The Most Popular Debt Consolidation Loans Options

Today it seems most everybody is asking about debt consolidation loans. And it’s no wonder since personal debt is higher than ever before in history. As you work through the maze of debt consolidation loans options, how do you choose which is best?

If you’re a homeowner with equity in your home, you have more debt consolidation loans options than someone who doesn’t own a home or who has a blemished credit history.

Here’s a brief overview of the more popular types of debt consolidation loans.

Debt consolidation loan options for homeowners


Today roughly 40% of the home equity loans, second mortgages and cash out refinances that lenders approve are used for paying down debt. These loans are easy to obtain and usually tax deductible, too.

Upon approval of a home equity loan, second mortgage, or cash out refinancing, you’ll receive a lump sum of cash to use any way you like (vacation, debt repayment, home improvement, etc.). The amount you’re loaned is determined after reviewing the status of your current mortgage, analyzing your home’s current appraised value, and looking at your current finances and your credit history.

Oftentimes, the amount borrowers are approved for is more than the amount needed to repay their debt. But it doesn’t make sense to pay interest on money you don’t need so another option is to apply for a home equity line of credit instead.

A home equity line of credit is a “revolving” credit line (similar to a credit card). It still offers you access to a lump sum of money equivalent to the amount of equity in your home. But since it’s a line of credit, you use only as much as you need. That way, you’re only charged interest on the amount you’ve borrowed against the line.

Besides ease of application, another feature that makes these so attractive to homeowners looking to reduce debt is that the interest rates usually are less than that which they’d pay for other types of debt consolidation loans.

Other debt consolidation loans options


Non-collateral personal debt consolidation loans are available to both homeowners and non-homeowners who have favorable credit scores (usually 720 and above). A high credit score shows that an individual understands the importance of properly managing credit. They typically won’t risk damaging their credit scores which is why lenders are willing to take bigger risks by not requiring collateral.

Those with lower credit scores should expect the lender to require collateral before approving personal debt consolidation loans. If you don’t own a home, you’ll probably need your car as collateral. There’s usually a limit on the amount loaned using a personal loan, and it may not be enough to cover all debt.

What to know about debt consolidation Loans


When you’re researching debt consolidation loans remember two important points. First, every lender has different lending criteria and different terms so shop around. Second, regardless of what the lender calls it, the monies received via debt consolidation loans and lines of credit have to be repaid!