Home equity is one of the safest forms of personal debt consolidation. Borrowers don't have to worry about paying fees to debt consolidation companies or ruining your credit through those services. Getting an additional mortgage is a good way to consolidate your debt and use the equity in your home to pay it off.
Personal debt consolidation may help you to fix your credit score. Poor credit ratings are usually the result of not making your payments on credit cards and personal lines of credit and then defaulting on them. There is nothing worse on your credit score than defaulting on credit cards and loan payments. A poor credit rating makes it nearly impossible to buy anything of significance like a car or other large purchases. Personal debt consolidation through home equity is one of the best ways to begin repairing your credit score.
This process works by consolidating your high interest balances such as credit card balances with a low interest loan from your home equity. You will use your home equity as collateral. This type of collateral will help you speed up the process of getting the loan. If your credit rating is exceptionally poor, you will most likely have no other way to get a loan that will pay off our balances without using your home equity as collateral.
The lender begins by calculating the value of your home's equity and determining if there is enough. They will then authorize the loan. There are rare occasions in which the home does not have enough home equity and individuals are not able to get the loan they need.
If you are in this rare situation, your next option in personal debt consolidation is through a loan without collateral. This may be difficult as well and you will need to make all the comparisons and possible closing fees that are associated with the loan. If the cost is too high, you are better off not getting the loan because you will simply be in a worse situation than before.
Your very last option, and it should be considered at the very end, is to seek help from a credit counseling company. They may be able to negotiate with your creditors and help you to set up low monthly payments. Be careful here because there are many scams that desperate individuals may fall victim to.