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What is Debt Consolidation?
Debt consolidation combines several unsecured debts like credit cards, medical bills, personal loans, payday loans, etc. into one bill. This helps eliminate mistakes that result in multiple finances charges like late payments.
Debt consolidation, when properly managed, can:
Lower your interest rates
Lower your monthly payments
Improve your credit score
Help you eliminate
If you are a homeowner, a popular option is to consolidate your debt and lower your monthly bills by refinancing your home. In many cases, almost 10 percentage points separate a 30-year mortgage rate from a credit card interest rate.
Cash-out Refinance
This type of refinance allows you to convert the equity you have built in your home into cash you can use for any purpose. Many homeowners consolidate credit card debt because they can make fixed payments over a set time period, rather than paying a revolving balance.
Potential Downsides
- You might cause your monthly mortgage payment to increase, depending on your interest rate and terms for which you qualify.
- Consider your loan term. If you have already paid down years of your mortgage, you likely don’t want to extend it to 30 years again. Instead, consider a 15 or 20 year loan period.
