Debt consolidation
- With a debt consolidation loan, all your debts will be consolidated
into one simple monthly payment. Debt consolidation works to eliminate
your late fees and reduce your interest rates to make that one monthly
payment lower than ever. Avoid taking drastic steps such as bankruptcy
Debt consolidation programs are viewed as positive by banks and creditors.
By engaging in a debt consolidation loan, your creditors realize you
are making a good faith effort to repay your debt. Creditors are willing
to work with debt consolidators to reduce your payments and in turn,
your debt. Pay off your debt quicker and easier than you ever thought
possible with a debt consolidation loan.
When should you consider a refinance for debt consolidation?
1. If you are only able to pay the min balance on credit card debt
each month.
2. If you have credit cards with high interest rates.
3. If your credit cards are maxed out.
4. High interest auto or recreational vehicle loans
5. High interest personal loans or college loans
Not only can a refinance save you money each month, but for many
people debt consolidation refinance:
Is a second chance to get their finances under control.
Provide an opportunity to learn how to better manage thier credit
in the future.
Very often can improve your credit score, which in turn could save
you more money by giving you access to better insurance rates.
In most cases you can deduct the interest paid on your mortgage
on your federal taxes. You cannot deduct interest paid on credit
card, vehicle or personal loans on your federal taxes.
Why would you want to pay 18-24% interest on credit cards when
rates are 1/3 to 1/4 of that for your home. It just doesn't add
up and make sense to continue to pay those high rates when you have
the option of lowering those rates. This can save you thousands
of dollars not to mention you will only have to write one check
instead of multiple checks every month.
You will not always be able to consolidate all of your debt. If
you simply have too much debt to consolidate, you should focus on
paying off the accounts with the highest interest rates first.
It is important to understand that although a consolidation loan
may help you get your finances under control, it doesn't "eliminates
debt", as some unscrupulous companies claim. Rather, it rolls all
of your debt into one loan, with one payment and one interest rate.
Debt consolidation should not be seen as an open door to apply for
more credit. It should be seen as a tool that will help you get
your finances under control, once and for all.
Homeowners who are heavily in debt and have difficulty managing
their finances should always consult with a financial advisor before
using debt-consolidation loans to get temporary relief. By taking
out a debt-consolidation loan, which uses the home as collateral,
to pay off credit card debt and other obligations, which are unsecured
debts, essentially transfers all unsecured debt into one that is
secured by the home. While defaulting on credit card debts usually
leads to nothing more than a bad credit profile and some collection
calls, defaulting on a mortgage can result in foreclosure of the
home.
