The Finance Blogger


Debt Loan Consolidation

Debt Loan ConsolidationDebt and loan consolidation is extremely important for people who are trying to get their financial affairs back in control. If you have a loan for the car, a couple of credit cards max’d out, a personal loan and a mortgage, then just maybe you are in need of some debt consolidation.

What is Debt consolidation?

Basically a consumer who has a lot of debt such as credit cards and personal loans with relatively high interest rates can consolidate the debt into one personal loan with a term that lowers the monthly payment due to a longer term and a lower interest rate. You want to be able to pay less interest than you were before to save you money and put more in your pocket for other things or to just reduce your debt even further. When you take out a personal loan, there are two types. The first is a non secured loan and the second is a secured loan. The secured loan usually means you can obtain a lower interest rate which will reduce the amount of interest you pay. You must provide something as collateral for the secured personal loan to secure it, such as your home. A non secured personal loan is totally open and you must have an excellent credit rating for the lenders to lend money to consumers for a totally open unsecured loan.

What are Typical interest rates?

Credit cards will carry interest rates as high as 21 % for most cards and up to 29% for many other store type cards when you carry a balance on your account past the end of the month. These high interest rates can add a lot to your monthly payment.

Personal loans and mortgages are down around 3 to 5% range which is very affordable at this time. There is a rumor that in 2014 interest rates will go up so be careful on how much debt you take out.`

Car title loans have recently been getting a lot of attention along with payday loans and other types of loans that people take advantage of when they have no credit rating or cannot get  a loan through regular lenders. These types of loans are all over the map in terms of interest rates with the worst being upwards of 300% per year or 25% per month. This is atrocious and far too high. Anyone taking out a loan at these rates is being robbed and paying far too much in the way of interest. At these rates a consumer will never repay their loans.

Can I consolidate my Debt on My mortgage?

The answer is yes, however there are some requirements. You must have sufficient equity left in your home to accommodate the increased amount of the mortgage. You must have a good to excellent credit rating and a source of income to support the increased payments for your new mortgage.

In addition there will be legal costs, appraisal fees and there will be administration costs. It would not make sense to increase your mortgage for a thousand dollars for example and have to pay all of these costs. Increasing by ten thousand or more would be more reasonable.

Whenever you can consolidate your debt and obtain a lower interest rate as well as lower monthly payments, most people should try to take advantage of this approach.


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