Should I Consolidate My Debt?

Learn more about when to consolidate debt with home equity loans

Debt consolidation with a home equity loan can help you create a more manageable monthly payment and might even get you a lower interest rate. However, if you're thinking about consolidating your debt, it's important to consider what may have caused your financial concerns, and work on ways to limit new debt while paying down your consolidated loan. Debt consolidation isn't for everyone, so how do you know if it's the right financial choice for you? If you are considering consolidating your debt, speak to a financial advisor who can talk you through the process.

The benefits of debt consolidation with home equity

Debt consolidation may make sense in certain situations. If you're able to get a home equity loan with a better rate and lower monthly payment, you can use that loan to pay off high-interest debt or payments you're struggling with. Consolidating your debt like this may mean extending the term of your loan, but once you have control over your finances you can begin making prepayments towards the principal to pay down your debt. You could also choose to open a home equity line of credit, which would allow you to make interest-only payments during the borrowing period, delaying the time period in which you need to make amortized payments until you find yourself in a better financial position.

When to consolidate debt

Everyone's financial position is different, but there are several scenarios where it may make sense for you to consolidate your debt. If you have high interest credit cards and can obtain a lower home equity loan rate, it might be wise to pay down your credit card debt with home equity financing. You could also use home equity to cover car payments, medical bills or damage to your home. This may not mean consolidating all your debt into the new home equity loan, but rather, using what you need for a short time and benefiting from interest-only payments on a HELOC and a lower rate when the borrowing period ends.

You probably don't want to use home equity to consolidate student loan debt. In fact, you may not be able to. Student loan rates are often lower than other loan options and you may be better off speaking to a student loan originator about deferment or other student loan repayment options rather than using home equity to consolidate your debt.

Repair and consolidate your debt

Debt consolidation with a home equity line of credit is a short term solution to a difficult problem. If you're having trouble making payments or managing your debt, you should take time to look over your finances with an expert. They'll help you pick the right way to consolidate your debt, counsel you on repayment options and create a personalized system to manage future expenses and avoid debt.

Learn more about home equity borrowing from Citizens Bank

Home equity financing is a versatile borrowing tool. It can be used to cover home renovations, take care of emergency payments and consolidate debt. If you decide this is the right option for you, start the home equity application process by completing a contact form online, or speak to a Home Loan Originator at Citizens Bank to learn more about home equity loans and lines of credit. They can help you choose the loan structure that best fits your borrowing need.

 

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