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Debt Consolidation Line of Credit

A line of credit is one of the best ways consolidate your debts. A debt consolidation line of credit can help you improve your credit rating, reduce the cost of your debts and improve your financial situation.

A line of credit is an agreement between a borrower and a lender that makes a certain amount of credit available to the borrower for a set amount of time. The difference between a line of credit and a loan is that a loan is a one time payment of money. A line of credit is a permanent arrangement that a borrower can take advantage of on a long term basis.

The biggest advantage to a debt consolidation line of credit is that you can take advantage of it as long as credit is available. This means that you can use it to repay debts months or even years from now. Another advantage is that more credit will be available as you pay of the debt consolidation line of credit. The credit will always be there for you to use as long as the agreement is in force.

How a Debt Consolidation Line of Credit Works

In a debt consolidation line of credit, you use money from the line of credit to pay off credit card balances and other debts. Then you have to pay off the lender that has given you the line of credit.

As with a loan you will have to pay interest on the money that you’ve borrowed. The credit will still be available for you to use after you’ve paid it off. This means you can have credit available to pay off future debts and expenses.

Equity Debt Consolidation Line of Credit

The most common debt consolidation line of credit available to average people is an equity line of credit. An equity line of credit uses the equity in your home or another piece of real estate to secure a line of credit.

To get this line of credit you’ll have to own a home or real estate in which you have equity. Equity is the difference between the value of your home and the amount it is mortgaged for. If the amount of your mortgage exceeds your home’s value you don’t have equity.

The big advantage to equity lines of credit for debt consolidation is that the interest rates on these financial tools are usually much lower than those on credit cards and other consumer debt. Taking advantage of an equity line of credit for debt consolidation can save you hundreds or thousands of dollars in interest.

Other Debt Consolidation Lines of Credit

There are some lines of credit that you can take advantage of for debt consolidation. Many banks offer a cash or checking line of credit this is a line of credit attached to a checking account. This line of credit covers checks and payments when there isn’t enough money in the account. In some cases a consumer is given a credit they can use to access such a line of credit.

By writing checks or using a credit or check card a person can use this line of credit to pay off debts. The drawback to using this credit is that the interest rates on it usually are about the same as those on credit cards and other consumer credit.

Paying off the credit card balances directly is usually a better option than taking advantage of this line of credit.