| Consumer credit card debt is on the rise, caused in | | | | A simple loan example: An average rate of 15% on |
| part by a stagnant economy, and people are looking | | | | credit cards with a combined balance of $40,000 could |
| for a better solution to balance their budget. | | | | have a monthly payment of about $560, over a 15 |
| For some, debt consolidation loans could provide an | | | | year term. A debt consolidation loan with the same |
| answer. The process of taking multiple high interest | | | | balance at 8 percent could have a payment of about |
| debts and combining them into one low payment | | | | $382 over the same term. A lower rate would of |
| seems easy enough, but you need to own a house | | | | course result in more savings. Also, the loan balance |
| with enough home equity and decent credit. | | | | could be paid off in about half the time by applying the |
| Debt consolidation loans are basically cash out | | | | monthly savings to the payments. |
| refinance home loans or home equity loans. Your | | | | When debt consolidation loans involve cash out |
| unsecured credit card debts, or other debts, are paid | | | | refinancing, be aware that some lenders have an |
| off using your home equity. A low fixed rate loan | | | | underwriting guideline called seasoning. Cash out can |
| reduces your total overall payments, and since debt | | | | be limited under this guideline based on when home |
| consolidation loans are fully amortized, your debt | | | | equity was taken out. Restrictions may apply if there |
| becomes zero at the end of the loan term. Converting | | | | was a cash out refinance done within the last 6 |
| your debts to a secured home loan may also provide | | | | months to 1 year. FHA loans can offer more flexibility, |
| an another benefit, money saved from tax deductible | | | | with cash out allowed up to 95 percent of value, just |
| interest. | | | | consider the costs incurred. |
| A little known benefit of debt consolidation loans can | | | | The seasoning guideline on refinance debt consolidation |
| be the elimination of credit card daily compounded | | | | loans may not be limited to just a previous refinance. If |
| interest. More interest charges accumulate on | | | | you took out a home equity loan, second mortgage, or |
| compounded interest accounts compared to simple | | | | line of credit, within the last 6 months to 1 year before |
| interest loans, which can result in paying interest on the | | | | refinancing, the new loan could also be subject to cash |
| interest charges, if only the minimum payments are | | | | out limitations. |
| made. | | | | |