Consolidating Debt
Are you struggling with meeting your expenses each month? Are you relying on your credit cards to pay for regular daily expenses and not paying the balance off each month?
If you're a homeowner, you may want to consider the merits of a consolidation debt refinance. This plan will roll all your bills into one monthly payment that will be less than you're paying today, and you will almost certainly save on interest charges, over-limit fees, and late charges .
A consolidation loan refinancing will help you reduce stress and give you the chance to improve your credit. But there are things you need to consider so you don't end up in a worse position than you already are in.
You have three options when considering a a loan refinance.
First, you can refinance your existing first mortgage. If interest rates are attractive, and you have sufficient equity after paying off your bills, this might be the preferred way to go.
If the prevailing interest rate is at or lower the interest rate on your current loan, this may be the logical strategy. However, if the interest rate is higher than your current mortgage rate, be very careful. That's because you're not only paying interest on the debt you're you are paying off, you are subject to the increased interest rate on your existing mortgage, and that's probably not a good thing.
Your second choice is to consider to take out a second mortgage - This strategy is preferable if you don't want to be paying off your bills for 30 years as you would be by refinancing your first mortgage. With this plan you take out a loan for a specific amount of money and pay it back over a term of 5-15 years.
The benefit with this strategy is you pay off your bills and don't have the temptation you would have with a Home Equity Line of Credit (HELOC) to spend the extra funds that may be available on other purchases that increase your debt. Another benefit is that you can find fixed rate second mortgages which, in my opinion, are preferable to variable rate mortgages.
Your third option is to take out a a Home Equity Line of Credit (HELOC). With this option, you get a revolving line of credit that is available as necessary to pay bills and expenses.
The advantage of a HELOC is that you just pay interest on the money you borrow. If your line of credit is for $10,000, if you only use $5,000 you only pay interest on the $5,000 which will save you money.
If you choose a home equity loan to consolidate your debt, use it carefully. Frequently, the lender will structure the loan to maximize their leverage against your equity in your property. Your problem is in resisting the temptation to spend the extra money. For example, let's say you have an extra $10,000 available in your equity loan after you've paid all your bills. For many people that's an invitation to spend the surplus $10,000, so they end up deeper in debt than when they started. It's a vicious cycle.
Using a home refinancing to consolidate your debts may be a suitable strategy to clean up your bills, but use it wisely, carefully. Don't put yourself in worse shape than where you started. And when you?ve paid them off, get rid of your credit cards! You'll sleep much better when they?re gone.
Nick Hurd is the developer of consolidationsecrets.com and has written many articles assisting people to get out from mountains of debt. You will find lots of additional information at Debt Consolidation Can Relieve Your Burden Consolidate your bills and get over the turmoil
About the Author
Rating: Not yet rated