Debt Consolidation Finance – Access To A Debt Free Life

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Debt Consolidation Finance – Access To A Debt Free Life

Debt consolidation finance can indeed lead to a debt free life if arranged properly and managed in such a way that the interest you pay on your total debt is minimized and you use this money that you are saving to pay down your debt more quickly. Let’s assume that a client has a small mortgage, several credit cards which are maxed out to the limit and they would like to borrow some money to also complete some necessary renovations on their home such as a roof replacement.

Their home has a great deal of unused equity that can be accessed by increasing their mortgage at a low interest rate. Their credit cards will be at a minimum of 18% interest and if they are store sponsored credit cards the interest rate could be as much as 28% interest on any unpaid balance. At these rates the cost of interest can add up really quickly. The roof can probably be patched but they risk water leaks which can generate more a lot more damage and expense.

Remortgage your Home and Apply Debt Consolidation Finance to your Credit Card Debt

Consumers should consider borrowing sufficient funds in this situation using the equity in their home to pay the balance in full on all of their credit cards and also to pay for, in this case the roof repairs. Instead of roof repairs it could be remodeling the kitchen, updating the bathroom etc. The point is to avoid paying high interest rates on the credit cards and applying for a personal loan to fund the repairs they need to do on the roof of their home. A personal loan will have a higher interest rate than their secured mortgage and the payments will be spread over a maximum of 5 years which will negatively affect their cash flow. Using a mortgage to finance the debt consolidation and the renovations will spread the payments over the life of the mortgage and lower the monthly payments. Your monthly cash flow will not be impacted as significantly as a personal loan would.

Use the Cash Flow Savings to Pay Down Your Debt Quickly

Now that the mortgage has been refinanced and the debts consolidated into one mortgage and one payment, consumers will find that their monthly payments will be less than they were when they were attempting to meet all of their monthly cash flow payments for personal loans and credit card payments. This monthly savings should be applied to the debt on the mortgage as extra payments to save even more money in reduced interest costs over the long term.

By applying the savings to the mortgage, consumers will find that they can have a debt free life a lot more quickly than if they just go and spend the cash flow savings that they are achieving. For most consumers the temptation which most of us succumb to is that we have this extra cash and we go out and spend it rather than apply it to our debts. It may take a few years, but when you make that last mortgage payment, this will truly be a reason to celebrate. This is a great way to achieve a debt free life by applying debt consolidation finance guidelines.

It Takes Discipline to Apply Debt Consolidation Finance Guidelines

It is so easy to just borrow additional money on your home, pay off the credit cards, pay for the roof repairs and then just start using the credit cards again. Next thing you know the credit cards are back at the maximum again and you are worse off because you have a larger mortgage and you have more credit card debt. In addition your credit rating may have also slipped a few points. Credit ratings are determined by a number of factors which may seem obscure to many people. Your total debt that you owe, the number of credit cards you have which indicates the total possible debt, your record of meeting all of your obligations each month and your overall long term credit history all go into maintaining your credit rating.

For example, if you have an excellent record of always paying your bills on time and never missing a payment with anyone your rating should be pretty good. On the other hand if you have a large mortgage and a bunch of credit cards, you are going to lose points on your credit rating due to the potential debt that you can accumulate on all of these credit cards. Worse will be when you charge up these credit cards to near or at the maximum and also have a large mortgage. This will definitely lower your credit score. Missing even one payment that gets reported can also have a dramatic impact on your credit rating as well. Applying debt consolidation finance guidelines and having the discipline to stick with them will help to ensure that you avoid these pitfalls, maintain your credit rating and pay down your debt relatively quickly.

It really takes discipline to make sure that you do not find yourself in this situation again. If you do not have the funds, then do not spend the money. Consolidate your loans once and then focus on achieving a debt free life!

Should I use a Broker to Consolidate My Debt

Many people will just go to their current company that they have their mortgage with and make arrangements to refinance their existing mortgage and then consolidate their debt. There really is no problem with taking this approach, other than they may end up paying too much in terms of the interest rate on their new refinanced mortgage.

We always urge consumers to request a discount whenever they renew their mortgage. The worst that will happen is that the mortgage company declines the request. You may be surprised at the same time when they shave a quarter percent off or offer to pick up some or all of the cost to refinance the mortgage. These fees can include appraisal fees, legal fees, and processing fees.

Even better try using a broker to find you a mortgage that is competitive with your current mortgage company. They may end up offering the same rate to you, in which case you will have the satisfaction of knowing that you have the best rate available. You may also be able to use this rate as leverage with your current mortgage company. The broker may also be able to find a mortgage company that offers a lower rate with the same terms and conditions as your current mortgage comp[any in which case you save even more money!