What is Debt Consolidation? You can consolidate your debt with a mortgage. When someone obtains a new loan to pay out several smaller loans, debts or bills that they currently have and combine them into one loan with one monthly payment this is Debt Consolidation.
Each loan you take out has its own contract, you borrow at an agreed rate over a period of time. To consolidate debts, you need a new, larger mortgage and then you can use that money to consolidate smaller loans. People use debt consolidation loans to combine high-interest rate loans, credit card balances, overdrafts, bills, debts to family and income taxes.
People get debt consolidation loans for many reasons:
It simplifies finances.
It can save money.
Smaller monthly payment.
It can pay off debt faster.
Different ways to consolidate debt with a mortgage:
Home Equity Loan – This is often called taking out a second mortgage. If you have a good amount of equity in your home. This is the amount you own after you subtract your mortgage from the value of the home.
Home Equity Line of Credit – Lines of credit can be secured by your home. Your bank may offer you an unsecured one if you have good credit and a good income.
Unsecured Debt Consolidation Loan through Bank or Credit Union – If you have a decent credit score and have some good collateral (security for the loan) to offer.
Business Loans or Line Of Credits for Self Employed Individuals – If you own your own business for more than 2 years this is an option
Hopefully, you now understand what Debt Consolidation is and whether or not it is right for you. It ultimately depends on many things including your financial goals, your credit score, and whether you follow a budget. We always encourage you to create a budget and make sure your spending is less than your income. Create a plan to get yourself to where you want to be in the future, instead of using a consolidation loan as a crutch to just get you by for a while. Our team is here to help you. We encourage you to reach out today to be proactive about eliminating your debt in an educated and effective way!