The standard reasons for using home equity to finance a debt consolidation loan--like lowering interest rates--still make sense in tight economic times. Additionally, however, threats of recession create new and pressing reasons for consumers to ditch some of their credit cards and start calling debt consolidation lenders.

Traditionally, a point in favor of debt consolidation loans has been that using home equity as the source of such a loan generally provides a lower interest rate than credit cards. Recently, this interest rate advantage in favor of debt consolidation loans has widened considerably. At the same time, credit card interest changes create new sources of budget unpredictability for people with credit card debt. Consequently, there's a new urgency for people to seek debt consolidation loan quotes to ease their credit burdens.

Credit Card Companies Have Changed the Game

What has happened?  Well, while credit cards have long reserved the right to change interest rates, they have recently started making those changes in a drastic, and in some cases seemingly arbitrary, manner. Discover, Bank of America, and JP Morgan Chase are some of the issuers who are reported to have sprung rate hikes on their customers. Those new rates exceed 20% in some cases.

It's bad enough that this jump in credit card rates comes at a time when other interest rates are generally falling. What's worse, in some cases these rate hikes have come out of the blue, hammering customers who have never failed to make a minimum monthly payment.  The last thing families trying for budget discipline need is this kind of extreme unpredictability.

Little Relief besides Debt Consolidation Loans

Although some legislative remedies are being discussed, they offer little in the way of real relief--just the possibility of extended notification periods, and/or the ability of credit companies to raise rates on new purchases only. In short, the best relief for consumers may be a debt consolidation loan. These offer not only the possibility of lower interest rates, but also the opportunity to lock those rates in for the life of the loan. That's the kind of stability a household can build a budget around.

Sources:

CBS4.com

The Seattle Times

About the Author:

Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.