How To Consolidate Your Debt (entrepreneur organizations)

August 23rd, 2008 admin Posted in finance |

By Paul Hata

Some homeowners opt to re-finance to consolidate their existing debts. With this type of option, the homeowner can consolidate higher interest debts such as credit card debts under a lower interest home loan.

The interest rates associated with home loans are traditionally lower than the rates associated with credit cards by a considerable amount. Deciding whether or not to re-finance for the purpose of debt consolidation can be a rather tricky issue.

There are a number of complex factors which enter into the equation including the amount of existing debt, the difference in interest rates as well as the difference in loan terms and the current financial situation of the homeowner.

This article will attempt to make this issue less complex by providing a function definition for debt consolidation and providing answer to two key questions homeowners should ask themselves before re-financing.

These questions include whether the homeowner will pay more in the long run by consolidating their debt and will the homeowners financial situation improve if they re-finance.

What is Debt Consolidation?

The term debt consolidation can be somewhat confusing because the term itself is somewhat deceptive. When a homeowner re-finances his home for the purpose of debt consolidation, he is not actually consolidating the debt in the true sense of the word.

By definition to consolidate means to unite or to combine into one system. However, this is not what actually happens when debts are consolidated. The existing debts are actually repaid by the debt consolidation loan. Although the total amount of debt remains constant the individual debts are repaid by the new loan.

Prior to the debt consolidation the homeowner may have been repaying a monthly debt to one or more credit card companies, an auto lender, a student loan lender or any number of other lenders but now the homeowner is repaying one debt to the mortgage lender who provided the debt consolidation loan.

This new loan will be subject to the applicable loan terms including interest rates and repayment period. Any terms associated with the individual loans are no longer valid as each of these loans has been repaid in full.

Are You Paying More in the Long Run?

When considering debt consolidation it is important to determine whether lower monthly payments or an overall increase in savings is being sought. This is an important consideration because while debt consolidation can lead to lower monthly payments when a lower interest mortgage is obtained to repay higher interest debts there is not always an overall cost savings.

This is because interest rate alone does not determine the amount which will be paid in interest. The amount of debt and the loan term, or length of the loan, figure prominently into the equation as well.

As an example consider a debt with a relatively short loan term of five years and an interest only slightly higher than the rate associated with the debt consolidation loan. In this case, if the term of the debt consolidation loan, is 30 years the repayment of the original loan would be stretched out over the course of 30 years at an interest rate which is only slightly lower than the original rate.

In this case it is clear the homeowner might end up paying more in the long run. However, the monthly payments will probably be drastically reduced. This type of decision forces the homeowner to decide whether an overall savings or lower monthly payments is more important.

Does Re-Financing Improve Your Financial Situation?

Homeowners who are considering re-financing for the purpose of debt consolidation should carefully consider whether or not their financial situation will be improved by re-financing.

This is important because some homeowners may opt to re-finance because it increases their monthly cash flow even if it does not result in an overall cost savings.

There are many mortgage calculators available on the Internet which can be used for purposes such as determining whether or not monthly cash flow will increase. Using these calculators and consulting with industry experts will help the homeowner to make a well informed decision.

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Refinancing Rates - Florida Refinance - Car Refinance 871
By Alex Refintage

Here are several tips to help you find the best mortgage rate when refinancing. The customer should get real low rates of mortgage for refinancing, to make it worthwhile. With a mortgage, you are bound to pay a considerable amount of money each month. Currently, the rates in Florida have touched a 20-year low. The problem is that the average homeowner cannot access wholesale mortgage rates directly; members of the pubic must rely on mortgage brokers for access to wholesale mortgage rates. Refinance home mortgage rates are typically lesser than the original initial loan. At the end of the term, the monthly payment reverts to a combination of interest and principal. With a mortgage, you are bound to pay a considerable amount of money each month. The refinance mortgage rate you are hoping to find will enable you to save money on your mortgage by reducing your monthly payment. At the end of the term, the monthly payment reverts to a combination of interest and principal. You can obtain all the particulars by contacting a mortgage loan refinance specialist. You need to look at the various loans available when you want to refinance. This results into lower refinance home mortgage rates, because in this case, the investors presents low capitulates loans to avoid future lower capitulates rates. A refinance mortgage rate that lowers your mortgage interest can allow you to complete home repairs and have money for other needs that you just wouldn’t have had otherwise. This pushes the refinance rates to descend and brightens the prospect for the lowest refinance rates. The customer should get real low rates of mortgage for refinancing, to make it worthwhile. The refinance mortgage rate you are hoping to find will enable you to save money on your mortgage by reducing your monthly payment. Choosing a wholesale lender for your next mortgage will allow you to take advantage of wholesale mortgage rates, something youll never be able to do with a bank. You can find out the best refinance mortgage rate by going to an Internet web site and supplying answers to a survey that will enable a quote to be made for your particular situation. If home improvement is your goal, consider taking out a home equity loan. -No-Closing Cost refinance rates: This refinance option offers you with a chance to disburse some upfront fees to receive the refinanced new loan. A refinance mortgage rate that lowers your mortgage interest can allow you to complete home repairs and have money for other needs that you just wouldn’t have had otherwise. If the customer has a good credit standing, then the lender would be willing to fund the mortgage at a low rate. Refinancing is available in Florida for all types of loans like conventional loans, VA loans and bad credit loans. For more information please visit #1 Home Mortgage Refinance: Refinance Home Mortgage Rate. So if you wish to refinance your home mortgage, a Florida lender is the best option. Refinance mortgage rates can be obtained by applying for a mortgage refinance or by supplying information and generating a quote for a refinance. Fixed mortgage are loans where the rate is locked whereas in adjustable rate mortgage, the rate varies with the market fluctuation. Lowest Mortgage Rates provides detailed information on Compare Low Mortgage Rates, Lowest Commercial Mortgage Rates, Lowest First Mortgage Rates, Lowest Fixed Mortgage Rates and more. Financial experts generally recommend refinancing if it gives the customer a rate lower by at least two points. Or you may be thinking of getting a fixed-rate mortgage with attractive terms instead of your current adjustable-rate mortgage.