Selling the Farm: Home Equity Loans As a Means of Debt Consolidation (cont.)
Contributed by Alix Mcmurray
Debt Consolidation: It's a Bird, It's a Plane, No, It's a Balloon Payment!
Those easy monthly payments can be a boon on the short-term, but read the fine print. You may be looking at a balloon payment at some time in the near future. A balloon payment is the balance of your loan, payable immediately. The bank providing the loan can take your house away if you don't pay, which is called foreclosure. And even if you pay on time, with the accrual of interest over, say, 15 to 30 years, the amount you end up paying may be well beyond the value of your home. That easy solution at the start may become a monster over time.
Collateral, is It a Four-Letter Word in the Dictionary of Debt Consolidation?
Your home is probably your world. You worked for it, it contains all you possess of value -- mementos, furniture, appliances, pets, not to mention all those hours of painting, plastering, wallpapering, cleaning, organizing. It should be precious to you. With a home equity loan, you are telling the bank that all this is worth the sum of your loan amount, that it is your collateral, your defense in the chess game of credit. Can you put a dollar amount on all these things?
If You Make the Commitment of Debt Consolidation, Take Heed!
It is a noble and valiant thing to initiate debt consolidation and climb back into the driver's seat of your financial future. Just make sure that you can anticipate your potential in the near-term future so that monthly payments and even a balloon payment don't oblige you to "sell the farm" for much less than it's worth!
