How many bills do you have every month? Six? Ten? Twenty? Wouldn’t it be great if you could lessen the number of bills you paid every month? What if you could cut all of your debt bills down to one payment every month? Is this even possible?
Debt consolidation financing is one way to lower your interest rates and monthly payments on credit cards, auto loans and mortgages. You do need to be smart about debt consolidation financing, however.
About the only bills you cannot put into debt consolidation are your utilities and basic expenses. Debt consolidation takes your credit card bills, your auto loans and even your mortgage and combines them into a single payment. Two types of debt consolidation financing exist – equity loans and unsecured loans. With an equity loan, you take the money from the equity in your home and borrow against it to use in debt consolidation financing. This gives you a second mortgage.
The other option is an unsecured debt consolidation loan. Many people choose this route because they don’t have to secure the loan with their home equity. The downside of this loan is a higher interest rate to make up for the higher risk and lack of secured property. This option usually occurs after the debt consolidation financing firm works with your creditors to cut interest rates and reduce balances on debts as much as possible. The loan is usually created after you have participated in their program and they’ve structured the repayments as securely as possible.
Even if the debt consolidation financing is a higher interest rate for the unsecured loan, it’s unlikely that you will spend more money in the end than if you tried to pay the debts yourself. Credit card interest rates vary and readjust at different phases of the repayment process, particularly if you get behind on them.
Even if your interest rate is up to 15 or 20 percent in debt consolidation financing, if it is a fixed rate and term, you will pay it off more quickly than you would several revolving credit accounts. With debt consolidation financing, you have one payment at a steady interest rate and an end in sight. The end result of debt consolidation financing is that you save money in interest payments and your budget gets a little wiggle room.