December 07, 2001
By: Bev Dodd
Debt consolidation equit loan rate: Do your own calculation
Tired of writing so many checks to pay your bills each month? You can use a debt consolidation equit loan rate to consolidate your bills and lower your monthly payments. How are you going to pay off your debt? A debt consolidation equit loan rate could be the answer. We'll discuss this more below.
A debt consolidation equit loan rate is a form of revolving credit in which your home serves as collateral. Because the home is likely to be a consumer's largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses. With a home equity line, you will be approved for a specific amount of credit-your credit limit-meaning the maximum amount you can borrow at any one time while you have the plan.
For a debt consolidation equit loan rate do your own calculation to determine what you are spending right now! Just add all your monthly payments including existing mortgage payments loan payments, credit card payments, car leases and then divide that by your gross monthly income. This simple calculation will quickly show you if you are heading for trouble. If that number is more than 50% you should seriously consider consolidating your debts now - before it's too late! Some people will let it slide for two or three months, fall behind mortgage payments, loan or credit card payments and now are trying to consolidate, but in many cases it's too late and they may end up loosing their homes - DON'T DO IT!
How does a debt consolidation equit loan rate differ from other types of loans? A home equity loan is secured by the available equity in your home. Unlike other loans such as boat loans, personal loans, most student loans and credit cards, the interest paid on a home equity loan is generally tax-deductible. The amount that is deductible is limited to the smaller of either $100,000 or your home's fair market value less the outstanding mortgage or other liens owed on your home. While a loan to consolidate all of your debt into a single obligation is appealing and may have a lower interest rate than credit card interest rates, make sure that you can really repay that amount. Understand clearly the terms, including the interest rate on the loan.
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