Many Florida residents find themselves looking for ways to reduce outstanding debts. One option that may help homeowners find a measure of relief from overwhelming debt is to use a home equity loan to pay off other outstanding debts.
One mortgage broker reported helping a client obtain a loan of $465,000 on a home worth $620,000. What the client primarily wanted to do was eliminate a home equity line of credit on which they owed nearly $37,000. The cash that the couple obtained was more than enough to pay $70,000 toward the line of credit and credit card debt. With an interest rate of only 3.75% and a 30 year term, the resultant payment was lower than what the couple had paid previously.
Equity in a person’s home has value. When a person is able to access that equity, it can provide much-needed cash that can be used to pay other debts. Because a home equity loan is a secured debt, it typically carries a lower interest rate than unsecured debts such as credit cards. That means that a person who consolidates multiple debts into a home equity loan may be able to get lower monthly payments, especially on a long-term loan.
There are many options available to consumers faced with mounting debts. Debt consolidation is one way to reduce debts without damaging a person’s credit. A lawyer may be able to help consumers obtain a loan to pay off other debts, negotiate lower monthly payments or negotiate a settlement with creditors. Alternatively, a lawyer may be able to help consumers determine whether bankruptcy is the right option for debt relief.
Source: SFgate.com, “Couple pays off debts with 30-year loan,” March 27, 2013