Contrary to popular belief, not all consumers with debt are careless. Debt is an insidious phenomena.
Even people, who manage their finances with care can start out with a $100 credit card bill and watch it grow to $10,000 in a few years later. Debt goes from "negligible" to "cause for concern" to "everyday stress factor" very quickly.
The precise point in time, when a manageable debt load becomes unmanageable is when you can only afford the minimum monthly balance or when your next month's bill is consistently higher than your current month's bill.
The Federal Trade Commission (FTC) agrees that debt consolidation can be a good resource for consumers struggling with debt.
The most important aspect of debt consolidation is to realize that consolidating your debts does not make your debts vanish, rather, they make your debts manageable and payable.
Homeowneres can take advantage of their home equity to consolidate debts, regardless of credit history.
Whether your credit score is 500, 600 or 720 - you can get a loan by doing your research.
You have two options when refinancing your home.
Option #1: First mortgage refinance debt consolidation loan. This option allows you to refinance your existing home loan and take cash out. It works as follows. Let's assume that you own
a home with an appraised value of $200,000. You still owe $150,000 on your home loan. This means that you have $50,000 worth of equity in your home. You can refinance your existing home loan to take out $50,000. You can now use the $50,000 to pay off all your creditors.
Your new mortage loan amount would be $200,000. You have now replaced your credit card bills, student loans, automobile loans, etc with one mortgage payment. Instead of paying Visa $500, Mastercard $250, Student loan $250, Sears $350, car dealership $425, etc - you will now have to pay only your mortgage company.
Option #2: Second mortgage refinance debt consolidation loan. Instead of refinancing your first mortgage, you can choose to take out a home equity loan or home equity line of credit (HELOC). The loan works the same way as option 1, except in this case you will have two loans.
Your original loan of $150,000 and a second loan for $50,000. This means that you will need to make a payment towards both loans but you get rid off all your various credit card, auto loan and student loan creditors.
Tips for finding good mortgage refinance debt consolidation loan products, whether you have good credit or bad credit:
1. Shop around for the best loan you can find. The internet makes it extremely easy to complete one form and get multiple offers on your loan request. Take advantage of this resource.
2. Find a good interest rate. The lower the interest rate, the more money you apply towards your principal balance.
3. Get a loan type that is suitable for your situation. Get a fixed loan, if you plan to remain in your home for a long time. Consider an adjustable rate mortgage (ARM), if your home is a temporary abode. Beware of balloon payments with adjustable rate mortages.
4. Read your loan terms and understand stipulations such as pre-payment penalities, balloon payments, etc.
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