A debt consolidation loan is essentially a home equity loan or refinance mortgage, which is used specifically for consolidating high interest debt into a lower fixed rate monthly payment. Fixed rate debt consolidation loans are amortized to be paid off at the end of the term, eliminating the debts.

It’s possible to save more money by converting high interest rates, and daily compounded interest on credit cards, and other debt, into a lower rate loan with simple annual interest. More savings may come from tax deductible interest when a loan is placed on an owner occupied residence.

$40,000 of debt at an average credit card interest rate of 15%, might have a payment of about $560 per month, when amortized over a 15 year term. A debt consolidation loan term at 8% would have a payment of about $382 over the same time period, which could save $178 per month. If your goal is pay off your debt as soon as possible, the loan term could be reduced to about 8 years by applying the monthly savings to the debt consolidation loan payments.

In addition to reducing your rates, eliminating compound interest can add to your total monthly savings. In this example, you may save another $50 per month by converting to a simple interest debt consolidation loan, instead of making minimum payments on credit cards. It’s possible that daily compounded interest on credit cards can accumulate to more than the minimum monthly payments, which can result in paying interest on the interest accumulating on the account. Consolidating debt into a fixed payment schedule can help eliminate the never-ending minimum payment cycle.

Fixed rate, simple interest home equity loans, can be secured by a first or second lien on the title deed of a residential home. The amount of home equity that is available for a loan is determined by the difference between the appraised value of the property, and the balance on the first mortgage.

With a fixed rate home equity loan, the lender makes a one-time payment of the full amount that is borrowed, which is paid to you at the closing of the loan process. If you have an existing second mortgage, line of credit, or equity loan on your home, it will need to be paid off with the proceeds of your new loan, so be sure to request a sufficient amount of money to include the existing loan.

The available loan programs can vary, and the maximum loan to value, depending on the specific lender. Other options can include a zero cost loan, or loans for borrowers with bad credit, which usually require more equity. Home equity rates can vary depending on risk factors such as, credit scores, the amount of the loan, and the loan to value.

Tax deductible home equity loan interest provides an additional incentive to pay off high interest debts, make home improvements, or take cash out. When a loan is secured by a lien on your primary home, the interest payments may be tax deductible within allowed limitations, which can be the lesser of $100,000 or a maximum 100% of the home value.

Loan terms can range from 10, 15, 20, or 30 years. A longer term provides a lower monthly payment, but also means you will pay more interest over the life of the loan. For example, the payment on $100,000 for 30 years may be about $200 less per month than a 15 year term, however, the interest charges could be more than double, if paid over the full 30 year term.

What is a 125% home equity loan?

The is a second mortgage that allows you to borrow more than what your home is worth. You can borrow up to 125% of your home’s value. This is an ideal loan for you if you have no equity in your home. If you have a VA or a FHA loan or want to payoff a second mortgage to get some extra cash this one is for you. Its generally tax deductible up to 100% of the value available of the house.

How does it works ?

This is a FICO based program with a minimum of 640 middle fico score required. Presently there are no exceptions. For example, if your house is worth $100,000 then you would be allowed to borrow a combined total of $125,000 between your first and second mortgage.You have to be in the property for at least 6 months or to be a previous owner.

Why should I apply ?

Pay off credit cards,and other debt.
Lower your payments by hundreds of dollars each and every month, and make only one easy monthly payment.
Make home improvements, pay college tuition, or just take a vacation.
Tax deductions ( please consult your CPA)
What is the criteria for this loan ?

FICO Scores 640 and above.
Some Cash Out restrictions
Loan amounts $30,000 and above
For A Credit borrowers
Bankruptcy 5 years discharged.
Appraisal required for amounts above $35,000
Six months in the property or a previous home owner.

When students graduate from college, they begin to enjoy the fruits of their labors. Many land good jobs, and some buy new homes. After a few years of home ownership, if the market is rising, they may also eyeball their student loans, and consider the pros and cons of using a home equity loan to pay off their debts.

If you’re a college graduate with student loans, you probably envision having to pay your debts for years to come. While the prospect of becoming debt-free seems like a pipe dream, it can happen much sooner if you manage your debt intelligently. But does smart debt management include using a home equity loan to pay off your student loans? Like anything in the financial world, this option has a variety of pros and cons.

Lower rate, tax deductible interest
At first glance, consolidating your student loans into a home equity loan seems like a no-brainer. Because a home equity loan uses your property as collateral, banks can offer it at a lower rate than most private student loans. The lower rate alone can save you thousands of dollars in long-term interest payments, and you also get added tax benefits. Interest paid on a home equity loan is tax-deductible, which will lower your overall costs.

A home equity loan is a fixed-rate, fixed-term loan. The fixed rate can be extremely appealing, as private student loans often include variable rates. If you’re conservative with your money, eliminating uncertainty may help you sleep better at night.

A home equity line of credit (HELOC), which is a line of credit based on the equity in your house, will also help you pay off your student loans. As an added bonus, you can use the HELOC as an emergency source of funds if you get into a crunch. The interest is still tax-deductible, but be forewarned: the rate on a HELOC is variable, and can spike upwards.

Notice the rewards; consider the risks
Choosing a home equity loan to repay your student indebtedness has plenty of rewards, but you do need to be aware of the risks. First and foremost, a home equity loan uses your house as collateral. If you run into tough times, and have to default on your mortgage, you could lose your home.

While you’ll gain a tax deduction for interest paid on your home equity loan, you’ll lose the deduction that comes with student loan interest. You’ll need to run the numbers to see which loan benefits you the most.

The future for most college graduates will include years of debt payments. Between mortgages and student loans, it may seem like you’ll be mired in debt until the end of time. However, smart management of these debts-such as paying off your student loan with a home equity loan-can save you thousands of dollars. Understand your options, and you’ll be on your way to a debt-free life.

Paying Student Loans With Home Equity
By: Greg Mischio

That is the question. And a lot of parents are asking it. In fact,

“So could you maybe tell me which way is the better way to go to finance my daughter’s college. She is a freshman and I’m not sure if I should do a Home Equity loan or try to get her a loan through her school’s student loan program. She’s going to Ol’ Miss!”

The short answer is: It depends. There are several key differences to consider between these types of financing.

Generally, before considering any other type of financing, students should fill out the Free Application for Federal Student Aid (FAFSA) first, to see what they qualify for in financial aid. With the information from the FAFSA, the school can put together a financial aid package that may include grants and scholarships that your student doesn’t want to pass up.

Your student’s financial aid package will also show what he or she qualifies for in Federal Stafford Loans. The Federal Stafford Loan is one of the most affordable options for financing college today, with a fixed interest rate of 6.80%, so if you’re planning to borrow money for college, students should look to that loan first.

Assuming the Federal Stafford Loan does not cover all college expenses, there are three common choices to consider for financing to bridge the gap: the Federal PLUS Loan for parents, home equity financing, and private student loans.

Take a closer look at these options by reading this comparison chart.

Ultimately, you’ll want to choose the option that makes the most sense for your individual financial situation. It’s not a “one size fits all” approach. The financing that works for Nate and his daughter at the University of Mississippi may not work for you at all schools.

For example, maybe you don’t want to mess with the FAFSA and would like to bypass federal loans altogether, so you choose a home equity line of credit. Or maybe you don’t want to use the equity in your home for education because you know you’ll need a new roof soon, so you apply for a Federal PLUS Loan or cosign a private loan for your student.

Parents, tell us: When it comes to borrowing for education, what has worked best for you?

Student loan or home equity financing?
by Caroline,

A home equity loan is a special type of loan 5ACthat is used by homeowners who wish to use their equity as collateral. It may be necessary for a family to obtain a home equity loan for things such as medical bills, college costs, or house repairs. In a nutshell, a home equity loan is basically a lien that is placed on the property. Obtaining a home equity loan requires the customer to have good credit, and they should be a low risk borrower. Home equity loans are divided into two types, and these are open end and close end. A home equity loan may also be referred to as being a second mortgage.

When compared to traditional mortgages, home equity loans tend to be shorter in length. In places like the US, homeowners may be able to deduct the interest the earn on their income taxes. With the closed end home equity loan, the homeowner will be given a set amount of money at the closing, and they will not be able to borrow any more money. The amount of money that they are given will be determined by their credit score, salary, and the value of the home. It is not uncommon for a homeowner to borrow 100 percent of the value of the house, and some lenders will go beyond 100 percent in a process that is called over equity.

Closed end home equity loans will often have rates that are fixed. In addition to this, the loan may be amortized for as long as 15 years. Once the term of the loan ends, the homeowner may need to pay what is called a balloon payment. To avoid the balloon 5ACpayment, the homeowner will need to either pay more than the minimum payment each month or refinance the home equity loan. The open end home equity loan may also be called a home equity line of credit. With this loan, the homeowner can decide when they want to borrow money against the equity of the home.

At first, the lender will set a limit on the credit line, and this limit will be dependent on many of the things that are used with closed end home equity loans. As with the closed end loan, it is possible for the homeowner to borrow 100% of the value of their home with open ended home equity loan. The length of these loans may be as long as 30 years. The interest rate for the home equity line of credit will be variable. The minimum payment that is made each month will be directly connected to the interest. The interest rate of both of these loans will typically be dependent on the prime rate.

Home equity loans have a number of powerful advantages, and they are utilized by millions of consumers. Many people encounter situations where they need large sums of money, and they money that they have may be tied up in investments. Home equity loans are a great way for them to pay for these large expenses.

Michael Colucci is a writer on Home2CB Equity Loan which is part of the Knowledge Search network.

Home Equity Loan Facts
by creditmanagementbpwve