Sponsored Content: Meeting the expectations of everyday life may seem daunting when debt is growing in the background. Though this reality exists for many people, banks and other financial institutions have financial tools for individuals to manage their debt more effectively through debt consolidation.
For homeowners, home equity loans with low, fixed rates from Discover® Home Loans or another lender may be a good option for their debt consolidation options.
What is Debt Consolidation?
Debt consolidation is the process of bundling multiple debts into a single loan with a lower annual percentage rate (APR) and lower total monthly payments than the original debts.
If you have multiple forms of high-interest debt, such as a credit card balance, a personal loan or other high-interest loans, debt consolidation can save you money both month-to-month and in the long run.
What is a Home Equity Loan?
Home equity loans — also known as second mortgages — allow you to use your house as collateral for a secured loan that draws funds from the equity you own. Being secured by your home, these loans come with rates that are typically lower than unsecured borrowing options.
If you need debt relief in the form of consolidation, home equity loans can be leveraged. There are numerous benefits to using home equity loans for debt consolidation.
For one, you’ll typically have a more favorable interest rate to pay. Also, the term limits for home equity loans can span over the course of 10 to 30 years in most cases. However, it is important to remember that defaulting on a home equity loan can lead to losing ownership of your home.
When Should You Consider Home Equity Loans for Debt Consolidation?
If you’re a homeowner who feels confident in your ability to make your debt payments but has a difficult time managing multiple payments or struggles with high interest, it may be a good time to consider a home equity loan.
Interest rates on home equity loans are still low compared to other loans that are not backed by collateral. They can allow you to bundle multiple credit card debts into a single, lower-interest monthly payment. You can also set up a structured repayment plan that lets you know you’re chipping away at your debt as expected — which can be much more comforting than the up-and-down cycle of revolving credit card debts.
This can present the unique opportunity to move debt in a way where you’re making lower monthly payments and paying less overall due to a low interest rate — a powerful double advantage.
About Discover Home Loans
Discover Home Loans provides home equity loans and mortgage refinance options with a range of benefits for qualified homeowners. Find options that fit within your budget at discover.com/home-loans. © 2023 Discover Bank, Member FDIC | NMLS ID 684042
Name: Carolina d’Arbelles-Valle
Job Title: Senior Digital PR Specialist