Debt Consolidation and Refinancing

One of the best things about owning a home is that you can use your equity to strengthen your financial position and to make your cash flow much easier to manage.

This is especially the case when it comes to managing credit cards personal loans and other small debts that tend to accumulate over a period of time. There are some quite dramatic examples which demonstrate how consolidating debt can make your life easier as you will see shortly.

But, before we go any further let's look at some terminology.

In the main, banks are careful when lending money to first home buyers for the following reasons.

Debt consolidation means replacing all of your existing small debts for instance credit cards, leases, personal loans, store cards etc into one larger loan that can be more easily managed on a monthly basis.

Refinancing can include debt consolidation but is also a general term for moving your home loan to an alternative lender so you can take advantage of a better interest rate or lower fees or combination of both.

There is no doubt that debt consolidation can certainly make life a lot easier as the following example demonstrates.

A married couple own a house valued at $500,000. They have an existing mortgage of $250,000, a personal loan of $11,000 and two credit cards totalling $7000. The monthly repayments for these loans are as follows:

Mortgage: $1741.81

Personal Loan: $356.85

Credit Cards: $210

Total: $2308.66

By rolling all of these debts into one large amount of $268,000 and refinancing this new total with a new lender over a term of 30 years at 7%, the new required monthly repayment would be $1772.67.

This couple would be better off to the tune of $535.99 every month.

That's why consolidating debt makes real sense.

But, it is not as cut and dried as it first seems because there are other factors to take into account such as the cost of refinancing and a long-term ramifications of total interest to be paid.

In the pages that follow you will learn:

How to Use Equity to the Best Advantage.

How to Work out Whether a Personal Loan Is Better Than Debt Consolidation.

The Best Debt Consolidation Strategies.

Learning these tips will equip you to make the best decision that can save you hundreds or maybe thousands of dollars in the process. You’ll learn how not to be fooled into accepting the lowest rate loan just because it looks cheaper and you'll learn some techniques that can help you get an even better deal out of your new bank.

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