Open your wallet and count how many credit cards you have.
The average North America citizen pays 11 different creditors each month. Interest rate
on credit card and other consumer card is invariably much much higher than the interest rate you
will pay on a "secured" debt such as a second mortgage loan or a home equity line of
credit.
You will probably be looking at 7 or 8 percent on the latter vis-a-vis
20 to 25 percent on the former. Simply put this is three to four times more expensive.
Credit card companies loose billion each year on credit card fraud and bad debt. Yet
they are still very very profitable. Because you are feeding them with 20 percent plus
interest.
There are numerous financial institutions such as banks, credit unions and other
private lenders which are keen to consolidate your debts.
How does it work. Simply the debt consolidating lenders will assess your credit risks
based on your credit history, your job, your background, your ability to make monthly
payments if they grant you a consolidating loan.
As a condition of the consolidating loan, you will be required to cancell all your
previous cards. This is beneficial to you because you can no longer be tempted to buy
that "unnecessary stuff". You just don't have a card in your wallet.
The amount of the consolidating loan will be used to pay off all your credit card
and other consumer card debts. You then have only "one loan" to take care of each
month at a much lower interest rate. Your one and only one monthly payment will be
way lower than the total monthly payments of all your previous card debts.
The consolidating loan may be in several form. One form is by way of a second mortgage
on your property if you still have equity on your home. Or by way of a home equity
line of credit, which in fact is a loan secured by a second or third mortgage on your
home.
Again there are hundred of banks and lenders keen to consolidate your debts. Take
your time and negotiate for the best rate.
Remember on a 25-year $100,000.00 fixed rate mortgage, a half percent drop in interest rate will
save you $9,173.82 in interest charges over the life of the loan.
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