman’s language this means that with the undertaking you stand to increase both the size of your mortgage and your mortgage loan in return for cash.
What you need to know about cash-out refinance
Know that, most lenders will not allow you to take cash-out before the end of the first 12 months. Lenders enacted this form of policy to make sure that borrowers do not take home with zero money down and quickly refinance for cash-out.
Finally, whatever the method that you decide to use to pay off debt , you need to read the pros and cons of each, and also seek financial advice from the financial experts. Some problems you may easily solve by just using your credit card.