As mentioned in some of our other blogs, debt consolidation is a common tool people use to get out of debt. Often however since they are unsecured loans, you will likely find that you will be asked to use a home loan for debt consolidation. A home equity loan or line of credit with cash out to pay off the debt is a way the house is used to leverage debt, the worst is losing your home through foreclosure which is a serious risk. A credit card debt and typical debt of credit cards only has the maximum negative of the account being put into collections and or yourself being sued. Of course, the effects to your credit rating are your initial concern, however, the reality is that these unsecured debtors lent the money to you as a consumer at a high interest rate knowing that you would most likely be in more debt within 6 month to a year from when they gave it to you.

It is actually a mirage or misunderstanding by debtors that converting credit card debt into home equity loans is a good thing, because there may be other opportunities to leverage good debt and equity such as a home to make investments such as the purchase of other real estate or business expansion. Instead, the money goes to service bad debt, and increases the risk of the home owner into losing their home if they cannot pay the debts. Just because your credit card says your Bank name beside where it says Visa or MasterCard doesn’t mean that you have to get a secure line of credit against your house or renegotiate your mortgage. The percentage interest and calculation by the major credit card companies is a calculated risk that they take, so don’t feel pressured by your bank asking you to consolidate your debts.

It’s probably not a bad idea to look at debt counselling if you are in debt, but hold your ground when it comes to your home, its an asset of last resort that could be used for leveraging and increasing your wealth versus sinking it into servicing your debts.

If you can consolidate your home with friends and family at a leveraged interest rate and unsecured, you are in a much better position. If you have been thinking about borrowing funds from friends or family, we have a quick solutio for your loan documents. You can sign-up for a membership and profile free here by clicking create a profile and then you have access to choose the type of documents you want to create or get a guide for free: Click Here