Consolidating debt with a home equity loan
This makes them useful for situations where you need money for periodic expenditures, such as home improvement projects, but there's nothing to stop you from simply making a one-time draw to consolidate your debts.
There are a couple reasons you might opt for a HELOC debt-consolidation loan rather than a standard home equity loan.
However, if you've fallen behind on any of these and need to get caught up, you may be able to pay off your past due balances with a debt consolidation loan.
You just can't use that loan to continue to pay your new obligations going forward. There are several options, including going to a loan consolidation specialist or, if you're a homeowner with equity in your property, taking out a home equity loan to cover your debts.
Many lenders specifically offer loans for this purpose.
Of course, this approach requires that you have fairly good credit - if your FICO credit score is in the mid-600s or lower, you may have trouble getting such a loan from a bank or credit union.
That's particularly helpful if you can combine it with a lower interest rate as well. Basically, you borrow a single, lump sum of cash that's used to pay off all your other debts.
Home equity loans come in two major types a standard home equity loan and a home equity line of credit (HELOC).
The standard home equity loan is the most commonly used for debt consolidation because you borrow a single lump sum of cash, whatever you need to pay off your debts, and then pay it off over a period of years at a fixed interest rate.
You can also seek to take out a personal, unsecured loan on your own or try to negotiate some sort of arrangement with your creditors. The simplest, and most straightforward way to consolidate your debts is to simply to take out a new loan from your bank or credit union and use that to pay off the various bills you may have.
You're then left with one monthly bill to pay rather than several.
Search for consolidating debt with a home equity loan:
First, there are little or no origination fees with a HELOC.