Debt Consolidation ? Discipline is Required if Consolidating with Home Equity

Debt consolidation is a popular topic these days. The average American carries nearly $10,000 in credit card debt and credit card debt of $100,000 is not all that unusual. New legislation that takes effect in October 2005 is going to make it harder for those with problem debt to file for bankruptcy, so many people are trying to find ways to consolidate their debt instead. One of the most popular ways to do that is through a home equity loan, but borrowers need to be careful, as there are potential problems with borrowing against your home to pay other debts.

The concept of debt consolidation is simple. You transfer the debt from one or more high interest loans to a single, larger loan at a lower interest rate. The most popular way of accomplishing this is to transfer debt from a credit card, which often carries an interest rate of 20% or more, to a home equity loan with an interest rate of less than 10%. By doing so, you can reduce your debt payments by as much as several hundred dollars a month. Those taking out home equity loans for such purposes should be careful and be aware of the following potential problems.

Consolidating through a home equity loan trades unsecured debt for secured debt. Credit card debt is unsecured by collateral. Should you fail to pay, the credit card companies can send a collection agency after you to collect their money, but that's about all they can do. If you transfer the debt to a home equity loan, the debt becomes secured by your home. If you fail to pay that debt, you could have your home repossessed. For those who have problems paying their bills, this could represent a substantial risk.

Consolidating debt requires discipline. Some spenders cease spending only when their credit cards are at their limit. Transferring debt to a home equity loan clears the credit card balance and reduces it to zero. The debt still exists; the bill just comes from a different company. Once the bill is back to zero, compulsive spenders may not be able to resist the urge to spend more. This will leave them with both a home equity debt and additional credit card debt, making a bad situation even worse.

Debt consolidation through home equity loans is a great way to reduce debt. Debtors just need to be aware that they are risking their home when they do so and that additional spending discipline is required. Many debtors may benefit from simply canceling their credit card accounts once the debt is transferred to the home equity loan. Reducing debt is always a good idea. Debtors just need to make sure that they don't run up more debt or lose their home in trying to do so.

©Copyright 2005 by Retro Marketing.

Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including End-Your-Debt.com, a Website devoted to debt consolidation information and HomeEquityHelp.net, a site devoted to information on home equity loans.

---

Powered by Feedzilla

Websites For Sale

Master Resell Rights Ebooks

What You Need to Know About Debt Consolidation Loans UK

Should you find yourself over your head in debt, you... Read More

Debt Relief From Debt Consolidation

If you are up to your neck in debt, there... Read More

Pay Off Debt Now: 5 Steps To Getting Your Finances in Order

In our world of dizzying change, nothing is more true... Read More

Individual Voluntary Arrangement IVA, an alternative to bankruptcy

Individual Voluntary Arrangement, IVA is an alternative to bankruptcy -... Read More

Credit Card Purgatory - A 7 Step Comprehensive Plan to Get and Stay out of Credit Card Hell

Does this Sound like You? There are 100 shopping Days... Read More

Shake off the Chains: Credit Card Debt Elimination is Easier Than You Think!

Feeling like you're on the brink of financial disaster? You're... Read More

Debt Consolidation: How it Works

As long as consumerism flourishes most of us will be... Read More

Debt Consolidation Mortgage - Decode Its Apparent Complexity

Someone great once said that 'if it isn't the sheriff,... Read More

Debt Consolidation: Friend or Foe?

Debt consolidation has become big business in this country over... Read More

Debt Consolidation Made Simple

If you have considered debt consolidation then you are probably... Read More

Stafford Loan Consolidation

Stafford Loan ConsolidationA Stafford Loan, which can help to finance... Read More

The Burden of Debt

Over recent years personal debt in the UK has exploded.... Read More

Escape the Credit Card Death Spiral

You're burdened with crushing debt and at the end of... Read More

Negotiate Your Way Out Of Debt

Eliminating your debt is a daunting task. What can you... Read More

Bad Credit Debt Consolidation Loan

Nowadays, many people can get into a bad credit situation... Read More

Consolidate All Your Debt Into One Monthly Payment

Are you feeling overburdened with debt? Are you paying out... Read More

Debt Consolidation - Free Information About Consolidating Debt

Millions of consumers across the globe are searching for a... Read More

Guide to Debt Consolidation Loans

Here is a useful guide to Debt Consolidation Loans. A... Read More

What Is A Debt Consolidation Program?

Debt consolidation programs are devised to get you out of... Read More

Debt Consolidation ? Be Careful When Trading in Your Car

The automobile has long been recognized as the classic American... Read More

How To Get Rid Of Debt Problems Step 2 -- How To Prepare A Financial Statement

Here is how to prepare a financial statement, for the... Read More

How To Get Rid Of Debt Problems Step 1 -- How To Deal With Your Creditors

However far you are along the road of financial/debt problems,... Read More

Debt consolidation ? Options for Reducing Credit Card Costs

Americans are using credit cards more than at any time... Read More

A Simple Question We All Wonder - Are Debt Settlement Companies Scams?

Are debt settlement companies scams? It's a simple question so... Read More

Before Considering Debt Consolidation

If you believe in the good in people then you... Read More