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Home Owner Debt Consolidation Loan Types


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TERMINOLOGY

Consolidation of debt with a home loan by the owner of the property can be a smart financial move for the future. If you have a great deal of outstanding debt, consolidating it into a lower interest loan can be very beneficial.

Home Equity Loan

Using the equity in your home is a great way to consolidate debt because you will pay a much lower interest rate. Credit cards, personal loans and other consumer loan products have higher rates than the traditional home equity loan. If you have a lot of debt, you can get rid of the credit cards and consolidate them into one loan with a lower rate. The lower monthly payments will save you a lot of money. In addition to saving you money in payments, you can deduct the interest on your taxes.

There is also a loan called the home equity line of credit, or HELOC. A HELOC also uses the equity in your house and you can deduct the interest on your taxes, as well. The main difference with this type of loan is that there are no set terms and you can repay what you borrow. It works very much like a credit card for the first 5 to 10 years.  The rates are typically lower and the interest is also tax deductible.