Consolidate Debt and Save Money
If you're looking to reduce your overall monthly bills and potentially lower the interest rate on your loans, debt consolidation may be the solution you're looking for. With debt consolidation, you can combine all your monthly bills into one simple payment. In many cases, the new loan may even save you thousands of dollars in principal and interest.
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1 Advantages of Debt Consolidation Loans
- Can reduce the number of bills
- May lower double-digit interest rates to single digits
- Loans can free up cash, which you can use for other expenses
2 Debt Consolidation Loan Options:
If you're a homeowner and want to consolidate your debt, there are several types of loan options you can choose from: The most popular loans used to consolidate debt are:
- Cash out refinance - Where you refinance your home for more than its worth and use the additional amount to get cash or consolidate your debt
- Home Equity Loans - Also called second mortgages, allow you to borrow against the increased fair market value of your house, by using the available equity your home as collateral
3 Three Smart Moves to Help Consolidate Your Debt
If you're uneasy about the number of cards with balances haunting your budget each month, it may be time to act. Fortunately, there are many ways to achieve debt consolidation. The right one can bring you budget relief. The wrong one, however, may make matters worse.
Below, we've outlined three of the best moves you can make to beat credit card debt - without giving yourself more financial woes down the road.
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"Debt Consolidation: Guide"Consolidate Your Debt with 3 Smart Moves
1. Save money on existing debt by lowering your interest rate.
One of the most important benefits of consolidating your debt is to lower not only your total monthly payments, but also the amount of interest you pay on all of your credit cards combined.1
A popular way to achieve this is by using your home's equity to consolidate your balances. Why? Average interest rates on home loans are significantly lower than that of the average credit card. For example, during one week in June of this year, average mortgage rates hovered near 6 percent for a 30-year, fixed-rate loan, while the average credit card standard variable rate remained at 14.6 percent.2 That's a difference of more than 8 percent - and that could potentially equal hundreds of dollars in interest every month.
A smart way to consolidate your debt is to access your home's equity and get extra cash when you refinance your mortgage. The concept is simple: You refinance your mortgage into a low interest home loan for more than you currently owe (up to a maximum of the amount of your home's current value), and get cash back for the difference. You can then use that cash to consolidate other debt. And with this type of refinance loan, closing costs can usually be rolled into your total mortgage balance, so there's little out-of-pocket cost to refinance. Another bonus? The mortgage interest you pay is usually tax deductible, something credit cards can't offer.*
Consolidating your debt with a cash-out refinance loan can put you on the road to substantial monthly savings - savings that you can use to get out of debt faster. Here's just one example.
2. Avoid balance-transfer traps.
Right now, your mailbox most likely contains at least one special offer from a credit card company, promising a low-interest, balance-transfer option to help you consolidate debt from higher-interest cards. But this kind of debt consolidation can be a tricky road to navigate.
If you choose to take advantage of these offers, you'll need to stay on top of when your special rate offer ends - or attempt to pay off the new balance before the end date - to reap the benefits long term. In addition, every time you choose to implement a balance transfer, you need to be aware of the added fees that can range from 1 to 3 percent of the amount of the transfer.
A better choice might be to secure a fixed-rate consolidation loan - again, a refinance of your mortgage with cash back for consolidating debt is a good option. It would provide you with a low interest rate that never changes. You simply transfer your balances once and then close the credit card accounts.
3. Lower your monthly payments - and use the extra cash wisely.
Combining your credit card debt into one loan - with one, low monthly payment - is a mainstay of achieving debt relief. (Again, a mortgage refinance loan with cash back can be a great tool. Another option might be a home equity loan.) The key to making a home loan refinance or home equity debt consolidation loan pay off, though, is to use any extra money you save on payments each month to pay down your balance or other debts. This way, you're making faster progress toward paying down your debt.
You might also choose to put some of the money you save on monthly payments into a savings account. That move will provide an emergency fund you can then use when unexpected expenses pop up, so you don't have to use credit cards again and increase your amount of debt.
If you'd like to consolidate your debt with a mortgage refinance (or a home equity loan or line or credit), we're standing by to answer your questions. Simply call 1-866-436-0620 today or click here to schedule a complimentary account review.
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