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When you decide to consolidate your debt, the obvious first question is how? and thats a question that isnt easy to answer right off the bat.

Sure, you can go to your bank and ask them to consolidate all of your debts. You could get a new credit card with a 0% interest rate on debt transfers. You could call a credit-counseling bureau, many of which were recently taken off tax exempt status by the IRS, because rather than working to help you, they work to earn a huge profit off you

Every option has a downside, and there are more options besides. But lets go through these three possibilities and break down the advantages and disadvantages.

1.GETA BANK CONSOLIDATION LOAN
Banks love it when their customers decide to get smart with their debt burden, and they love it even more when they do so with that bank. When you transfer $10,000 of credit card debt (at 19% interest), a car loan (at 15% interest), and a retail charge account (at 18% interest) into a single bank loan at 9% interest, both you and the banks win. The downside of this is that banks can be tougher to get credit from than other lending institutions, and that means if youre in real debt trouble, they might not view you as a good bet.

2.CREDIT CARD WITH 0% ON DEBT TRASFERS
Some credit card companies send out special offers to try to entice you to bring your business to them. For example, one is the offer where theyll give you a new credit card with a sweetheart rate, and any debt you transfer from an existing credit card, theyll let you pay zero percent interest on. Thats not a bad deal, but the devils in the details after a certain amount of time, your account reverts to above-standard interest rates, sometimes as high as 29%. In this instance, using a credit card to consolidate debt may actually see you with more debt burden in six months time.

3.CREDIT COUNSELING BUREAUS
These outfits claim to be non-profits that are only there to help you get out of debt, but the reality is the industry has been taken over by people who earn big money from your creditors by getting you to pay them back in a prompt fashion. For example, lets say your best option is bankruptcy hey, sometimes you just need to start over. A credit-counseling bureau, which gets paid, based on how much you pay back, will be much more inclined to tell you to NOT go for bankruptcy, because they make more if you spend three years eating noodles and sending all your money to Visa. Avoid.

In the end, your best bet, if you can manage it, is to have your bank set you up with a debt consolidation loan. The rate will be better, the payment structure easier, and you can cut those credit cards into pieces at last!

Debt Consolidation Online – 3 Things To Watch Out For

Looking for a debt consolidation service? There are hundreds of companies out there who can help you consolidate your debt into one low-interest monthly payment. However, you need to beware of scammers! Some unsavory folks will simply try to take your money by making promises of debt consolidation–and then they don’t deliver on those promises. So as you’re browsing for Debt Consolidation online, remember to watch out for these three things:

Outrageous promises

“We’ll wipe your credit clean in less than 3 days!” “We’ll get your interest rate dropped to zero percent!” These types of outrageous promises are a sure sign of a scam operation. Any legitimate debt consolidation company will make reasonable promises and claims about the services they offer. Look for companies that offer help, assistance, and guidance–NOT miracles.

Spam, telemarketing and junk mail

Be wary of any service that solicits your business, especially with cheap marketing tools like email spam, telemarketing and junk mail. (Fliers on a community bulletin board are even worse.) In general, it should be you who seeks out their business, rather than they who contact you. Television commercials are an exception, however. They are generally acceptable advertising since the company is not contacting individuals directly, but is rather targeting a broad audience.

Exorbitant fees

Don’t pay any company an up-front fee before they’ve even looked at your case! Sometimes called “client assessment fees,” some companies will charge you $50 or $100 just to review your paperwork for a few minutes–then they shuffle you out the door! Although it’s not unusual to pay a debt consolidation service an initial fee plus a monthly fee, you shouldn’t be paying exorbitant amounts. Shop around so you know the current rates for this type of service, and walk away from any company that seems to be gouging you.

Although a debt consolidation service can get your interest rates lowered and help you get a handle on your finances, it’s always smart to be wary and on the lookout for unscrupulous scammers. Before you sign on with any company, make sure you check them out with your local Better Business Bureau.

Debt Consolidation Mortgage Loans – Using Home Loans To Reduce Debt

Excessive debts cause a lot of worry and anxiety. Many people hope to become debt free. However, earning enough money to care for daily living expenses, while paying down credit card balances is challenging. There are options available to those burdened with debt. Owning a home has certain advantages. Debt consolidation mortgage loans are easy to qualify for, and provide enough funds to payoff creditors.

Different Types of Debt Consolidation Mortgage Loans

If choosing to consolidate debts, homeowners usually obtain a lump sum of money. The funds can be used to payoff credit card balances, personal loans, auto loans, etc. Once credit account balances are zero, homeowners simply submit one monthly payment to repay the debt consolidation loan.

Because debt consolidation mortgage loans have very low interest rates, most homeowners are able to repay the loan within a few years. Typical repayment periods consist of five to fifteen years. Moreover, the monthly payments are very affordable. You can expect to save hundreds each month.

If opting to take advantage of a debt consolidation mortgage loan, you may select a mortgage refinancing or home equity loan option.

How to Consolidate Debts with a Mortgage Refinancing

Cash-out mortgage refinancing is perfect for consolidating unnecessary debts. Moreover, this method serves multiple purposes. Because of falling mortgage interest rates, many homeowners are deciding to refinance for a lower rate. In some instances, this may greatly reduce your mortgage payment.

With a cash-out refinance, homeowners borrow from their homes equity, and use the money to consolidate debts. Refinancing creates a new home loan. Furthermore, if borrowing cash from your equity, the mortgage principle will also increase. For example, if borrowing $25,000, the mortgage amount owed will jump from $100,000 to $125,000.

Home Equity Line of Credit and Home Equity Loans

Another approach for using your homes equity to obtain cash for a debt consolidation involves getting a home equity loan or line of credit. In this case, loans are approved up to the amount of equity you have built in the home. Because home equity loans are protected, homeowners with less than perfect credit may also get approved.

Home equity loans are dispersed as a lump sum. This is ideal for paying large credit card balances and other types of loans. With a line of credit, homeowners are approved for a revolving credit account. Lines of credit are also ideal for debt consolidation.

Swimming in heavy credit card debt sometimes means getting deeper in debt simply because of high interest rates. The IRS no longer allows credit card interest as a deduction. If you use a home equity loan to consolidate and pay-off your bills, you could actually save cash three ways: 1. No interest accrues on your credit card balances, 2. Your new loan could have a lower interest rate, lowering your monthly mortgage payment, and 3. At the end of the year, three IRS allows you to deduct most if not all of the interest from your mortgage.

One possible glitch in the system is a variable rate loan. If your home equity loan has a higher interest rate, the potential exists you could have more out of pocket expenses than you had before.

While equity loans usually offer a lower interest rate, the closing costs could be higher. And, some lenders could charge a pre-payment penalty, almost forcing you to stay in your home rather than sell if a potential buyer makes an offer.

One way around these restrictions is a home equity line of credit. Those usually dont carry any closing costs, and there usually arent any pre-payment penalties.

If you have extremely good equity built up, you may want to consider cash-out refinancing. No matter what your home is worth, borrow only enough to pay off the existing mortgage and a specified amount you need to spend. For example, if your home is worth $300,000, but you only have $100,000 to pay-off. Borrow more than the existing mortgage, but less than the homes market value. You will then have lower payments, and probably less restrictions for an early pay-off.

Debt consolidation mortgage loans can help you lower your interest rates and monthly payments. With reduced rates, you can also pay off your debt sooner. However, reducing your equity could subject you to private mortgage rates. You may also end up spending more on interest payments by delaying payments.

Saving With Mortgage Interest Rates

Mortgage interest rates are much lower than credit card or unsecured loan rates. Consolidating your debt with a refinanced mortgage or home equity will reduce your payments simply by having a lower rate. By paying the same monthly payments, you can pay off your debt rapidly.

Your interest is also tax deductible with a mortgage or home equity loan, where your credit card interest isnt. Student loan interest is also tax deductible and shouldnt be consolidated for a higher rate.

Reducing Your Payments

Consolidating with a loan also allows you to reduce your payments by picking longer terms. So if your income is reduced or you have other financial obligations, lengthening your payments can give you some breathing room in your budget.

Paying More In Fees And Interest

The cost of a mortgage can be more than what you are paying in interest charges if you have a small amount of debt. To refinance a mortgage, origination fees can add up to thousands. Other types of home equity loans can cost hundreds or nothing to open. You may also have to pay private mortgage insurance premiums if dont leave 20% of your equity in tack.

Delaying payments can also add up interest payments, even with a lower rate. For example, a loan amount of $10,000 will cost $11,587.10 in interest for a 30 year loan at 6%. That same amount will cost $5,896.71 for a 5 year loan at 20%, which is what most credit card payment plans are like.

Deciding To Pay Down Debt

Consolidating your high interest credit can help pay off your debt by providing structured payments. You can also lower your interest rates, making repayment easier. However, be aware of the costs and shop around for low rates and fees. To get the most out of a consolidated loan, choose short terms to avoid making large interest payments.