One of the main reasons people consider refinancing is to consolidate all of their debts. All of the separate loans and debts that a person has can be combined into one lower interest loan, which can be amortized and paid off over time. Debt consolidation is very easy to understand and implement and could save you thousands of dollars a year.
The first part of understanding refinancing for debt consolidation is to know what debt consolidation is. This is where all of the debts that a person already has – personal loans, credit cards, lines of credit, even auto loans – will be moved into one debt consolidation loan, secured by real estate.
This means that the person will still have to pay for everything that is owed from the previous loans, however, the interest rate for the single loan will be much lower than the rates from the other loans in someone’s debt portfolio.
Another benefit about refinancing for debt consolidation is it can help to increase one’s cash flow. Online calculators can be used to help determine how much money one will save in the long term and how much of an increase in cash flow will be involved.
Let’s give an example: Assume 2.99% interest rate, 25 yr amortization
|Current Mortgage:||$250,000||$1,050 / month|
|Visa||$15,000||$450 / month|
|Master Card||$10,000||$300 / month|
|Line of Credit||$25,000||$750 / month|
|Total||$300,000||$2,550 / month|
|New Mortgage:||$300,000||$1,418 / month|
|Visa||$0||$0 / month|
|Master Card||$0||$0 / month|
|Line of Credit||$0||$0 / month|
|Total||$300,000||$1,418 / month|
As you can clearly see, that’s a savings of $1,132 per month for the same amount of debt right now. That represents $13,584 per year! Contact one of our mortgage professionals and start putting that money to better use!