What is a home equity loan and how does it work?”
Refinancing, second mortgages and home equity lines of credit are methods people use to pay off their unsecured debt. A home can be used as collateral for a loan to pay off unsecured (credit card) debt. Repaying the loan may mean lower payments than credit cards because payments are spread out over 10-30 years. This process turns low priority (unsecured) debt into high priority debt and could result in someone losing their home. This option is best for people who have the ability to stop incurring more unsecured debt and for people with good credit that qualifies them for a loan at a favorable interest rate.
