Debt Consolidation

Consolidate using a second mortgage

“Second mortgage” and “Refinancing your Mortgage” and “Home Equity Loan” are all names referring to the same things. This is where a bank lends you money against a part of your home. For example, where your home is worth $500,000, and the mortgage is for $400,000, in this case, you own $100,000 of your home, also referred to as your equity. The bank can permit you to use some of this equity in order to pay your debts. In this situation, you would effectively have two mortgages, the second of which would comprise your debt consolidation loan.

Overdraft or line of credit

Banks were giving out lines of credit to pretty much everyone before the recession. Now, however, with the global economy has changed, a line of credit is considerably more difficult to qualify for. You have to check with your credit union or bank for their exact criteria. As a general rule, you will need an excellent credit score, a positive net worth (though this isn’t always a requirement), and a healthy income.

Overdrafts and lines of credit can be unsecured or secured, depending upon your circumstances as well as the bank’s policy on lending at the given time. Their policies change depending on how well they think the economy is doing.

Overdrafts and lines of credit are the same things, in essence, both turning your bank cards into credit cards, allowing you to spend money that you don’t possess up until a given limit, you have to make minimum monthly payments, just like with credit cards.

Credit cards

In case you fail to find a debt consolidation company, one that provides you with a reasonable loan, you can try consolidating your credit card balances, coalescing them into a single card with a low-interest rate. You can then make your payments aggressively, getting out of debt faster.

If you’re lucky, you may come across promotional offers that offer extremely low interest rates, providing you with a great opportunity for debt consolidation. However, this can backfire if you fail to pay off your debts in time, with the promotional offers expiring and higher interest rates applying.

If you have a high credit score and aren’t in a great amount of debt, you may also qualify for a credit card with a low-interest rate.
One great advantage of this is that you can pay more than your minimum amount required unless there’s an emergency, in which case you can go back to paying the minimum.

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