Debt consolidation loan

DEBT CONSOLIDATION

You don't need to own property to be able to consolidate your loans.

Consolidating loans with your existing mortgage is very effective if you owe large amount of money on your credit cards, personal loans, car loans, etc. See the Example-1 on our home page.

Available options for debt consolidation

Most of people with several personal loans and credit cards will sooner or later have difficulties with keeping their loan repayments on time. Some of them will only have late payments and the others will have listed credit defaults against their names. Often the easiest solution to improve one's cash flow is to consolidate existing debts into one single loan.

Debt consolidation loan can be obtained in several ways. The most common solutions are:

Refinance your existing mortgage including all your personal loans and credit cards. To be able to do this a person must have enough equity in their home, it means the value of your home must be grater than the amount owed to the bank. For example if the value of your home is $400,000 and you owe $300,000 to the bank, your equity is $100,000. If you have $50,000 debt in your personal loans and credit cards you would refinance your mortgage to the value of $350,000. Now there is only one loan, your home loan. You can not use 100% of your equity to consolidate your loans.

Replacing your existing personal loans and credit cards with one unsecured personal loan. This option is available for people without existing mortgage. Ideally, your new loan will have lower interest rate which will result in lower monthly repayments. Your secured personal loans can be consolidated as well. Car loans, boat loans, machinery and equipment loans can be replaced with one single loan with lower interest rate.

Credit card balance transfer is another option of debt consolidation. Some financial institutions will offer you to transfer all your existing loans and credit cards into a new low interest credit card. This option may seem attractive, however you should read 'small print' in your contract. Usually a very low interest rate is only offered for a limited time period after which it will change to standard interest rate. In some cases, this standard interest rate may be higher than your original interest
rates before the balance transfer.

You can also consolidate electricity and phone bills as well as school fees. An unsecured personal loan is issued to pay all your bills and fees.

Debt consolidation will help you to reduce your current monthly payments and simplify your budgeting. Extra money available after consolidation should be used wisely. Spending habits should be changed and monitored carefully preventing financial difficulties reoccurring.