If you have multiple debts to pay, debt consolidation will often be recommended. It’s a great option for many consumers, including homeowners with a mortgage payment. This term refers to the option of combining multiple outstanding debts into one. You will basically take out a new loan, to pay off a number of smaller loans, thereby reducing your monthly debt payment to a single one.
People choose to consolidate their debt for various reasons; you may want to simplify your current finances, save money by making lower payments every month, or simply pay off multiple debts faster. When you qualify for a debt consolidation loan, the company that issues the loan will either pay off your creditors directly or pay the money over to you, making it your responsibility to ensure that you pay off each creditor that falls under your consolidation application.
How It Works
When you consolidate your debt, you basically take all your outstanding loans, combine them, and take out a new loan to pay them off. So, for example, where you would have had five different creditors to pay every month, you take out a loan that will pay them off completely – thereby having only one loan repayment to make.
Debt consolidation is a popular option among homeowners, as it is possible to use the equity in your existing mortgage to pay off your current loans. While it is technically impossible to combine different loans – as they all have different terms, interest rates, etc. – consolidating them into one can be a great way to save money at the end of the day.
The Benefits of Debt Consolidation
Consolidating your debt has numerous benefits, which include the following:
- You benefit from a lower interest rate
- You save money every month with lower repayments
- You increase your available cash flow
- You can change your financial situation if things are starting to become too expensive
- You will improve your credit rating when paying off loans faster
Consolidating debt can also be a great way to manage your credit card debt, which is why it’s a real benefit for so many consumers. Always ensure that you work with a reputable broker that will give you sound financial advice and a customized solution based on your unique financial needs.
At Mortgage Guys we specialize in debt consolidation and we can assist you with consolidating your debt, especially if you have a current mortgage. We’ll assist you with your application and can also help you calculate how much you can save by consolidating your debt.