Thursday, June 6, 2013
A Guide to Home Loan Consolidation
Sometimes, it seems that bills and debts begin to spiral out of control and there just doesnt appear to be any way to break free. If you find yourself in this sort of situation and are falling behind on your bills and other debts, you might want to stop and consider a home loan consolidation to help you get everything back on track. A home loan consolidation uses the value of the equity stored in your home to secure a loan that is then used to consolidate your various debts and bills into a smaller, more manageable monthly payment.
Additionally, by choosing to use a home loan consolidation you can actually begin to repair any damage that has been done to your credit rating by some of your previous outstanding debts. As with any loan, however, its important that you take the time to learn about how these loans work so that you dont accidentally get in even deeper over your head.
Debt Consolidation
The first thing that you should know about a home loan consolidation is that the name is actually somewhat misleading. Instead of truly consolidating your debts, the loan that you receive will be used to pay those debts either in part or in full. You are then left with either reduced and up-to-date debts to finish paying, or you have completely paid what you owe and have only the loan payment to make each month. The end result appears to be a consolidation of your outstanding debts and bills, though they will be reported to the credit bureaus as either paid in full or at least paid up to the current date.
Securing the Loan
Since a home loan consolidation uses the equity that youve built up in your home over the years, it actually works much like a mortgage loan that you would apply for from any bank or other lender. The major difference between the two loans is what the money is used for... while a mortgage is used to buy the house or other real estate, the home loan consolidation is used to repay old debts or make others current. You should use the same caution that you would use with any mortgage or homeowner loan, taking the time to shop around for lenders and comparing the loan offers that you receive from each.
Credit Repair
If youre having to consolidate your outstanding debts with a home loan consolidation, theres a good chance that your credit rating has taken some damage while your debts and bills were starting to get out of control. Luckily, in addition to making your debts current if not completely paying them off (and thus stopping your debtors from making continued reports to the credit bureaus about your late or missing payments) you can actually begin to slowly but surely fix some of the damage that has been done by those same debts.
Making your loan payments on time will cause the lender that youve gotten your home loan consolidation from to begin making positive reports to the credit bureaus, which is very important to getting your credit back on track. Though the damage done by your previous debts can remain on your credit report for several years, in time the negative reports will begin to expire and be removed from the report... and the newer positive reports will begin to have more and more effect on your overall credit score.
