Weighing Debt Consolidation Refinance Options

When it comes to dealing with debts, most of us would do our very best to eliminate

the debt altogether or at least to reduce the amount whenever and however we can. Sometimes when the debt gets a bit too high for comfort, then we might consider various options such as debt consolidation refinancing and home equity loans in order to reduce our burden of debt. There may be a lot of factors to consider including the advantages and risks of each and every option.

Debt consolidation refinancing is one of many options you have, to consider as a way to reduce the monthly payments of your existing debts. Refinancing in order to consolidate your debt is not relatively a new idea but it definitely needs careful consideration and a lot of solid planning. Normally you would have the option of cash-out refinance or a second mortgage. Before you even consider either option, it is advisable that you find the root of your problem and see if either option will serve the purpose rather than landing yourself even deeper in debts than before.

Some might argue that a cash-out refinance might end up being cheaper than a second mortgage. Most experts are also likely to advice against getting a second mortgage to consolidate your debts. When given the option between mortgage refinance & debt consolidation loans, a lot of financial experts are likely to agree that you would be taking a higher risk if you opt for the former. This is because your home would be the collateral especially if the debts you are consolidating are unsecured debts such as credit card bills. If you should ever continuously default on the payments, your creditors will have the option of exercising their rights over your home and seize your property. So you might want to really think things over before deciding to take the leap.

One of the reasons a mortgage refinance might be helpful, if you are consolidating your debts, might be because, it enables you to remain as a creditworthy debtor. This is because, it might be able to keep you from filing for bankruptcy. Other than stopping the harassing phone calls from your creditors, you may also be able to consolidate all your bills into one monthly payment that is relatively lower than your original debts especially if your original debts are credit card debts. Credit card debts carry a much higher interest rate. So once youve rolled all your credit card bills into one mortgage refinance at a lower interest rate, you may have the option of paying a significantly reduced amount of money every month. It is advisable that you are sure you can handle the size of your second mortgage, because, you definitely would not want to end up being deeper in debt than before.

As mentioned earlier in this article, a mortgage refinance for reasons of debt consolidation might be a very risky step to take. Another reason could be that you might also be extending the term of your loan to a period of 15 to 30 years which makes you spend a large part of your life in debt. Also you might end up paying more than you originally owe due to the longer pay back period. In the long run you may not be putting an end to your debt but merely spreading it across a longer pay back period while still being charged due interest.

So when you are considering your options for debt refinance, you might want to seriously look into various options and weigh all the pros and cons before finally deciding on one solution that you think might be best for you. Of course, you may not have to do it all by yourself. You always have the option of engaging a professional expert to advise you on the best solution that will address your particular financial situation and allow you to pay your debts and still live your life comfortably. However, always remember that your financial advisors can only give the best advice but the choice ultimately lies in your hands.

by: Ask Bill

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