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Pay Off Debt with a Home Equity Loan

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The consumer is the v8 engine of our economy. The more people buy, the better our capitalist system works. While consumerism works well on a macro level, sometimes people overextend themselves on the micro level and accumulate debt. If you need to get yourself out of the red, consider using a home equity loan.

Being a good American takes a lot of money. Our businesses thrive when consumers are happy and flush with cash. Even in the harrowing days that followed 9/11, our politicians urged us to get out and go shopping, because of short terms goals.

Pumping money into the economy is a great way to help America though a crises, but it can hurt you on a personal level if you’re not careful. Very often, people spend too much money on shopping trips, and acquire debt that they simply can’t pay off.

If you’ve been a loyal consuming American who’s now heavily in the red, a home equity loan can help you get back in the black.

HELOC basics
There are two types of second mortgages: A home equity line of credit (HELOC) and a home equity loan. Both can be used to pay off debt, but each has a specific application.

A HELOC works like a credit card; it’s a line of credit that uses the equity in your home as collateral. By switching your debt load over to a HELOC, you can take advantage of the loan’s favorable interest rate, which is often much lower than credit cards, because the leader have security in you property.

A HELOC is a good choice for paying off smaller amounts of debt, primarily because it carries a variable interest rate. However, if the Federal Reserve decides to increase rates, payment on a large amount of debt could prove burdensome.

Home equity loan basics
For larger loads of debt, consider using a home equity loan. This is a fixed rate, fixed amount loan.

You borrow the money in a lump sum, and make set payments over a certain period of time. Because you’re locked into a rate, you don’t have to worry about market fluctuations. It’s ideal for large, one time expenditures like home improvements or debt consolidation.

When you shop for a second mortgage, consider a number of different variables. Look for the lowest rates, the best terms, and the lowest closing costs.

Make sure that your home equity lender also has a number of references and excellent customer service. Work with a bank or credit union that bends over backward for your business.

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