Consolidate Your Debt With a Home Equity Loan

By Gabriel Traverso
Local Lender Columnist
Apr 6, 2007
It might make perfect sense to borrow against your equity to make home improvements, but San Diego homeowners with out-of-control debt might also consider home equity loans for help getting their finances under control.

Debt Consolidation Using Home Equity

Today more homeowners are turning to the equity they have in their homes to solve their debt consolidation problems. In fact, a recent study conducted by the American Community Bankers Association suggests that 40% of today's home equity loans are being used for debt consolidation. If you have equity in your San Diego home it could be the perfect way to get your debt under control.

Borrowing Against Your Equity

It may have taken years to build up equity in your home, especially now that the San Diego real estate market is stabilizing. Once you borrow against that equity, it may take some time to get it back. However, if you have high credit card debt with interest rates exceeding today's mortgage rates, taking out a home equity loan could be the best answer. If you can lower your payments and lower your rates then perhaps a debt consolidation loan is the solution you've been looking for.

Exercise Caution

Home equity mortgage loans are hot right now and many San Diego lenders could be interested in your business, but be prudent. As you shop for a second mortgage watch out for the following:

• Loans based on the equity you have, not your ability to repay--make sure the payment is something you can handle or you could lose your home.
• Lenders who urge repeat refinancing--disreputable lenders may add high fees to your balance over and over with ultimately no benefit to you.
• Bait and switch: you agree to a loan but late in the process or even at closing the lender tries to switch it out for another. Lenders are required to give you three days to rescind, or cancel, a refinance loan against your primary residence. If something about your new loan seems fishy, use that right to cancel it.

Most lenders operate lawfully, but some predatory lenders don't exactly have your best interest at heart. Be responsible as you consider your debt consolidation options and if you take out a home equity loan make sure you won't be making your situation worse.

About the Author
Gabriel Traverso is a freelance writer, professional musician, and an artist. He resides with his family in Reno, NV.