Debt Consolidation May Be A Wise Choice If You Need To Tackle Down Your Overall Debt

Learn more to see if debt consolidation is right for you

It is a process of taking a loan where you qualify for a larger amount and use the money to pay off all your small debts. If you would like to deal with high consumer debt that is proving difficult to repay, you can turn to debt consolidation as a way of accessing quick cash to pay the debt. You can find a loan that will be stretched over a long period and pay off smaller debts that require large installments. The process will buy you more time to repay the debts.

You should be careful. If you can locate a lender with fair rates, you can consolidate. In most cases, it can hurt your credit. If you want to preserve your credit score, you can avoid it.

It can harm or build your credit score. Debt consolidation is not part of the strategy you can use to build your credit score. You need to shop around and locate the best lenders before you can take action.

What Is Debt Consolidation?

Debt consolidation refers to the process of merging several outstanding debts to reduce the number of payments and interest rates while buying you more time to pay them off.

The concept sounds pretty straightforward and ‘life-saving.’ However, it only truly is a saving grace if you can secure a low enough interest rate and, most importantly, if you can reorganize and change your financial habits for the better.

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Debt Consolidation Into A Mortgage

A good number-If, not most- of Arizona homeowners are struggling with mortgage payments. We all understand how frustrating this is and, of course, the consequences of forfeiting. Therefore it comes as no surprise that most would turn to acquire a debt consolidation mortgage.

This long-term loan also containerizes all your high-interest loans into one to ease the burden. It is possible to roll multiple debts into a mortgage that comes with a more lenient payment plan accompanied by a pay-off date. You will expect changes on the terms of the initial mortgage agreement.

Benefits Of Consolidating Your Debts Into A Mortgage

Owing several people money can be overwhelming; therefore, imagine if someone offered to cover it and talk you through a more flexible plan. That is precisely what debt consolidation does. Some of its core benefits include:

  • Lower interest rates
  • Reduced and flexible monthly payments
  • Assure pay-off dates
  • Additional funds from the new agreement
  • Staying in communication with your lender makes the process so much easier as both parties design the terms of the agreement

Qualifications For A Debt Consolidation Mortgage

Whether or not you can acquire a debt consolidation mortgage goes back to factors around creditworthiness. Most lenders review these factors first before even considering a candidate for the loan. They include:

  • Credit history – lenders will target personal information such as credits associated with your name, past and present employers listed in credit applications, late payments, etc.
  • Proof of income – the proof of income is an essential aspect that helps the lender determine how financially stable you are.
  • Home equity is the gap between your current mortgage balance and the value of your home. Ideally, the more you pay off the mortgage, the higher your home equity consequently, the more valuable your home becomes. Home equity can be used as an alternative to secure a debt consolidation loan instead of a debt consolidation mortgage. Home equity loans give you a higher credit limit and relatively lower interest rates.

There are several loans you can consolidate into a mortgage. They include auto loans, credit card loans, student loans, personal lines of credit. The loans that can be consolidated primarily depend on the lender’s catalog and may vary from one lender to the other. It is, therefore, essential to research adequately while looking for the lowest interest rates. Also, ensure to manage your finances better (best with the help of a credit counselor) as a consolidated loan can easily affect your credit score for the worst.

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You will have to look for a lender who will offer you a loan that you will use to pay off all your small debts. The process involves searching for a lender who offers fair interest rates.

It can be a good idea to locate a lender who can offer you fair interest rates. If you cannot find an affordable lender, it is not a good idea. The only benefit is that you will have all your debt in one place.

Credit card refinancing involves paying debt on your credit card, but debt consolidation involves merging several debts into one loan where you will manage to pay.

It can be smart to get a lender with low-interest rates and merge all your debts under such a lender. You put your debt in one place after deciding to go for the debt consolidation process.

You need to start by keeping the balances low to avoid additional interest. Ensure you locate a lender who has fair interest rates. The loan should be repaid on time at all times to avoid hurting your credit.

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