How to use home equity to consolidate your debt

How to use home equity to consolidate your debt

If you feel like you’re drowning in debt, you’re not alone. According to Experian’s State of Credit report, the average household has $24,706 in non-mortgage debt. That means things credit cards, medical bills or car loans. With such a heavy debt load and high interest rates, digging yourself out from that debt can be challenging.

That’s where debt consolidation can be a big help. And, if you own a home, tapping into your home equity instead of taking out a debt consolidation loan can be a smart choice. Learn more about how debt consolidation works and how to decide if it’s right for you.

What is debt consolidation?

Traditionally with debt consolidation loans, you work with a bank or other financial institution to take out a personal loan for the amount of your current outstanding debt. Once the lender approves you and disburses the loan, you use it to pay off your old debt.

Going forward, you have just one loan with one interest rate. The new loan has different terms than your old debt, such as repayment term, interest rate and minimum monthly payment.

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