Home equity debt consolidation will allow any homeowner to stop wasting money on high interest rate loans and begin paying down the principle amount on unsecured loans.  While many debt consolidation companies will offer to consolidate outstanding balances into one loan with better repayment terms, they will often charge interest rates of almost 20%, only marginally lower than a credit card.  Even those with low credit scores can qualify for a home equity debt consolidation loan that will allow them to pay off all high interest accounts and repay debt at 7-10% interest.  Over the life time of a loan, this will amount to thousands in savings, and will help a borrower become debt free much more quickly.

Debt consolidation home equity loans are only available to home owners.  A home equity loan means that you are borrowing money using your home as collateral.  This type of loan is considered a secured loan, as the amount borrowed is backed by something of equal value.  Because these loans are considered low risk, interest rates are typically in the single digits, far lower than those offered on unsecured loans.  In most cases, interest paid on home equity loans is also tax deductible, which will also lead to significant savings for the borrower.

The borrowing limit for these types of loans is typically the value of your home, or the amount of money you have already paid toward your home.  If the total amount of outstanding debt is less than this amount, using home equity for debt consolidation is a good idea.  While these loans will reduce monthly payments and often the repayment schedule will be extended.  Most mortgage loans are offered with 15 or 30 year terms.  Calculate the total amount of interest that will be paid in this time to find the full repayment amount.  Alternatively, if you are able, look into securing a loan that does not charge any additional fees for early repayment.  This way, even a 15 year loan can be paid off quickly and the benefits of the low interest rates will be seen.

Before taking out debt consolidation loans, it may be in your best interest to speak with a financial advisor.  They can talk to clients about what to expect when they consolidate debt and can be allies in understanding the terms of any loan agreement.  Advisors will help clients make a budget that will enable quick repayment, and will clean up a credit report before loan applications are filled out to guarantee the best possible interest rates.  Whether you decide to use a company that operates in your hometown or online, check with the Better Business Bureau and get a sense of the company history to make sure that they are a reputable institution.

Now is a great time for home equity debt consolidation.  For qualified applicants, home interest rates are at incredibly low levels, and low risk, fixed interest loans are widely available.  Anyone who holds credit card debt should consider moving balances into secured loans.