125% Home Equity Loans: A Solution for Debt Consolidation?

Tip! Don't just settle for low home equity loan interest rates when comparing home equity lenders. Lenders that offer low interest rates tend to have stiffer terms.

Debt consolidation, whether it relates to credit card debt consolidation, the consolidation of other bills or loans, or some combination of the three, is a growing trend. The promises that a 125% home loan offers, like no-hassle consolidation, extra cash, and the possibility of lower monthly mortgage payments are all very tempting, But is a 125% home loan right for you?

If you are a homeowner with relatively good credit trying to streamline your finances, the answer may be yes. Here are some facts to consider when making this decision:

1. A 125% home loan allows you to borrow more than your home is worth, as opposed to a traditional mortgage or refinance. According to eloan.com, "if your home is worth $100,000 and your first mortgage is $90,000, you can borrow $30,000, for a total of $125,000 and shrink your monthly payments."

2. The interest rate that you get with your loan contributes significantly to whether or not you actually end up with lower monthly payments. The ideal scenario would be to obtain a mortgage loan with a fixed or secure interest rate, (APR) Lenders at Capital Resource Finance report an estimated savings of up to three times more with a simple interest, fixed rate loan to pay off your debt versus simply making the minimum payments on your credit cards. This is because the interest on credit cards and other types of credit lines is compounded daily. Compound interest means that for each day your credit card has a balance, you end up paying on the interest, instead of directly toward the balance that you owe. This adds up to more money for the credit card company, not to mention that it will take longer for you to get out of debt.

3. If you are not able to obtain a fixed rate loan because of less than perfect credit or some other reason, you still have options. If you can qualify for an adjustable rate loan, it can still save you money in the long run, since your interest rates may become lower over time, and you will be able to consolidate your bills.

4. Several lending companies offer loan programs for people with no equity. Many lenders offer damaged credit options,but only a few mortgage brokers can help you with sub-prime 2nd mortgages. Also consider the option of obtaining a rate quote or pre-qualification online.

So do your homework: Take the time to find out what all of your options are and review them carefully before deciding, and you will be on your way to being debt free.

Aura is an aspiring free-lance writer who has written many home equity mortgage related articles. She was the Co-Editor of The Driftwood, a college newspaper published at her San Diego campus at Point Loma University. You can read more of her loan articles at BD Nationwide Second Mortgage and get more information about debt refinancing & 125% Home Equity Loans. If you need current interest rates for credit lines or fixed rate loans from California to Virginia, visit the loan quote department for Second Mortgage Rates select the state and you will get a free quote from a loan professional.

Home Equity News:

Bing: home equity site:msnbc.msn.com
Search results

Home equity loans drying up for some - Business - Personal ...
Like many homeowners during the housing boom, Lynnette Madden and her husband decided to open a home equity line of credit about a year and a half ago as ...
Americans' home equity near a record low - Business - Real estate ...
WASHINGTON ? Falling U.S. home prices have shrunk equity so much that the proportion of their homes that Americans actually own is near its lowest point ...
Students get creative to pay off loans - Business - Personal ...
Lines of credit typically work like a credit card, with a limit and a revolving balance: the average home-equity line of credit currently has an interest rate ...
Late payments for home equity loans rise - Business - Real estate ...
WASHINGTON ? Late payments on home equity loans climbed to a 1½-year high in the opening quarter of this year, while delinquencies on credit card bills ...
Home equity lines have dried up across U.S. - Business - Personal ...
Home equity lines have dried up across U.S. As home prices collapse, banks cut off credit, further souring the economy Below:
The Home-Equity Credit Crunch (Opinion) - Business - Small ...
The Home-Equity Credit Crunch (Opinion) How home price declines have contributed to tight credit for small businesses. Below:
Late payments rise on home-equity loans - Business - Stocks ...
Late payments on certain auto and home equity loans climbed in the final quarter of last year, while delinquencies on credit card bills largely held steady ...
Should I get a home equity credit line? - Business - Answer Desk ...
Nov. 5, 2004 ? Q: Would you please explain to me the pros and cons of acquiring a home equity credit line?... How does it affect your taxes?
Homeowners feel stress of life 'underwater' - Business - Real ...
A broad swath of homeowners ? those not headed for the worst-case scenario of foreclosure ? are nonetheless grappling with the impact of lost home equity.
Retirees no longer count on home equity - Business - Personal ...
Many Americans have recently found themselves changing retirement plans after losing a substantial amount of home equity as the housing market and the ...

Newsfeed display by CaRP