getting out of debt

If you are like most Americans now days you probably have a large amount of unsecured high interest debt. This is usually on high interest credit cards and unsecured personal loans.

One way to get out of debt is to refinance your mortgage and consolidate all, most, or some of your debt into your mortgage. To do this you would need to have some equity available in your home. By refinancing your mortgage you can save hundreds of dollars per month and many times even thousands of dollars per month off of your monthly expenses. Consult a mortgage professional today to find out how much money you can save.

Another advantage of a debt consolidation refinance is that the interest you pay is probably tax deductible. This can be a huge advantage come tax season. Be sure to ask your accountant if your mortgage interest will be tax deductible.

Some important tools to help you measure if a refinance loan is beneficial are;

Have you reached your credit limits on cards and loans?
Have you carried a large balance on your cards for longer than 2 years?
Has my interest rate increased due to late or slow pays?
Will it take you longer than three years to pay off your current balances?
Are you unable to pay more than your minimum balance due?
Have you noticed a decrease in your credit score?
Have you been more than thirty days late on your payments?

If you find yourself answering yes to three or more of these questions, it will most likely be in your best interest to consider a debt reduction loan that will allow you the opportunity to clear up your credit debt.

Many people are tempted to enlist the help of a consumer credit counseling agency. Although they can help get your bills in order, there are a few negatives that can go along with this decision.

For example, on your credit report most of your creditors will report that you are in consumer credit counseling. This can be seen as a negative mark when you are applying for a mortgage loan. Many lenders view this as the same thing as a Bankruptcy (chapter 13) and will underwrite the loan accordingly.

Other lenders will simply ignore it. It's best to talk to a competent mortgage broker and find out all your options.

Ask your mortgage professional to perform a cost analysis to determine if consolidating your credit card debt and mortgage into one loan will be beneficial. It is difficult to determine what is the best decision until you do the math and let a comparison show you how much you can save from a debt consolidation loan. Many times, the savings can be substantial since the average interest rate is much lower.

If you are planning on consolidating your debt with a new mortgage be careful to avoid the spending habits that lead to so much debt in the first place. Consolidating unsecured credit card debt with a loan secured by your home is only a wise move if you are confident that the credit cards will not get maxed out again.

A good mortage professional who is refinancing you for the purpose of taking cash out and consolodating debt will not only find a loan program for you that provides you with the cash to stabilize your debt, but they will also try to put you in a position where you maintain that stability and don't need to continuously draw upon your home's equity to bail yourself out of debt troubles.

If you are unable to refinance due to any number of reasons, then the more traditional way of getting out debt (and improving your credit) can be employed. Make a list off all your debts with the listed minimum payment of each. Now list beside that what payment you are actually making on each debt. Take all the little amounts that you are paying extra and combine it onto the debt that has the highest interest rate. This will pay down that one fastest saving you the interest you would otherwise have been paying. Once this debt is payed off, then use the same method on the next highest interest rate debt - repeat. This will pay off your credit cards and other debts quickly allowing you to increase your credit score and payoff your debt!

When you are consolidating debt like credit cards, you are dealing with two different types of interest. Revolving credit lines carry compounded interest vs. a home equity loan that carries simple interest. A simple interest loan will make getting out of debt much easier. Ask your loan professional for more information.

You can use debt to help you get out of debt. By using the equity in your home and going into deeper debt against the house you can payoff debt with higher rates. So if your paying 15-18% on a credit card then paying off that card can certainly be a great move!

Most people don't even realize how much interest they are paying on their credit card balances. Credit card companies headquartered in Delaware or Utah or the Dakotas are not regulated as to how much interest they can charge, and if you take a look at your statement very closely, you will probably find that your credit card issuer is in one of those states. This means they may be charging you 30% or even 40% APR. Consolidating debts from these lenders is a huge win for most consumers.

The first thing to do is to figure out how much debt you actually have. most people don't realize the amount of debt they have and how much it costs them each month. Once you do that, you need to get a plan established to pay the debt off in the shortest amount of time possible. The fastest way to pay off your debt is to utilize the equity in your home. It's very simple. All you do is restructure your mortgage to include your debts. This will give you a surplus of disposable income every month. If you use the surplus to attack the priciple balances, you will be debt free in 5-7 years.

A very important part of getting out of debt is to stop the debt from increasing. This can be done by paying your bills on time and reducing the debt amount. Also, rolling the credit card debt into your mortgage will lower the interest charged and help you get out of debt.

» DISCLAIMER: The information contained in this article on 'getting out of debt' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.