Are you ready to get out of debt? Tired of living paycheck to paycheck? Are you behind on some of your payments? Are you cutting back on the amount you pay to the utility companies and other essentials to pay down debt? If you are struggling to pay your debts, and you feel now is the time to end this cycle, it’s time to consider a debt consolidation home mortgage loan. This type of loan uses the power of your home equity to get rid of your debt.
Many myths and truths surround a debt consolidation home mortgage loan, so in this article we will explore the common misconceptions and give you a clear picture of how these loans work.
First, keep in mind that you do not have to include a debt in the loan just because it is a debt. Instead, you should look at each of the debts you have. It may make sense to pay down certain debts before filing for your debt consolidation home mortgage loan or some debts may have a lower interest rate and fixed term that is better than the consolidation loan. For instance, if you have student loans or medical bills, these debts are probably going to have better interest rates. You would end up spending more money on these bills if you put them into the loan. Your student loans may have a 3 percent interest rate, and often, medical bills carry 0 to 1 percent interest. These are much less than the loan rate that will be at least 5 percent or higher. You would pay more if you were to include them in the new loan.
There are definitely right ways and wrong ways to structure a debt consolidation home mortgage loan. Once you’ve determined what debts fit in the loan, you can move forward. Consolidation loans often get a bad rap because consumers make poor choices in structuring them. Sometimes consumers hinder their financial future by getting a debt consolidation home mortgage loan because they go out and get more debt on top of their existing debt. They get stuck in a vicious cycle that never ends. It’s important to have discipline and a good financial planner when pursuing this type of loan.