Debt Consolidation Loans
Debt consolidation loan users guide. What you need to know to find a debt consolidation loan that's perfect for your needs.
Home equity loans work very well for debt consolidation, home improvements, medical bills and big expenses like money for your children's' education. Unlike interest on other types of debt, such as auto loans and credit card debt, the interest on home equity loans is usually tax-deductible when used for its primary purpose. As with any type of loan, you'll do best if you shop and compare the rates and terms from several lenders before you finalize your decision.
Another possibility is a cash-out home mortgage refinance loan. With cash-out refinancing, you refinance your mortgage for more than you currently owe, and use the difference for whatever you wish. If the interest rate on your current home mortgage is 2 or more percentage points higher than current mortgage rates, a refinance might be an even better solution to your debt consolidation problem than a home equity loan.
If you are presently paying a higher rate, a cash-out home mortgage refinance loan will not only lower your rate, but provide you with additional funds for debt consolidation or whatever. Once you crunch the numbers, you might well choose this option as a better financial solution than a home equity loan or home equity line of credit.
There are important differences between home equity loans and cash-out home mortgage refinance loans. A home equity loan is a separate loan on top of your first mortgage, while a cash-out refinance is a replacement of your first mortgage. The interest rate is ordinarily more favorable on a cash out refinance, but you have to pay closing costs when you refinance, which you don't have to do on a home equity loan.
Closing costs on a home mortgage refinance loan can amount to hundreds or thousands of dollars, so it doesn't make sense to refinance a higher amount of principal at a higher rate. If your current mortgage is at a rate not that much different from the rate they are offering on your refinanced loan, you are probably better off leaving your mortgage alone, and applying for a home equity loan instead.
Your Next Step
Before making any final decision as to which way to go with your debt consolidation loan, you'd do well to do a preliminary "crunch" of the numbers. You may want to run the numbers first to see how a home equity loan could solve your needs and then run them again to see if a mortgage refinance could solve your problem even better. It's one thing to develop your own preliminary estimates, but it's another thing entirely to get actual quotes, from actual lenders, based on the specific and unique information you provide them.
The good thing about it is that there's a quick, easy, and free way
to take this next step, and it puts you under no obligation whatsoever. You can
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You may choose to proceed further with one or more of these lenders, or you may decide to go elsewhere for your debt consolidation loan, but at least you'll have a better idea as to whether the loan you have in mind is "do-able". The quotes you'll receive will take into account your state of residence, your stated general credit standing, and a number of factors that you provide that are specific to your situation.
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