In our modern world, debt grows at an alarming rate leaving many in financial stress and fearing for the loss of their credit rating. The good news is if you own a house you are in better shape than most because it not only keeps a roof over your head, it can be used for a home equity loan to consolidate your debt.

The equity you have built in your home over the years can now be used to help you correct your debt problem because it becomes the collateral for your loan. This can be a bit of a scary idea because if you miscalculate using this home equity loan, you are setting yourself up for bigger failure.

This is considered by most to be a second mortgage because your house is the collateral for it but the difference between this one and your original mortgage is the length of time of the loan. The term is a lot shorter on average being over 10 years but can be as short as 4 years.

A home equity loan comes with a nice low interest rate, and some terrific tax deductions, and it is also a great way to manage debt that’s becoming unmanageable. In fact it’s probably the best opportunity you’ll have before things go really sour.

But if you do not cut up your credit cards, your consumer debt will grow again and in only a few years you’ll be in the same position but probably with no options second time round. You need to not only consolidate, but you need to become a more responsible consumer looking out for yourself and your family while avoiding the consumer pitfalls.

The interest rate on a home equity loan can be better than consumer loan rates and certainly much better than even the best credit card rates. But the real reason that these loans are so appealing is because of the tax benefits which are not available on other types of consumer loans.

A home equity loan to consolidate your debt might be just what you need to get straightened out. Consult with a home equity loan expert to customize a solution plan. It is a good idea to research the basics using tools like a home equity loan calculator and gathering all your options before you make a decision to take money out of your home. Good luck!

HELOC or Home Equity Line of Credit is a variable-rate credit line and often their benefits are dependent, in part, on the rate environment. For instance, HELOC rate from the summer of 2000 until February 2001 skyrocketed to 9.50%. However, the rates dropped from 9.50% to 5.00% during 2001 and continued to fall till the rates reached 4% in July of 2003. Between July 2003 and March 2004 the prime rate hovered at 4%. However, if you had a HELOC from March 2004 to July 2006, then your rate would have doubled from 4% to 8.25% (Source: Federal Reserve Board). This week’s average HELOC rate is at 4.777% unchanged from last week’s average HELOC rate.

So, now you know how rates fluctuate – so what looked like a blessing a year back can be a burden today! However, that doesn’t mean HELOCs are bad. HELOC is undeniably a helpful tool as the interest is deductible and it can be used to retire more expensive debt like paying off a huge pile of credit card debt, or to finance college education for your kids. But HELOCs can be disastrous if used without judgment. Opening a HELOC is as easy as getting a credit card and the ease factor, surely, makes it very tempting. People open an account without knowing much about it and use the money to finance their day-to-day luxuries and let their balance grow and pay huge interest as they get into the HELOC hole.
All you need is to find a right HELOC. This is where HELOC calculators come handy as they: determine your current HELOC balance, help you get a clear picture of the borrowing and loan payments, also, help you prepare an effective and feasible budget so that you don’t end up being overburdened with debt. And the best part about HELOC calculators is that you don’t have to do the number-crunching! Just fill in the required boxes and know the number.