Despite popular belief, not everyone who gets into trouble with debt does so because of carelessness. Debt can be very insidious. Even people who manage their finances fairly well can start with $100 on a charge card only to see it grow to $10,000 in just a couple of years. Debts can go from “minimal” to “reason to be concerned” to a “serious stress factor” very quickly. Luckily, there are many resources like debt consolidation loans to consider.
How to know when your debt has become out of control
If you find you are making only the minimum monthly payments on your various balances or when your next month’s bill is greater than this month’s bill, your debt may be getting out of control.
What the Federal Trade Commission says
The FTC (Federal Trade Commission) agrees that if you are having a problem with debt, one good solution is debt consolidation. This is a way to bring all of your financial obligations together at a lower interest rate and with more time to repay them. Of course, this doesn’t make your debt disappear, it just makes your financial obligations easier to handle.
Option #1: refinance your first mortgage
One way to get a debt consolidation loan is to refinance your first mortgage. Let’s say you have a house with an estimated value of $200,000. But you owe only $150,000 on your mortgage. This means you have $50,000 worth of equity in your house. If you refinance your mortgage, you could get that $50,000 and use it to repay all of your creditors. Of course, your new mortgage would be for $200,000. But you have converted all your charge card bills, student loans, and auto loans, and so forth into one loan payment. Instead of having to pay Visa $500, MasterCard $250, $250 on a student loan, $350 to Sears, $425 on a car loan–you will now need to pay only the one lender.
Option number 2: get a second mortgage
If there is some reason why you either don’t want or can’t refinance your existing mortgage, you might be able to get what’s called a home equity line of credit (HELOC). You can use the funds from this loan exactly the same way as with Option #1, except in this case you will have two loans. You will have your original loan of $150,000 plus an additional loan for $50,000. Naturally, you’ll have to create a payment plan for both loans. However, you will be rid of all of your various charge cards, car loans, student loans and so forth.
Strategies for finding good debt consolidation loans
Whether your credit is good or poor, you should be able to find mortgage refinance debt consolidation loans. Here’s what to do.
- Look to find the best loan available. You can use the Internet to do this because you will probably have to complete just one form and then obtain multiple offers.
- Find the best rate of interest. The lower the rate of interest on your loan, the greater amount of money you will be applying towards your principal balance.
- Be sure to get a type of loan that works for your situation. For example, if you are planning to stay in your house for many years you might choose a 30-year loan. However if you believe you will only be there for five years or less, you might want to opt for an adjustable rate mortgage (ARM). This will have a lower interest rate than a fixed interest loan but do make sure it doesn’t come with some kind of balloon payment the end of the three or five years.
Get a free debt relief quote from NationalRelief.com and see how much you can save on your bills.