Understanding Home Equity Debt Consolidation
May 19th, 2011 | 
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These days, many people resort to getting a home equity loan when they need to finance a major expenditure like house renovation, debt consolidation or college expenses. It is quite easy to apply for this type of loan. Often, people’s application for home equity loans gets a stamp of approval. This is not surprising since lenders generally view this type of loans as low-risk loans. They don’t actually incur losses because they could always foreclose on the home if the debtor or borrower is unable to pay his loans. This is why home equity loans are sometimes viewed as second mortgages. However, if you have existing debts or mortgages, you might want to consider applying for a home equity debt consolidation loan.
What is HEDC?
To understand home equity in relation to debt consolidation, you need to first understand the concept of home consolidation. Basically, when you speak of home consolidation, you generally refer to the process of taking out one big loan in order to repay all other outstanding loans or debts. You end up with one loan and one interest rate.
When you speak of debt consolidation in relation to home equity, you obviously refer to the process of applying for a home equity loan and using the proceeds to pay off outstanding debts. This is not meant for just anyone because not everyone can qualify for it. It has a limited resource.
Who Needs HEDC?
If you are like most Americans, then you are probably struggling to pay off two or more credit card loans. Unfortunately, many people are sharing the same predicament. Many people are juggling two or three credit cards and they can hardly afford meeting monthly payments for one. Many are even forced to declare bankruptcy because they cannot afford to pay their debts especially the interest rates. If you are one of these many people, you may want to consider getting a home equity debt consolidation loan.
Basically, people who have multiple debts are those that are in dire need of home equity debt consolidation. The requirement, however, to qualify for this loan is home ownership. If you are not the owner of your home, you cannot apply for this type of loan. In that case, you may want to consider other sources for debt consolidation.
Can I apply for home equity debt consolidation if I’m a partial owner of a house?
Yes, you can. As long as you are technically a legal owner of a house, you can place this house as collateral to take out a loan for debt consolidation. You will be basically given a loan that is almost equal to the equity of your house. However, there are lenders who are willing to extend a loan that is equal to at least 85% of the house equity and there are those who are only willing to extend 50% of the value of the house’s equity. Before you actually choose your lender, you should carefully consider their terms, rates, charges and fees. This would give you the chance to get a higher amount of loan to fully pay off all your existing debts.
Posted in Home Equity | 
Tags: College Expenses, Credit Card Loans, Credit Cards, Debt Consolidation Loan, Dire Need, Home Equity Loan, Interest Rates, Predicament