Debt Consolidation Home Mortgage Loan – When To Use?
A debt consolidation home mortgage loan may seem like a perfect solution to get the cash you may need to pay off or consolidate your debt, but when should you use these loans? And are they really a good idea? Second home mortgages may also be used to consolidate any debt you have, and both of these loan options use your home as collateral against the debt. This means that if you do not make the agreed upon payments then you could end up losing your home to the lender. A debt consolidation home mortgage loan should only be taken out after you have evaluated all of the advantages and risks that this type of loan involves.
Loans and mortgages for people with bad credit can have very high interest rates, but in some cases this may be a less expensive option than paying the much higher interest on thousands of dollars on credit card debt. Some credit cards may carry an interest rate of twenty percent or more, and even if you have poor credit a debt consolidation home mortgage loan will not carry interest rates anywhere close to this. When you consider the 30 year fixed mortgage rates and then compare this to the rates you will pay on your credit card debt then it may make financial sense to take out a loan against your home to consolidate this debt. The savings can be used to pay off the consolidation loan faster, or used for other bills and financial needs instead.
Another reason why it may be a smart move to use a debt consolidation home mortgage loan is to improve your credit rating, so that you can refinance at a lower rate later on. Poor credit can mean much higher interest rates and less desirable traits. If you credit rating is affected by old bills and past due debts then finding mortgage loans with bad credit may help you consolidate your debt, and improve your credit rating while making a lower payment each month.