Home Equity to Consolidate Debt

Debt consolidation is available though a home equity line of credit. Home equity is the difference between what is owed on a mortgage and the market value of the home. This equity can serve as the basis for a loan which can be used for debt consolidation. This also means putting an unsecured debt against the security of your home.

Debt consolidation is a simple solution for gaining control of finances. Those choosing to consolidate their debts acquire a loan, and the funds are used to pay off creditors. In turn, the borrower begins making monthly payments to the lender issuing the consolidation loan.

Debt consolidation will not remove a borrower's debt. Instead, the borrower is able to management their debts and repay the balance in a shorter time frame.

There are several different ways to consolidate debts. For the most part, it is easier for homeowners to consolidate debts because their home's equity can act as collateral. Non-homeowners may have to consolidate with a non-profit debt consolidation company.

Determining a home's equity involves simple math. In a nutshell, equity is the difference between the home's market value and the amount owed to the mortgage lender. For example, if the home is worth $300,000, and the mortgage balance is $175,000, the equity equals $125,000. Thus, the owners may receive a loan up to $125,000. However, homeowners are rarely approved for the full equity amount.

About the Author
Settle your debts today! Read about debt relief from financial writer Brad McDonnell, who is an expert on personal finance topics involving debt consolidation, credit card debt, bankruptcy. Credit Solutions provides an affordable consolidation alternative.

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