Because interest rates on home equity loans are usually significantly less than interest rates on unsecured store cards and bank credit cards, debt consolidation may make a lot of sense, just to save interest. It might also make a whole lot more sense if you take the debt over a longer term and give your monthly cash flow a big boost, (as well as a little lump sum amount for something you may want).

Home Equity Loans Explained
A home equity loan is a secured loan. A method to release the embedded equity in the home you own. An alternative expression is that homeowners use the equity in their home as collateral. Such loans are often taken out by homeowners that wish to either; finance home renovations, pay for unexpected expenses, pay for higher education or even to refinance your credit cards or fund that ideal holiday.

Essentially this loan creates a charge, or additional charge, against the home until it is repaid. If the borrower already had an existing mortgage then the Home Equity loan will be a second mortgage ranking behind the first mortgage for security purposes, hence the need for the lender to ensure that the borrower has sufficient equity in the home to cover their loan advance

Obviously there are conditions that borrowers must meet before they become eligible for a home equity loan. These loans were historically only available for homeowners that had substantial equity in their home, as well as a good credit history, however many banks and loan companies have become more aggressive pursuing profits in recent years and some have been advancing home equity loans to borrowers with less equity and with less than perfect credit rating credentials.

Why would I want to Refinance Existing Debts
If you are interested in borrowing additional funds or just reducing the amount you already pay per month, you may be able to achieve both in certain circumstances. This occurs when you have small short term loans that are consolidated into one of the best fixed loans over a longer average term. Also many small short term loans that you would be paying out in this exercise, which are secured by a vehicle etc., or unsecured, tend to be at higher interest rates than home equity loan rates. This is because of the strength of position of the home equity loan lender who is a secured lender. (They have the right to sell up your house if you don't perform and usually ensure there is enough equity there to cover their debt in that instance).
Types of loans
Home equity loan rates and terms vary, essentially, loans on your home’s equity fall into one of two types: open ended loans and closed loans. A closed or fixed loan would be for a specific time frame with fixed monthly payments usually up to 15 years in term.

Open ended loans are those most often called a line of credit. With a highly flexible line of credit type loan, the borrower can draw, repay and then redraw, so they treat it like an overdraft and determine when they want to borrow and repay. Much the same as a credit card facility, in fact some of these facilities can be access with a credit card.

Line of Credit type loans usually require a more comfortable home equity for the lender and sound credit history, as they never know what their exposure on that loan will be from time to time except for its credit limit.

Why Choose a particular Home Equity Loan Lender?
Home equity loan rates can vary significantly between lenders and their interest rates may be different for their own fixed term facilities and for their line of credit style products. It's wise to compare home equity loan rates Read more...