Is a Debt Consolidation Loan Possible Without Home Equity?

When a consumer's personal debt starts to become too much for him to handle, he may consider debt consolidation. One debt consolidation option is a home equity loan or line of credit. Some consumers may not have enough equity in their home to do a home equity consolidation, or they may not feel comfortable putting their home up as consolidation collateral, according to the Federal Trade Commission website. There are options other than home equity to consolidate debts

Personal Loan

If you need to consolidate your debt, contact a loan officer at your local lender and discuss getting a personal loan. A secured personal loan is one that you get using personal assets known as collateral. Your paid-off car, jewelry or other items of value can act as collateral. If your credit is good enough, you may qualify for an unsecured loan.

Life Insurance

In some cases, people looking to consolidate their debt have already reached a point where their credit may not be good enough to qualify them for a personal loan. If that is the case, perhaps you have a life insurance policy that you have been paying on for years that now has cash value. You can borrow against it to consolidate your debt, according to financial expert Dana Dratch, writing on the Bankrate website. Your health needs to be good for you to qualify for a loan against your life insurance.

Balance Transfer

You may get offers to open a new credit account and transfer your existing balances at a lower interest rate. Be wary of a low introductory or balance transfer interest rate. These usually last for a short introductory period, then go up. The maximum possible interest rate after the introductory period must be outlined in the offer literature you receive. If that interest rate is lower than the interest rates you are paying now, then consider making the transfer.

Mortgage

Just because you do not have equity in your home does not mean you cannot use it as a way to consolidate your debt. If you can refinance your current home loan at a lower interest rate and with enough extra to pay off your debt, then it is something you should consider.