THE NEGATIVES OF HOME EQUITY LOANS
Almost all Americans have some sort of high interest debt that
is costing them too much money. Homeowners have the option of
utilizing the equity of their home by
applying for a low interest
home equity loan or a
cash-out refinancing. You are not eliminating
your debt when you use the equity from your home to settle your high
interest bills, you are simple relocating it. You can learn more
difference between equity loans and cash-out refinancing.
Your monthly debt payments will be lower with
any type of home equity loan. These lower payments are deceiving,
and are not as beneficial as you think. You will end up paying more
in the long run because you are now stretching out your payments
over an extended period of time.
Just like with any bad habit, good behavior is hard to keep.
Old spending habits come back, resulting in the purchase of
unnecessary items. All too often, the negative
credit card debt cycle reoccurs.
However, this time, the equity from your home is tapped out, leaving
you with no 'easy fixes' for resolving your financial issues.
Home equity loans are not cheap!
Your home's equity is something that you should
appreciate, conserve and not use up. Below are some facts about home
equity loans you should know:
Building home equity is a way to increase assets and supply you and your
family with a strong feeling of security. When you start using your
equity to pay your bills, you become poorer.
-- Using too much of your home's equity will result in you having to pay
PMI (private mortgage insurance).
-- Credit card companies are not allowed to foreclose on your home if you
do not pay your bills. However, a home equity loan is a
loan, secured by your house. If you do not make your payments, your
home can eventually be taken away from you by your lender. Learn
how to avoid foreclosure.
-- There are
fees associated in the closing costs of home equity loans.
This can result in you being in more debt. Also, some equity loans
have prepayment penalties if you decide to pay-off your loan early.
You can learn more about the
pros and cons of refinancing to consolidate debt.
You have other options:
There are other options for consolidating debt. We offer a
consolidation program that will reduce your debts by as much as 60%.
Once enrolled, we will negotiate with your creditors to reduce your
interest rates and total obligations. You can learn more about our
differences between debt consolidation programs and debt
consolidation loans is also a good idea.
You may also want to consider reading the
do-it-yourself debt elimination section of our site.