As strange as it may seem, for some people the secret to getting out of debt is to take out another loan.
Millions of people have often found themselves sinking deeper and deeper into debt as they watch the interest on their current bills eat up their monthly payments, While the idea of using one loan to cancel out another may seem pointless, in some situations it may not only make sense, it mightactually be a stroke of financial genius.
Refinancing For Debt Consolidation If someone struggling to meet the monthly payments on his or her debts is a homeowner, that individual's chances of qualifying for a debt consolidation loan are excellent.
If you are in that position, and feeling overwhelmed by your debts, refinancing your home to consolidate your debts will let you get back on your financial feet in far less time than you ever dreamed.
But before you leap into a decision to refinance your home as a way to eliminate your other debts, there are some things you should consider.
First, make sure you understand the concept of home refinance.
When you refinance as a way to consolidate your debts, you will be taking out a new home loan with your home as security, using the proceeds of the loan to pay off your existing home loan and as many of your other bills as they will cover.
You will be left with having to pay a single monthly payment instead of several, and the interest rate on your refinanced loan will hopefully be much lower than that on your other bills.
The refinancing procedure is almost identical to that of obtaining a home mortgage.
You will need to find a lender, negotiate the best possible terms, and then relax and appreciate the feeling of no longer having all those high-interest loans eating into your income every month.
Home Equity Loans Perhaps you are familiar with the term "cash out mortgage refinancing," but are hazy on its meaning.
What it refers to is the practice of borrowing a sum greater than your mortgage balance, or tapping into the equity you have accumulated in your home.
This will get you some cash, and is different from a debt consolidation loan in that the cash can be used in whatever way you like.
Many people use it to remodel their homes, hoping to increase their market value.
But others use it like a debt consolidation loan to clear up their other bills.
It's critical that you understand that taking a loan to consolidate your debts does not mean that you are excused from repaying them.
You are only making them less difficult to manage because you will be freeing yourself of the need to pay several bills each month.
The only way to regain control of your financial future is to cut your debt out by its roots so that its accumulating interest does not keep eating away at your income.
Deciding to refinance your home loanand do debt consolidation will be taking a giant step in the right direction, but only if you follow up by getting serious about living within your means.