finance debt loans – consolidate

L T asked:


my credit card debt is $17000 and my loan is $9000. And what if I loose my job?

Hazel

Carrie Reeder asked:




Secured loans make your creditors feel more secure about loaning you money. When someone takes out a secured loan, that simply means there is collateral to back up the money they borrowed. This could be a car, or more commonly, a house. There are pros and cons to getting a secured loan as opposed to a standard loan for debt consolidation.

Home Equity Line of Credit – Perhaps one of the most common secured loans is the home equity line of credit. This loan amount is based on how much equity you have in your home. Once you take out this type of secured loan, your house becomes collateral. The most positive aspect of a secured home equity loan is that the money you borrow is tax deductible. For instance, if you have $5,000 in credit card debt, you can roll that over into a home equity line of credit. The credit card payments are not tax deductible, but the home equity loan is. In contrast, standard debt consolidation loans are not tax deductible.

Interest Rate Advantages – Another advantage of using a secured loan for debt consolidation is the interest rate. For many people, credit cards are the source of their debt problems. Credit cards have enormous interest rates. Since secured loans are “secured” by collateral, they tend to have significantly lower interest rates.

After discussing the pros, it is important to understand the con of using a secured debt consolidation loan. Again, many people use a house or a car to secure these types of loans. If you happen to default on the loan and cannot make payments, your house or car will be in jeopardy. A house is usually the largest asset someone owns. You do not want to put your most valuable asset at risk.

For some people, debt consolidation is the best option for their financial problems. Be sure to carefully weigh the pros and cons before choosing to use a secured loan for your debt consolidation.

Ryan

Shawn P Dempsey asked:




Can you erase debt with a home equity loan or line of credit? Sort of. I am not suggesting that people go and take out a home equity loan to pay off debt. Because that is just taking on more debt to pay off debt. A no-win scenario. However, this is addressed more to the folks who already have a loan or line of credit and are not completely out of debt yet. So here are 3 ways to use a HELOC to get out of debt.

1. Eliminate High Interest Debt

Use the loan to pay off higher interest rate credit cards or loans. Most of these loans are at lower interest rates. Usually somewhere around 3% – 5%. If you have several thousands of dollars on a credit card that is at 15% then it makes sense to use the loan or line of credit to pay off the credit card. In fact if you have enough room on a HELOC to pay off other cards or loans then do it to take advantage of the lower rate and to consolidate multiple payments into one payment. Then accelerate paying off you home equity loan to get out of debt.

2. Temporary Emergency Fund

If you have $10,000 or $20,000 or more in a home equity loan or line of credit that is unused then do not use it and keep it as a backup emergency fund. Especially if you do not have the cash reserves yet for a true emergency fund. So while you are building up your real emergency fund keep the loan as a fall-back just in case anything like a job loss happens before you can build up a fully funded emergency fund of 3 to 6 months. In addition with the vastly lower interest rates on HELOC’s it makes sense to use it temporarily as an emergency fund rather than a higher rate credit card.

3. Pay It Off

Lastly you can pay off the HELOC. If you already have all of your debt paid off and you have a fully funded emergency fund, then pay off the HELOC and get rid of it. Let’s face it, ultimately any sort of home equity loan or line of credit is debt. And it needs to go. If you have no real need for it then pay it off and eliminate that debt. Do not get the wrong idea that you have to keep it just in case. It is debt and needs to be gone. This is the best option of what to do with a home equity loan.

No matter what you do be careful to fully think through the possible ramifications of using your home equity. The use of home equity potentially puts your home at risk if for some reason you can not pay back the home equity loan. Do not treat it lightly. Otherwise if you do have a home equity line of credit or loan carefully consider using it to help eliminate higher interest rate debt. Use it as a temporary emergency fund. And then pay it off and erase debt as fast as you can.

Lonnie

cme4ins asked:


I contacted a debt solution program but they say my credit will be hurt until I get these paid off. My credit is real good I just have alot of credit card debt that I would like into one lump sum with a fixed monthly payment. I cannot take a home equity loan due to a second mortgage for a business loan. My local bank said I don’t have enough assets for a personal loan to cover the whole amount.

Christopher