Debt consolidating home equity mortgage
This makes them useful for situations where you need money for periodic expenditures, such as home improvement projects, but there's nothing to stop you from simply making a one-time draw to consolidate your debts.
There are a couple reasons you might opt for a HELOC debt-consolidation loan rather than a standard home equity loan.
However, these cash advances can also get you into trouble, because they usually reset to a fairly high rate once the no-interest period expires - often 16 to 18 percent.
They also typically charge an up-front fee of several percent of the amount borrowed, so you need to take that into account as well. One of the best, and most popular ways to consolidate your debt is through a home equity loan.
First, there are little or no origination fees with a HELOC.
HELOC also are usually set up as interest-only loans during the "draw" period when you can borrow money before starting to pay it back, often 10 years - which can be helpful if you're experiencing temporary financial problems.
The standard home equity loan is the most commonly used for debt consolidation because you borrow a single lump sum of cash, whatever you need to pay off your debts, and then pay it off over a period of years at a fixed interest rate.
First, you may be able to get a lower interest rate on your consolidation loan than you were paying on your various other debts.