You are planning to go for a debt consolidation mortgage. You do not know what to make of this. Your debts are large and you are worried about the future. Debt consolidation mortgages can be a great way of getting out of debt and improve your financial situation. Here is some information that will help you decide if it is the right option for you.
If you own a home, debt consolidation through a loan is pretty much a standard mortgage product. It is available from most banks and is fairly easy to obtain. The interest rate on the loan is based on your credit history and the equity in your home. A secured loan is a good choice, as you will have a lower interest rate than an unsecured loan.
The main advantage to debt consolidation mortgages is that you do not have to keep paying all your separate debts. It can be very tempting to juggle too many loans and not enough money to pay them. With a single consolidated loan, you can make one payment each month and have one interest rate rather than several.
The disadvantage to debt consolidation mortgages is that the rate of interest is often quite high. It may be double or triple the normal interest rate. This can add up quickly and cause you considerable extra costs. A secured debt consolidation mortgage is a good choice if you own your own home and can qualify. However, if you do not own a home, an unsecured debt consolidation mortgage will be the best option for you.
Your credit report will contain details of the debt consolidation loan. This is important because if you want to borrow more money in the future, lenders will look at your credit report to see how well you have managed your finances over the past year or so. They will be looking for signs that you have successfully repaid your debts. If you have a poor credit report, you will find it very hard to get a loan for anything other than an automobile or something similar. You may also find it difficult to obtain financing for other high cost items such as a boat or a house.
Another disadvantage to debt consolidation mortgages is that your monthly payments could prove to be extremely high. If you are already struggling to keep up with your mortgage payments, this could push you even further into debt. Even though the interest rates on debt consolidation mortgages are usually lower than those for most other types of loans, you must carefully consider how much you can reasonably afford to pay each month.
The final disadvantage to debt consolidation mortgages is that they usually do not provide any type of relief for late payments. Any money that was paid on time will remain unpaid at the end of the term. If you are in debt, the thought of having to scramble to find a solution to a debt that has gone out of control is frightening. The best solution is to first get your debt consolidation mortgage reviewed by a debt counselor and see what type of help you need. If the answer is financial ruin, then you should probably move on to finding a solution without delay.
While debt consolidation mortgages are becoming more common, it is important to understand the disadvantages and potential benefits before making a decision regarding this type of mortgage. Take the time to do your homework and consider all of the information that is available before making your final decision. The decision you make regarding debt consolidation mortgages will have an impact on your life for many years to come. Make sure that you are making the right one.