Debt seems like something people can no longer escape today. If you were to meet a random stranger and ask them, they would most likely admit to having a debt of some kind. As a matter of fact, if you were to distribute the credit card debt in all of Australia to every one evenly, each person would be responsible for paying off about $3,800. That's a rather grim figure, but, fortunately, there are a number of ways people can get out of debt. One of them is through debt consolidation. Part of a two-part series, this article will mostly focus on what debt consolidation is, why you should use it to get yourself out of debt, and how to consolidate debt into a mortgage.
What is debt consolidation?
Debt consolidation is simply using one loan to pay off other (multiple) debts. When you consolidate your debt, what you are doing is combining all your other debts under that loan. So when the monthly bills come around, you will end up paying for only one bill, instead of a number of them. Debt consolidation is most often used with credit card debts, since credit cards are notorious for having high interest rates.
So, why consolidate your debt in the first place? For starters, you consolidate your debt to get a chance at lowering the interest rates you are being charged with. Taking out a loan with a lower interest rates or fixed interest rates can keep you from spreading the money you have on hand too thinly. Having to pay only one bill for your debts in a month also gives you a break from the burden of debt and lets you can focus on paying for other needs.
One popular way to consolidate debt, aside from taking out a loan, is consolidating it into a mortgage. The mortgage in this case acts in the same way as a low-interest loan that you would have taken out. What happens is that your debts get absorbed into the mortgage's value. The result would be a new mortgage balance, a lower interest rate, and a significant increase in the amount of money that has been freed for use per month.
Consolidating debt into mortgage, however, is no panacea. Just like all things concerning loans, it's always good to be aware of the possible downsides. In exchange for the lower interest rate that you get from consolidating debt into your mortgage, you will end up having to pay off your mortgage for a longer period of time. Whether that works for you in the long run will depend on your situation. At this point, it helps a lot to do the math. When computing, always take into account the payment cost per month, the total amount of interest you will pay, the total principal, and the sum of both the principal and the interest at the end. Once you've gotten your numbers, compare the results and weigh the results going for and against consolidation debt into your mortgage.
To make things easier for you, get the assistance of an experienced finance company. www.personalloanscarloans.com.au will most definitely provide you all the help you need to consolidate your debt and live a more comfortable life.