Consolidation Debt

Many consumers carry a great deal of high interest debt and just by consolidating debt that they have they can save a great deal of interest cost and reduce their monthly payments as well. Consolidation of debt is one of the smart money steps that can be taken by consumers. It is financially smart and relatively easy to do as well. Secured mortgages is one way to consolidate debt with very low interest rates and save a bundle.

Carrying a Balance on Your Credit Card

Consider the person who is carrying a balance on their credit cards and paying 19% or more on this unpaid balance. Everything that is charged to the account as long as you are carrying a balance costs money. Consider consolidating this debt into a mortgage that is secured with the equity in your home. You may be able to lower the interest rate to less than 4% at the time of writing. It will depend on the credit rating you have and the lender that you are dealing with.

Let’s assume that you have equity available in your home. Also the lender is willing to increase your mortgage or add a second mortgage to your home. The interest rate for this mortgage will be much lower than the rate charged on your credit card. Consumers may have to pay for an appraisal fee to establish the value of the home. They may have to pay for legal fees to register the mortgage. Some of the processing costs and charges associated with the mortgage may also need to looked after. When you compare these costs with those of what you would pay in high interest charges most people will come out ahead of the game.

Consolidation Debt – The Real Challenge

The real challenge for most of us after we have rearranged all of our debt is to not resume the same pattern. We need to avoid charging large amounts to our credit cards. Eventually if we are not careful we will end up with unpaid balances on our cards again. There is no question that credit cards are a convenient way to pay for various items, but if we cannot pay the balance at the end of the month the cost of those items is just going to increase.

Following a guideline that essentially says I will use my credit card as long as I have the money in my bank account to pay for what I am charging to my credit card will prevent the purchase of a lot of items until we have the cash and ensure that an unpaid balance is not built up. Most of will find this difficult to follow, however it does work if you practice this approach. You will likely never be in a position to need to consolidate debt again.