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Using an equity loan for debt consolidation

By Gordon Parkes

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Published: 17Dec2008
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A home equity loan is a great way to free up extra cash, whatever the reason for borrowing. If your home is worth more than the mortgage on it, you will be able to obtain a home equity loan equal to the difference.

This loan can be used for any purpose, such as:

- Debt consolidation.

- Home improvements.

- Financing a car purchase.

- Funding a well deserved holiday.

If you have other debts, you may want to use an equity loan for debt consolidation. This involves taking out one secured loan to pay off several other existing debts.

Debt consolidation can make it easier to handle your monthly repayments, as well as saving you money.

Instead of juggling several repayments, a consolidation loan means you can focus on just one monthly payment. Secured loans also usually have a lower rate of interest, so using consolidation to pay off unsecured loans can save you money.

Secured loans have a lower interest rate because some form of asset has been named as collateral on the loan. This means that there is less risk to the lender.

While debt consolidation can save you money, it can be difficult to find the right lender. One way of doing this quickly and effectively is to let a broker carry out a search for you.

A manual search will mean that you will have to contact several lenders and take on the complex task of comparing different interest rates, repayment terms and other deals. A broker will be able to do all this for you. By using their extensive network of contacts, a professional broker will be able to compare hundreds of lenders, finding the equity loans that meet your needs and fit your budget.

Your broker will also work with you when you are filling in loan application forms. If you have any questions, your broker will be able to answer them.

You can also help make sure that your loan application is successful, by ensuring that you have all the paperwork you need at hand before completing the forms. Usually, you will require:

- Recent utility bills, such as gas or electricity bills.

- Proof of identification, including your address and photograph.

- Payslips or account references.

- Bank statements form the last three months.

By taking out a home equity loan, you can benefit from the value of your home, using the money to pay off existing debts, and dramatically reducing your outgoings.

Gordon Parkes has written numerous articles about the loans industry and how people can benefit from debt consolidation. Find out about getting a finance consolidation loan or freeing up cash with a bad credit equity loan.

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