The Center For Debt Management
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Thinking of Consolidating Your Debt? Putting Your Home On The Line
Is Risky Business

If you are a homeowner who needs money to consolidate debt or for home repairs, you may think a home equity loan is the answer. But not all loans and lenders are the same. You should shop around. The cost of doing business with high-cost lenders can be excessive and, sometimes, downright abusive. For example, certain lenders, often called "predatory lenders," target homeowners who have low incomes or credit problems or who are elderly by deceiving them about loan terms or giving them loans they cannot afford to repay.

Borrowing from an unscrupulous lender, especially one who offers you a high-cost loan using your home as security, is risky business. You could lose your home and your money.

Think about Your Options

If you're having money problems, consider these options before you put your home on the loan line.

Talk with your creditors or with representatives of non-profit or other reputable credit or budget counseling organizations to work out a plan that reduces your bill payments to a more manageable level.

Contact your local social service agency, community or religious groups, and local or state housing agencies. They may have programs that help consumers, including the elderly and those with disabilities, with energy bills, home repairs, or other emergency needs.

Contact a local housing counseling agency to discuss your needs. Call the U.S. Department of Housing and Urban Development toll-free at 800-569-4287 to find a center near you.

Talk with someone other than the lender or broker offering the loan who is knowledgeable and you trust before making any decisions. Remember, if you decide to get a home equity loan and can't make the payments, the lender could foreclose and you would lose your home.

If you decide a loan is right for you, talk with several lenders, including at least one bank, savings and loan, or credit union in your community. Their loans may cost less than loans from finance companies. And don't assume that if you're on a fixed income or have credit problems, you won't qualify for a loan from a bank, savings and loan, or credit union--they may have the loan you want!

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