Home Equity Debt Consolidation Tips

Find ways to use your home equity as a consolidation loan to reduce debt

From mortgage payments and car payments to student loans, life insurance, credit cards and any other number of financial obligations, life is certainly full of big bills. Even people who are responsible with their money can face some level of debt. If you’re a homeowner, your home equity can actually help consolidate this debt.

Home equity can be a great consolidation loan for a couple of reasons:

  • Home equity loans have lower interest rates than personal and other types of loans, like car loans.
  • Your repayment period is more like that of a mortgage with multiple periods to choose from.
  • Interest you pay on a home equity consolidation loan may be tax deductible. Consult a tax advisor for eligibility.

Review the following home equity debt consolidation scenarios to see if this may be a solution for you.

  • Simplifying student loan payments with a home equity consolidation loan

  • With the cost of education rising and more people getting advanced degrees, student loan payments can seem overwhelming. Payments can stretch to 25 or even 30 years, and interest rates and consolidation opportunities constantly fluctuate. If you didn’t lock in the best rate on your loans and you’ve owned your home for several years, consider home equity consolidation. This is a particularly attractive option for married couples in which both partners are carrying student loan debt. It’s possible that you’ll be approved for a loan that can satisfy your various lenders, leaving you with one, low-interest loan to pay.

  • Paying off high-interest car payments using your home’s equity

  • As they say, new cars lose value the second you drive them off the lot. While it’s only an expression, it highlights the reality that auto loan debt is some of the “worst” debt to carry: Auto loans have high interest rates and collateral that depreciates. When you’re finished paying off the loan, you’ve paid more than the value of the car. Instead of taking out auto loans every time you buy a new or used car, look into your home equity loan options. This can be especially helpful if you’re a multi-car family. A home equity consolidation loan can pay those cars in full so you can pay one loan with lower, tax-deductible interest.

  • Eliminating credit card debt with home equity consolidation

  • Credit cards are another source of debt tension in many households. Just like auto loans, credit cards carry high interest rates. Once you fall behind on a credit card, fees and added interest can start to push the total out of your reach. If you’re carrying a significant amount of credit card debt, perhaps upwards of $10,000 or $15,000, investigate your home equity options. You may be able to consolidate your debt into one payment with a longer repayment period and much better interest rate. Zeroing out your credit card balance could also help your credit score.

Carrying a large amount of debt can be stressful, but there are options and tools out there to help you take control of your finances. If you find yourself in one of the above situations or something similar, talk to a Citizens Bank Home Loan Advisor or answer a few questions online to get the home equity loan application process started. Once you submit your information, a Home Loan Advisor will contact you to complete your application.

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