If you are having debt problems, you may be able to find a way to fix your situation by using your home equity for consolidating your debt. Being able to understand how you can use your home’s equity to consolidate debt can help you take control of your finances and manage it better.
What is Home Equity?
Your home’s equity is the principal of your home mortgage that has been paid in addition to the value of your home as it appreciates. In order to find out how much your home’s equity is, all you need to do is to take the amount of your home’s valuation and deduct the mortgage you owe from that valuation.
How Home Equity Help to Consolidate Debts
If you have a heavy load of debts like car loans, credit card debt, and others, a home equity loan can help you take control of things. The problem with such debts is that they are unsecured debts that carry high rates of interest. What that means is that you spend a lot of money every single month just to pay the interest on those debts and not on the principal. Consolidating debt using the home’s equity will allow you to pay less interest and more principal to pay off the debts quicker.
Home Equity Debt Consolidation Options
Should you decide that you would like to use your home’s equity for debt consolidation, there are several options available.
- HELOC or Home Equity Line of Credit – With a home equity line of credit, you are advanced some money up to the credit limit you have. You can get that money as you need it and have access to it using a debit card, credit card or a checkbook. Usually, the interest rate is adjustable and you only pay interest on the money that you have withdrawn. Home equity line of credit is usually more useful for purposes that require payments over some period of time like college tuition fees or making home improvements.
- HEL or Home equity loan – A home equity loan is considered by many as a better option for consolidating debt. This type of equity loan involves taking a second mortgage on your home’s equity. You borrow lump sum at a fixed rate of interest and you pay monthly installments on the home equity loan. This type of equity loan id best if you have a situation where money is needed all in one go like when consolidating debts.
How Home Equity is used for Debt Consolidation
Lenders make use of a formula to find out how much of the equity on your home is available for use as home equity loan. The formula is the valuation of your home less the mortgage that you owe equals your home’s equity. After you have determined that you home’s equity is enough to be used to consolidate your debts, then you can use the home equity loan to pay off all your creditors. It will allow you to save a significant amount of money in interest payments and all your debts will be wrapped up into a single manageable payment.
If you are confident that you home has enough equity and that putting it up for collateral is the best possible option for you and your family to consolidate debt, then contact Gold Trust Lending for your loan requirements. You can use our Quick Quote option at any time so that you can get an idea of how the loan may be able to help you consolidate your debt. The Gold Trust team will help you figure out which type of loan will best fit your needs so that you can consolidate your debt.
Whichever option you choose, you will need to go through a process that is very similar to the process you had gone through when you were applying for your home mortgage. The process may vary slightly depending on the situation of the loan applicant but once the loan is approved, you will be able to use the money from the line or credit or loan to start paying off your debts.
To make the process stress-free, Gold Trust Lending will give you much needed assistance so that you require for ensuring that you are able to get the much needed funds to consolidate your debts. Our highly trained team of mortgage professionals will be ready to provide you with all the information you need.
Gold Trust Lending has been helping people with their home loan related needs for decades and has the reputation of offering the most competitive rates. With Gold Trust you can be sure that the loan process is as stress-free as possible and that you will get all the possible help you need to find the loan that will help you and your family.
The first steps to turning your dream to own your first home a reality are:
- Complete our simple, secure online instant quote on the left sidebar of this website
- Receive a personalized instant quote from a licensed loan originator
- Choose the loan that fits your needs
- Let us handle the loan process from start to finish until the day you get your keys
When you are truly ready to make your dream to sleep in your own home a reality, Gold Trust Lending can help you make sure you enjoy all the benefits of getting a home loan that truly fits your needs.