Consolidate Your Debt with Home Equity Loan Refinancing

By JJ Singh
Loan Page Columnist

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Let's say you've owned your home for 10 years. The amount of your mortgage now is $230,000, but your home was just appraised to be worth $500,000. The equity you have in your home is the difference between the value of your home and the balance on your mortgage - in this case $270,000.

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What is Home Equity Loan Refinancing?

In the example above, you can turn much of that money into cash through home equity loan refinancing. As a result, you get a "second mortgage" to be paid back with your initial mortgage.

Use Your Cash for Debt Consolidation

Admit it. You use your credit card for impulse purchases all the time. You bought an iPod Nano, a new leather jacket, and new rims for your car - all of which was financed by credit cards. While there's nothing wrong with using credit, you may not be able to pay it off all at once. Plus, your interest rates are likely to be very high--sometimes above 25%.

The good news is that you can use your home equity loan refinancing for debt consolidation. You can take the cash you just got from the equity in your home and pay down your high interest credit card debt--either through a debt consolidation company or on your own.

The overall idea of debt consolidation is to take multiple payments and make only one, at a lower interest rate--while paying off principle and not just interest. With money from a home equity loan, you can do just that, significantly saving on interest payments in the long run.

Sources:

www.creditinfocenter.com

About the Author

JJ Singh is a loan consultant who has mortgaged his life away to the micro finance industry in New York City. He holds a Bachelor's Degree in Economics from the University of Virginia.

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