Debt Consolidation

Consolidating your debt in a single low-interest loan can save on interest payments and speed the process of paying off debts. The important thing is that you make the choice now to reduce your debt. The more you wait, the more cash you stand to lose. Luckily, there are many forms of debt reduction options available.

If you are a homeowner, a few examples of the loan types you can choose from include a cash-out loan, a home equity loan, or a home equity line of credit.

• Cash-out Loan: A cash-out loan allows you to refinance your home while pulling cash out at closing. For example, if you owe $100,000, you could refinance for $120,000 allowing you to get $20,000 (minus closing costs). The money can then be used to consolidate your high interest debt.
• Home Equity Loan: A home equity loan is a loan that uses equity in your home as collateral. Most home equity loans are second mortgages. The money can be used for whatever purpose you choose, including debt consolidation.
• Home Equity Line of Credit (HELOC): Instead of being setup as a typical home loan for a fixed dollar amount, a HELOC is setup as a line of credit with a maximum credit limit. This allows you to use the money as you need and avoid paying interest on the entire amount. Again, a HELOC is typically a second mortgage and can be used to consolidate high interest debt.

If you are not a homeowner, the best option for you may be an unsecured personal loan. Unsecured personal loans usually place greater emphasis on your credit history but are available to you regardless of home ownership status.