Home Loan to Consolidate Debt
January 31st, 2006
With the hints of
higher interest rates, it may be time to lock in all your credit
card debt by refinancing your Home Loan. Not only are higher
interest rates looming, you also have to worry about new laws that
have doubled the credit cards minimum payments.
If you only have
$10,000 in credit card debt you are probably better off paying the
debt or getting a second on your home. The reason for this is
because the cost to refinance a home loan is usually not a free
service. If you shop around you should be able to avoid some loan
people refinance a mortgage for a lower interest rate, others are
faced with consolidating credit card debt. The advantage to
refinancing the credit card debt with a home loan is that mortgage
interest is deductible on taxes, where credit card interest is
usually not deductible.
credit card debt is a good idea, because new bankruptcy laws may not
let you walk away from this debt. If you canít make the payments
and you go bankrupt you still may have the credit card companies to
pay off. If you have any equity in your house you would lose it
anyways, so refinancing is just a way to lower your overall monthly
payment. By lowering your monthly expenses you may find it easier
to afford everyday expenses.
You should try to
get a fixed rate loan and one that does not have penalties if you
want to pay it off sooner than the term. Hopefully the loan you
currently have does not have penalties attached for early pay off.
Make sure to check into all the fine print, including any new fees
for a new loan as well as penalties and points. You can shop online
through a loan broker service to find the best loan deal. If you go
to just one lender you may have not got the best loan with the
lowest loan fees.
Avoid home loans
that have APRís. The rate can be slightly less than a fixed rate
loan but you put yourself at risk for higher interest rates and
higher payments when interest rates rise. Also avoid loans that
have balloon payments after a time period, a low payment sounds
great until the balloon payment arrives. A lot of people try to get
the lowest payment possible because they would not otherwise afford
the house. This is a reality that you might be faced with, but
treat these options as a last resort.
If you have the
credit card debt and you do refinance, it might be time to cancel
some or all of your credit cards. If you donít address how you got
the credit card debt in the first place you will likely find
yourself in the same situation a few years later. You need to
address the reasons that you have the credit card debt and try to
avoid making the same mistakes in the future. Make a effort to pay
with cash for everything. Paying cash will force you to set a
budget and follow it. When you run out of cash, it is like a wake
up call on how much everything costs. It will make you more
conscious about how much you can spend in a month.
Best Syndication Staff Writer
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