Debt Consolidation, The Hazard of Home Equity Loans
By Scott Sumerford on Friday, August 31st, 2007 :: 4:35 pmCategory: Financial News
Home ownership not only provides a safe place for your family to live, but it can be your greatest investment. Why then are so many Americans risking the security of their home to consolidate debt? Consumer debt has risen 80 percent in the last ten years and consumers are searching for a solution to increasing debt. Home-equity loans have become a popular form of debt consolidation, but many consumers are finding out its dangers too late.
According to RealtyTrac, a leader in the foreclosure market, foreclosures increased 9 percent in July and are up 93 percent since July 2006. The total number of foreclosures reported nationwide during July was 179,599. The exact cause of the increased number of foreclosures is due to suspect lending practices, second mortgages and a myriad of factors.
Unfortunately, many consumers don’t realize the inherent danger involved with adding unsecured debt, such as credit card debt, to their home mortgage payment. Banks offer home-equity loans as a way to consolidate consumers’ debt, but often the new loans have adjustable interest rates, closing costs, appraisal fees and other costs the bank may charge. These charges are usually rolled into the loan and consumers actually pay thousands of dollars in interest simply acquiring a home-equity loan.
If you are considering debt consolidation with a home-equity loan, research the company and the structure of the loan. It is important to calculate all the added fees involved with home-equity loans to see if the complete process will actually save you money or cost you more money. An alternative to a debt consolidation loan is debt settlement, which can save you thousands on your credit card debt.
Author Bio: Scott Sumerford has several years of experience working in the financial industry and has written a myriad of articles on various financial matters. He graduated from the University of Texas at Arlington where he worked as a writing center tutor and contributed to the university’s newspaper, The Shorthorn. Read more about how Credit Solutions offers a viable alternatives to debt consolidation.
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