Consolidating your debt by refinancing allows you to put existing debt into your mortgage—typically at much lower interest rates.The result is a single interest rate and single monthly payment.
Consolidating your debt into your mortgage
In that case, consolidating high-interest debt into a lower-interest loan may be your best option.
Let’s say you’re carrying $40,000 in debt in various forms—a personal loan, credit cards, school loans, car title loans, and other debts.
, into one single bill that’s paid off with a loan.
There are dozens of ways to do this, and some include transferring debt to a zero or low-interest credit card, taking out a debt consolidation loan, applying for a home equity loan or paying back your debt through a debt repayment plan.
According to Nerd Wallet.com, the average balance in April 2014 for households with credit card debt is $15,191.
While consumers can use techniques such as the “snowball method” (paying off your lowest balance in full while paying the minimum on other credit cards, then tackling the next debt with as high a payment as you can handle), the concept of debt consolidation for one overall payment is appealing.
A loan with a longer term may have a lower monthly payment, but it can also significantly increase how much you pay over the life of the loan.
View the Total Cost of Borrowing Before you apply, we encourage you to carefully consider whether consolidating your existing debt is the right choice for you.
When researching loan consolidation options, you may come across what’s known as debt consolidation companies.
Some of these are legitimate, according to the Consumer Financial Protection Bureau, however, others are incredibly risky.
Consolidating credit debit or multiple loans means you'll have a single payment each month for that combined debt but it may not reduce or pay your debt off sooner.