Why You Should Use a Refinance for Debt Consolidation

If you happen to have high interest credit cards or loans and want to pay them off in one lump sum, a cash-out refinance, might be the best decision for you. It could save you money in the long run from paying interest on credit cards and you could use that money saved to invest back in the home or to pay off the new loan. This could help to raise your credit score because you won’t have as much debt overall. Increasing your credit score can help you a lot in the long run if you were to lose a job or have an emergency where you need a credit card immediately. The Mortgage Company specializes in mortgage refinancing throughout Salina, Abilene and Ellsworth.

Things To Consider

The biggest reason a cash-out refinance could be risky is that if you cannot make the payments, you could lose your home due to foreclosure. You want to make sure you are able to make these payments and review your budget thoroughly so your home is not at risk.

Another thing to consider is the interest rate and closing costs. The interest rate and closing costs should be factored in when reviewing the terms of the refinance to make sure it’s worth the risk overall. Depending on the lender, they could charge a large amount in fees costing you more than you’re actually saving. It’s important that the savings on interest is more than you’re paying in closing costs.

Types of Debt Consolidation

Refinancing with a home loan is an option if you are a homeowner, but that’s not the only choice out there. You can also consolidate with a credit card balance transfer. Balance transfers can be tricky because in order to be successful, you have to pay close attention to the interest rates. When performing a balance transfer, you want to move a balance on a card with high interest to one with little or zero interest. Many companies have an introductory rate that changes after six months to a year, so it’s essential to make sure that balance is paid before the rate increases in order to actually save you money.

Personal loans are also an option for consolidating debt if you’re able to qualify for a loan large enough to cover your credit card balances. This loan would need to at an interest rate that is low enough for you to handle the payments in a quick amount of time so that it doesn’t end up putting you in more debt than you started with in the first place.

There are also debt consolidation loans and programs that should be evaluated and studied before deciding if that’s the best option for you. Often times these kinds of loans extend the term and lower the interest so you’re not necessarily paying much less, just paying it off in lower payments.

Reach Out Today!

Getting out of debt can seem like an impossible task but we know that there’s a solution for your situation and would like to discuss your options with you to make the process as easy as possible. Please reach out to us with any questions today!