| Debt consolidation is a popular topic these days. The | | | | after you to collect their money, but that's about all |
| average American carries nearly $10,000 in credit card | | | | they can do. If you transfer the debt to a home equity |
| debt and credit card debt of $100,000 is not all that | | | | loan, the debt becomes secured by your home. If you |
| unusual. New legislation that takes effect in October | | | | fail to pay that debt, you could have your home |
| 2005 is going to make it harder for those with problem | | | | repossessed. For those who have problems paying |
| debt to file for bankruptcy, so many people are trying | | | | their bills, this could represent a substantial risk. |
| to find ways to consolidate their debt instead. One of | | | | Consolidating debt requires discipline. Some spenders |
| the most popular ways to do that is through a home | | | | cease spending only when their credit cards are at |
| equity loan, but borrowers need to be careful, as there | | | | their limit. Transferring debt to a home equity loan |
| are potential problems with borrowing against your | | | | clears the credit card balance and reduces it to zero. |
| home to pay other debts. | | | | The debt still exists; the bill just comes from a different |
| The concept of debt consolidation is simple. You | | | | company. Once the bill is back to zero, compulsive |
| transfer the debt from one or more high interest loans | | | | spenders may not be able to resist the urge to spend |
| to a single, larger loan at a lower interest rate. The | | | | more. This will leave them with both a home equity |
| most popular way of accomplishing this is to transfer | | | | debt and additional credit card debt, making a bad |
| debt from a credit card, which often carries an interest | | | | situation even worse. |
| rate of 20% or more, to a home equity loan with an | | | | Debt consolidation through home equity loans is a |
| interest rate of less than 10%. By doing so, you can | | | | great way to reduce debt. Debtors just need to be |
| reduce your debt payments by as much as several | | | | aware that they are risking their home when they do |
| hundred dollars a month. Those taking out home equity | | | | so and that additional spending discipline is required. |
| loans for such purposes should be careful and be | | | | Many debtors may benefit from simply canceling their |
| aware of the following potential problems. | | | | credit card accounts once the debt is transferred to |
| Consolidating through a home equity loan trades | | | | the home equity loan. Reducing debt is always a good |
| unsecured debt for secured debt. Credit card debt is | | | | idea. Debtors just need to make sure that they don't |
| unsecured by collateral. Should you fail to pay, the | | | | run up more debt or lose their home in trying to do so. |
| credit card companies can send a collection agency | | | | |