A debt consolidation loan is a loan designed to roll expensive, short term (credit card) debt into a longer term loan with lower interest rates. Usually this is done with a second mortgage or home equity loan, although some home buyers will roll short term debt into a new mortgage, either at the time of purchase or when refinancing the home with a new mortgage.
The benefits of a debt consolidation loan are:
- Turn numerous high-rate bills into one, easy payment
- Payoff credit card debt
- Eliminate or lower your credit card interest payments and fees
- Borrow up to 100% of your home's value
- Lower your monthly mortgage payments
- Reduce interest rates
- Reduce debt and cut payments by 50-80%
- Avoid bankruptcy
- Become debt free
- Put an end to creditor harassment
- Rebuild your financial future
Consolidating your debt in a single low-interest loan can save on interest payments and speed the process of paying off debts.
Key Points If Your Are Considering A Debt Consolidation Loan
1) If the debt consolidation loan is consolidating credit card debt that was accrued as the result of unrestrained spending, then a debt consolidation loan must be accompanied by a change in spending habits. Otherwise, the credit cards that are paid off with the loan are going to remain an alluring option, and soon there will be another set of big credit card charges to pay off in addition to the debt consolidation loan.
2) It is particularly important to decelerate on credit spending after taking out a debt consolidation loan that is secured by your home. If the household debt once again becomes unmanageable and one of the delinquent debts is the consolidation loan, it is possible to lose your house.
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