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Debt Consolidation Debt consolidation is the process of combining all of your debt (credit cards, car payment, student loans, etc) into one low-interest loan with one payment. By combining all debts into one loan, you can save money in interest every month and speed up the process of paying off your debts. If you are a homeowner, a few examples of the loan types you can choose from to consolidate include a cash-out refinance, 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 on your mortgage and your home is worth $200,000, you could refinance for $150,000 allowing you to get $50,000 (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. A HELOC is typically a second mortgage and can be used to consolidate high interest debt.
Consolidating your debt can provide relief from high interest debt, as well as simplify your bills by making only one payment each month. Contact me today for more information. Together, we will determine if you could benefit from consolidating your debt.
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