Debt consolidating home financing
If you’re in debt, you may have asked yourself: “Is debt consolidation a good idea?
” In this post we’ll help you answer that question by explaining how a debt consolidation loan works, what the alternatives are, and describing when debt consolidation can help you and when it will not. You need all the information in order to make the best decision, so that you can turn your finances around as quickly and painlessly as possible. It’s a loan that allows you to pay off your current debts with a new loan that has different terms (usually from a different lender) than your current loans or credit cards.
If that’s the case, putting your house on the line may be too risky of an option for you.
Balance Transfer You might have seen offers for “0% interest” credit card balance transfers.
Your repayment plan might be much longer, which could cause you to pay more interest over the life of the loan even with a lower interest rate than what you had before.
Instead, you will owe the debt consolidation company an amount equal to the total sum of all your debts.The fees and interest rates can end up being very high – especially if you have fair or poor credit.Since most people struggling with debt do not have excellent credit scores, they’ll have to pay high interest rates and fees which will burn a large percentage of their total cash flow each month. Furthermore, even if you get what seems like a good interest rate, there is still a significant risk involved in dealing with a debt consolidation company.While home equity loans usually have fixed terms, meaning the amount of the loan, the interest rate, and the timetable for paying back the loan are all fixed, HELOCs on the other hand allow you to apply for a credit limit that you can draw upon at your convenience – but with no guarantee that your interest rates will stay the same.While a home equity loan or HELOC can usually provide a lower interest rates than other loan types, there’s a catch.