Consolidating debt can save you money and your home, car or other property. This is often known as a second mortgage. Debt consolidation refinancing takes the equity in your home and the lender restructures your mortgage to use this equity to pay off your old debts.
Unfortunately, second mortgages can be less than pretty. If you are in serious debt, chances you’re your credit score is not the best. You can still get the debt consolidation refinancing, but it will most likely be at a higher interest rate. If you do not want to go with the higher interest rate, you will have to pay off some of the worst debts and get back on track with payments. You may also need to bring some down payment money to the table.
Most lenders are not willing to lend to consumers with less than a 700 credit score. The recent recession and bank failures have constrained loans. The best way to get yourself prepared for debt consolidation refinancing is to pay your mortgage payments on time, stay away from the credit cards and save as much as possible for a down payment.
If you can show your lender that you are taking steps to being more responsible with your money and increase your equity and down payment, you can possibly find a lender that will work with you on a debt consolidation refinancing.
One of the best ways to get on track in preparing for a debt consolidation refinancing is to meet with a reputable financial advisor. This advisor will help you set up a budget and walk you through the process of cleaning up your finances. This person will give you guidance, but it’s up to you to make it happen. Your advisor may place you into a debt consolidation program before you enter into your loan. He or she will help you work with your lenders to reduce interest rates and payback balances on your debts. If you can get through this process, many times a lender will say yes to getting you approved for a debt consolidation refinancing.