Should You Consider Consolidating Debt?

Professional Mortgage Solutions in Rego Park, NY works with long-term customers to build and establish their financial goals through homeownership. In today’s post, we are here to walk you through the process of debt consolidation. If you can consolidate your debt, you may be able to get lower interest rates and better loan terms. Read more about the process of debt consolidation, refinancing mortgages, and building your credit and financial security below and contact us with any questions.

Reasons to Consider Debt Consolidation

There are many reasons people seek to consolidate debt: many students consolidate their loans after school to lock in at a lower interest rates and payment plan. Others consolidate credit card debt, auto loan debt, or mortgage debt. Many people in the United States struggle with debt and need to understand the process of debt consolidation. Working with a trusted professional and speaking to reputable companies like Professional Mortgage Solutions is essential to avoiding any potential scams.

In order to start the process of consolidating debt, you need to research which tool to use; some choose a personal loan, while others may refinance a mortgage to obtain lower interest rates and monthly payments. You may have two mortgages that you are seeking to combine into one new loan.

The Process of Debt Consolidation

For people who really need credit repair, debt consolidation may become an integral part of their plan to pay off debts and raise their credit score. However, you have to review whether consolidation will harm your credit. Here are some key steps in the process of debt consolidation to consider:

1) Understand each debt you wish to consolidate and list out its current terms; include the monthly payment amount, interest rate, and total debt due.

2) Next, total the amounts of all debts due in one column, and the total monthly payments combined in another column.

3) Review your debt consolidation options and ask about the monthly payment and interest rate totals.

4) Add the totals for the debt consolidation side-by-side to the columns with your current debts and compare costs.

Taking Out a Home Equity Loan to Consolidate Debt

When homeowners take out a Home Equity Loan, this can be another method to consolidate debt. This may simplify your life, leaving you with one payment instead of multiple loans or payments. This will often require you to pledge your home as collateral, so take your time to research this option. Factors to consider will include:

  • Whether the consolidation will negatively impact your credit score;
  • Whether the new loans will contain interest payments primarily, and prolong paying down the principal balances; and
  • Whether you get more value by keeping funds with the home and earning value, or, whether you can save more funds by consolidating debt.

You should consider the type of Home Equity Loan that makes the most sense when considering your financial goals. You can consider two types of Home-equity loan. One is a fixed-rate loan, which you pay back over set period at a fixed interest rate. If you sell your home, you must repay this loan in full if it is not yet paid off. The other is a line of credit, from which you can draw funds as needed, within the restrictions of the lender.

If you want to learn more, or have questions about our debt consolidation post, contact Professional Mortgage Solutions in Rego Park, NY. We are happy to answer your questions!