Refinancing your mortgage loan may entitle you to a better interest rate and save a great deal of money. Did you know that you may be able to eliminate other debts with the same loan? You can do just that with debt consolidation refinancing!
Debt consolidation is the process of combining all or part of your existing debt into a single loan that enables you to save money by making one monthly payment. That new loan is called, what else, a debt consolidation loan. When you have a debt consolidation loan, your preexisting debts are all paid, resulting in an improved credit rating. No longer do you have to deal with harassing phone calls from your creditors or multiple payments and multiple interest rates.
By combining debt into a debt consolidation mortgage refinancing loan, you take advantage of your status as a homeowner to get a lower interest rate on all of your bills. It is not without its problems, of course. By taking advantage of lower interest rates and lower monthly payments, you are extending the overall length of your loan. This will in turn mean that you’ll be paying more interest payments over a longer period of time.
If you combine loans that originally had a 12 year repayment schedule, into a new debt consolidation refinance loan, you might be extending the overall period of repayment to as much as 30 years. The total amount of interest paid, despite the lower interest rate, will increase based on the time it takes to repay the loan.
Homeowners need to understand that this type of loan is not without concerns. Immediate cash flow problems are temporarily decreased, but the outstanding credit debt will remain the same or even increase. A free online debt calculator will help you figure out the numbers before you decide whether a debt consolidation refinance is a good choice for you. Either way the effect will decrease payments but extend repayment.
The primary goals should include finding the lowest interest rate for the debt consolidation and the ability to pay that debt off quickly. Know if the refinance loan company allows for additional payments above and beyond regularly scheduled monthly payments. Making additional payments and designating the excess towards the principal will help eliminate the overall debt much more quickly.
For homeowners, a mortgage refinance with a lower rate of interest may be a smart choice. A debt consolidation provides the opportunity to eliminate high interest credit card debt. The overall terms and conditions are more favorable than those offered by credit card companies. Research and asking the a lot of the right questions will put you in a better position to determine where you stand and identify the potential benefits (or not) of a debt consolidation refinance loan.
Out there is the right option for mortgage refinancing to consolidate debt. You just have to find it.