Thinking about a debt consolidation loan? Knowing some useful terms can help you through the process.
Appraisal: An analysis of the estimated value of property (like your home) prepared by a certified appraiser. Lenders typically use this to determine whether you will be qualified for a loan.
Appreciation: This is the increase in your home value resulting from the market rising. This appreciated value of your home or property is what is worth now.
Break-even point: This is the point you, the homeowner, will begin to see the savings after refinancing your mortgage. It is at this point that it makes sense to refinance.
Cash-out refinancing: This is when you refinance your mortgage to receive cash to use for another reason. It is typically used to pay off credit or finance work on your house.
Equity: This is the difference between the fair market value of your house and the amount left on your mortgage. It is also called the owner's interest.
Home Equity Loan: This is typically a second mortgage secured by the equity you have built in your home through your mortgage payments. It gives you the freedom to tap into the equity you've built up and get a lower interest rate than you normally would with an unsecured loan.
Home equity line of credit: This is a revolving line of credit that is secured against the equity in your home. It is similar to a credit card in that it allows you to withdraw money as you require it. Since it is secured against your home, it also allows a lower interest rate than you would receive with an unsecured loan.
Mortgage refinancing: Whenever you pay off one mortgage with the proceeds from another, like when you sell your house, you are refinancing. This is useful to get a better interest rate, change the terms of your mortgage, get money to renovate your home, or pay off debt.
The decision to reach out for help with your debt is not one that's easy to make. You were raised to "do the right thing", but now it’s nearly unbearable. You struggle along while your creditors are turning up the heat. And now you’re at the point where the late fees, penalties and interest expense make it impossible to keep your head above water.
Ask yourself this. If you could eliminate your debt without permanently damaging your credit, why wouldn't you?
