Pros and cons of a home equity loan
Florida residents who are tying to consolidate their debt may look at getting a home equity loan. In most cases, the interest rate on a home equity loan is lower than that on a credit card balance. However, this is not the only factor that people should consider when choosing to use equity in a home to consolidate debt. It is also important to consider that people could lose their home for failing to make equity loan payments.
Credit card debt may also be easier to discharge in a bankruptcy proceeding compared to home equity loan debt. This is because credit card debt is unsecured while the home equity loan is a secured debt. Prospective borrowers should also consider that loans may take up to 10 years to repay, and if the value of the house drops, they may owe more than the house is worth.
Those who have good credit may have other options aside from a home equity loan. It may be possible to consolidate credit card debt by transferring existing balances to a card offering zero percent interest for anywhere from six months to two years. A personal loan may come with an affordable rate that does not require a borrower to use a house as collateral.
Debtors who are looking for a fresh financial start may wish to consider filing for bankruptcy. Chapter 13 bankruptcy allows a debtor to reorganize and repay debt balances over a three or five year period. Creditors may also agree to renegotiate the terms of a secured loan to help a borrower get current on his or her mortgage or other loans secured by collateral.