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Lower Bills With Debt Consolidation Refinancing Vs Home Equity Loan

Consolidating your debt can help you lower your monthly bills and interest rates. While refinancing and home equity loans can both help you pay off accounts, they have their own benefits. The best choice depends on your current mortgage terms and future financial goals.

The Goal Of Debt Consolidation

The goal of debt consolidation is to pay off your current debt with a new, lower rate loan. The lower your rates, the more of a savings your pocketbook will see each month. But loan fees can eat into those savings.

Extending your loan term can also lower your monthly payments. But your interest costs will be higher over the life of the loan than if you choose a shorter term.

For debt consolidation to be most affective, plan on paying off and closing accounts as soon as your receive your loan amount. That way you wont be paying interest on two account or be tempted to use your credit.

Refinancing Your Mortgage For Debt Consolidation

Refinancing your mortgage to cash-out your equity for debt consolidation purposes will qualify you for lower rates than a home equity loan. Having one mortgage is seen as less risky by lenders than by having two loans.

But you also have to consider overall rates. If you currently have a low rate mortgage, then refinancing for a slightly higher rate doesnt make sense.

For example, if you have a $200,000 mortgage at 5% for 30 years, your interest costs $186,513.24. Say you refinance for an additional $10.000, but now your rate jumps to 6%. Your interest costs jumps to $231,677.04 an increase over $45,000. It would have been better to go with a home equity loan.

Using A Home Equity Loan

A home equity loan allows you to use your equity without affecting your current mortgage rate. In some cases, it can also protect you from having to provide private mortgage insurance, an additional cost.

However, home equity loans, also known as second mortgages, have higher rates than if you refinance your mortgage. This is only an issue if you have a high rate mortgage. In this case, the better choice is to combine the cash-out with a refinance.

In the end, you need to compare numbers to find what is your best option. Luckily, lenders offer free online quotes to make this easy.

Low Interest Debt Consolidation Loan – How To Get Peace Of Mind From Overwhelming Debt

The telephone calls will not stop, and theyre not going to. Youve had enough and have decided that its time to be proactive. Following will give you some tips as to how to get a low interest consolidation loan to obtain peace of mind from overwhelming debt.

Some may have a hard time with a low interest debt consolidation loan because of the fact that you are borrowing money from one source in order to pay back money from another source. While this is technically true, the benefits that this solution can include should be all the incentive you need to decide that this is truly a wonderful way to take back your peace of mind.

One major factor that will convince you that this low interest debt consolidation loan is a good idea is the part that makes it low interest. When you pay your monthly revolving debt, that debt incurs finance charges at a rate of at least 11-14%. For those that havent always had a good track record of paying your bills on time, that interest rate can climb as high as 24 or 25% if not more. At that rate, its highly unlikely that youll get your bills paid down to a manageable amount at all. If youre only paying the minimum each month, youre not touching the principal amount of what you owe at all. And this is with just one credit card. If theres more, those figures can double, triple, and so on.

With one low interest debt consolidation loan, you will be able to take all the amounts of what you owe on all of your revolving credit and combine it. In this way, you will only be charged interest each month on one amount. The interest charged each month will be less because of the lower interest rates that are available with low interest debt consolidation loans. This will ease stress from your pocketbook each month and possibly even free up some money each month for other expenses.

The phone calls will stop and your credit report will begin the process of repair. Make sure to stay on top of that credit report as those agencies can be slow to report changes in your credit. A life with financial freedom can lay in your very near future and your credit score will not be negatively affected. The low interest debt consolidation loan is no longer a possibility; rather it is an answer to the long suffering problem of overwhelming debt.