Equity Consolidation: Equity-based Financial Products

2007-03-08 10:33:40

( Financial )



THE NECESSITY OF DEBT

Debt and equity are necessary in our modern-day society. Every household has to contend with some form of debt at some point or another, with most families barely managing the multiple debts from one payment schedule to the next.

If you have been paying mortgage for some time now, chances are a significant part of your property is already free of debt; this segment of your home is called equity. Your equity is based from the appraised value of your home minus your outstanding mortgage balance.

Equity consolidation refers to special financial products meant to complement other loans such as mortgages and credit card debts. Equity borrowings are solely dependent on your equity, without which you cannot avail of equity consolidation loans.

Your loan-able amount is limited by the value of your home equity. Whether you are availing of an equity lump sum loan or a line of credit, you cannot borrow more than the set amount.

SECURED BY EQUITY

Equity consolidation loans are a good choice if you have some financial needs that must be addressed. Because these types of consolidation loans are secured by your equity, it has lower interest rate charges than other types of borrowings. Furthermore, the interest charges of an equity consolidation loan may be tax-deductible. Of course the downside is that the loan value is fairly limited, but there are ways to get around that like applying for other types of loans to augment your need.

The truth is there is a multitude of financial products and services out there to address practically every borrower’s need. The main issue is how to discern among them and find the one most appropriate for your case. You cannot depend on lending officers because often they will just tell you only what you want to hear. Be a proactive lender and know what you are getting into.


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