Paying off multiple debts can be very stressful, especially when you’re paying off medical bills, high-interest loans, and credit card bills. What if we tell you that there is an option that allows you to combine all the loans into one single loan so you can manage your expenses smoothly? So, if you want to reduce the burden of paying four loans at different times of the month, we have the perfect solution for you. A home equity line of credit is the ultimate answer to help you get rid of all your debt burdens and combine them into one single debt that you need to pay. In this article, we will explain what a home equity line of credit is and how it can help you consolidate your debt.
What is a Home Equity Line of Credit?
A home equity line of credit, otherwise known as HELOC, allows you to borrow money by keeping your house as collateral. HELOC will enable you to use the equity in your home. So, in this case, equity refers to the difference between your home’s current market value and the amount you still owe on the mortgage. This means that you can get a pretty good amount by applying for this line of credit. However, before you apply for a home equity line of credit, make sure to choose a reputable company like Amerisave. They offer loans at low interest rates. The best thing? You can borrow as much money as you need.
Reasons to Use a Home Equity Line of Credit for Debt Consolidation
If you are wondering why you should use a home equity line of credit for debt consolidation, let’s look at some of the primary reasons that make it an innovative solution for the consolidation of your debt:
A Lower Interest Rate
A high interest rate on a loan is precisely the factor where things go wrong. You can quickly solve this problem through a home equity line of credit. Compared to other loan types, HELOCs have substantially lower interest rates. Furthermore, using your house as collateral is the main factor lowering the interest rates. So, the lower interest rates mean that you can free up more money to repay your debts.
Boost in Your Credit Score
If your credit limits are high, it can affect your credit score. A high credit score qualifies you for better loans and credit card rates. Moreover, a good credit score also helps you qualify for car loans and rental facilities. You can also get good insurance deals if you have a high credit score. Plus, when you are interviewing for a job, your credit history will also be checked by the interviewer. That’s why paying off your debt with a home equity line of credit can boost your credit score.
Streamlined Payments & Increased Flexibility
A HELOC is all you need to consolidate all of your debts. This will help you avoid all the frustration of paying different loans on different dates. You can also sign up for automatic payment; this way, you will never miss a payment. Moreover, a home equity line of credit also offers you flexible draw periods (typically 5–10 years). You can access any fund that you want in this draw period. Plus, a home equity line of credit also offers a highly workable repayment option.
Although home equity lines of credit bring you a lot of benefits, you need to be extremely careful as your house serves as the collateral. Failure to repay the HELOC could put your property at risk. Therefore, make sure you have a solid repayment plan in place before moving forward.