Consolidation Loan Refinance

Are you having trouble paying your bills each month? Are you using credit cards to pay for regular daily expenses and not paying them off each month?

If you're a homeowner, you should consider a consolidation load refinance. This will consolidate all your bills into one monthly payment that will be less than you're paying today, and you will probably save on interest charges, over limit fees, and later charges as well.

A consolidation loan refinance will help you get your head above water and give you the opportunity to clean up your credit. But, there are things you need to watch out for so you don't put yourself in a worse position than you already are.

You have three choices when it comes to a consolidation loan refinance:

Refinance you existing first mortgage - If rates are low and you have sufficient equity after paying off your bills, this is the best way to go.

If the current interest rate is at or below the interest rate on your current loan this is the best way to go. However, if the interest rate is higher than your current mortgage rate be very cautious. That's because you're not only paying interest on the debt you're cleaning up, you're paying higher interest on your basic mortgage, and that's probably not a good thing.
Take out a second mortgage - This option is best if you don't want to be paying off your bills for 30 years as you would by refinancing your first mortgage. With this option you take out a loan for a specific amount of money and pay it back over 5 - 15 years.

The advantage with this loan is you pay off your bills and don't have the temptation you have with a HELOC to spend the extra money that may be available on other purchases that leave deeper in dept.

Another advantage is that you can find fixed rate seconds which, in my mind, are preferable to variable rate mortgages.
Take out a Home Equity Line Of Credit (HELOC) - With this option you get a revolving line of credit that you can use as necessary to pay bills and expenses.

The advantage of a HELOC is that you only pay interest on the money you borrow. Even if your line of credit is $10,000 and you only use $5,000 you only pay interest on the $5,000 which can save you money.

If you choose a HELOC to consolidate your debts, use it with caution. Frequently, the lender will set up the line of credit to maximize your potential for debt based on the equity you have in your home. The challenge with this is that it may be more than you currently need to pay your bills.

So, let's say you have an extra $10,000 available in your HELOC after you've paid all your bills. For many people that's an invitation to spend the extra $10,000, so they wind up deeper in debt than when they started the process. It's a vicious cycle.

Using a consolidation loan to refinance your home is an option or cleaning up your bills, but use it with caution. Don't put yourself in worse shape than you started with. And, after you pay them off, cut up your credit cards! You'll sleep much better after you do.

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Consolidation Loan Refinance

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