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You don’t necessarily need to have home equity to consolidate your debt. The most important thing to do is to have an income. Linking your debt consolidation to home equity means the loan is using the cash from your equity as collateral. This means if you default on the terms of the consolidation agreement the house may be used as collateral. Home equity should only be used if there is no other alternative.

Most debt consolidation companies work on the principal of income. If you have enough income to pay the consolidation as well as pay for your other bills they will take you onboard. Consolidation companies tend to be wary of using home equity as a collateral. It isn't necessary to have equity in your home to qualify for a consolidation loan. Consolidation works best when there are a number of creditors. This way the company will group all of your debts together and have you make one payment per month. The interest is adjusted to a manageable level and the debt is payed down month by month. Most consolidation companies will put you on a 3-5 year payment schedule. In the event the consolidation terms are terminated for non pay or violations of the terms, the interest rate will go back to the default rate and the loans given back to the creditors. Interest will continue to accumulate and the payments will be as were previously stated at the beginning of the terms of agreement.

Home equity is best used only when the housing market is high or in demand, if it is low and the property values are low, there is little equity to be used. Recently because of the housing market slump homeowners are finding their equity going down, problems with paying credit cards are on the rise and having extra money for consolidation is a problem for many. Debt counselors are available and may offer suggestions on consolidation and the use of your home equity.

In a nutshell, by a thoroughly researching and then comparing several debt consolidation services, borrowers will be able to qualify and determine the agency that meet your specific financial situation, plus the cheaper interest rate the market is offering. However, it's recommendable working with a seasoned and reputable debt counselor before even make any decision, this is the way you save time because of specialized advise and money by obtaining the best results in a reduced span of time.

Hector Milla is editor of the Reputable Debt Consolidation Companies website – where you can see his best rated debt consolidator service recommendation.

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