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Applying for a consolidation home equity loan is something that many people do to consolidate their bills. Using your home equity loan to consolidate bills makes sense on many levels. Getting your bills consolidated into one monthly payment can remove a huge mental and financial burden. There are a few advantages to applying for this type of loan.
One of the biggest advantages is reducing your payments to smaller, more affordable payments. Most of the time, people who are considering consolidation have several high interest credit cards. Paying credit card rates is a great way to remain in the cycle of debt because the rates tend to be high. The rates of a consolidation home equity loan are typically lower. Consolidating your debt into a more reasonable interest rate will save you money and allow you to pay it off faster.
Another huge advantage of home equity loans is that the interest is tax deductible. When you start a home equity loan, you will be paying a healthy amount of interest over the first few years. You can deduct that from your taxable income. When you compare this to any other type of loan, it will save you a great deal of money in the long run because credit card and car loans are not tax deductible.
Where to Apply
If you have a good credit score, you will receive many offers for home equity loans. When you receive one of these offers, there are usually a number of different options for you to apply with. You can either apply online or call their toll free number and apply right over the phone.
Also, most banks offer this loan type and you can apply in person. If you prefer to do business face-to-face with someone, this is often the easiest way. You talk to a loan officer, fill out some forms, and they will review the application.
What You Need to Qualify
Qualifying for a home equity loan requires much of the same that you need to qualify for a standard mortgage. The most important thing is that you have a good credit score. Your credit score tells potential lenders what type of borrower you will be. If you have a good history of paying your accounts and not much debt, your score will reflect this.
In addition to a good credit score, you will also need to be able to demonstrate that you can repay the loan. They will want to verify employment and make sure that you have enough income coming in to qualify for the loan. In addition to income verification, there is also verification of assets. You will need to be able to demonstrate that you have sufficient money in your bank to be able to cover your payment for at least 3 to 6 months.
Additionally, a lender will review your home’s condition and its value. They will do an appraisal on the house to make sure that there is equity in the home and that it is in good condition. Every lender has their own lending ratios they use to determine whether you have enough equity to borrow.
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