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3 Home Equity Debt Consolidation Loan Alternatives


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TERMINOLOGY

If you need to consolidate debt, you might look at a home equity debt consolidation loan. This type of loan is one of the most popular ways to pay off your creditors and get your payments under control. However, this is not always possible for one reason or another. You may not qualify for a loan because your home’s equity may be low, your credit might not be good enough and many other factors. Luckily, there are other options to consolidate debt besides using a home equity loan. Here are a few alternatives:

Hard Money Loans

Hard money lenders are everywhere these days and they are more than willing to lend you the money you need. They do business with people in distressed situations every day. They will lend you the money you need in return for a higher than average interest rate. This is not exactly the best option if you can avoid it, but it is an option if you need it. You can find hard money loans online or by searching around your area. Many times, they will advertise in the classified section of your local paper.

Peer-to-Peer Loans

A growing trend among financially savvy consumers is to use a peer-to-peer loan to consolidate debt. With a peer-to-peer loan, you are borrowing money from a private individual that has a little extra money lying around. They are not usually professional lenders, but people who want to lend a helping hand and earn a little bit of interest along the way. There are many sites out there that act as intermediaries between peers to facilitate the lending process. You simply log onto the sites and search for someone who can help. This can be done by putting out a classified ad on these sites or through a bidding process. The bidding process is an especially good idea as it can get you a better interest rate. You will fill out a form that includes the amount of money you need and the interest rate you request. Lenders will come along, look at your ad, then bid on the loan by lowering their interest rate. The website pulls your credit history and summarizes it for the lender. They award the contract, deduct the payments from your bank account and pay the lender. It is a very simple process and one that keeps the banks at bay.

Zero Percent Credit Cards

This is probably the riskiest strategy out there to consolidate your debt. This strategy is usually best if you are already paying high interest on your existing credit cards. Then, and only then, will this strategy make sense. If you have two or three credit cards with balances on them, you apply for a new credit card with an introductory zero percent APR. You then transfer the balances of the other cards onto this one. Typically, the zero percent rate is offered for up to 18 months and you can focus on paying off the debt.