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Frugal Finance - Debt Consolidation

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Debt Consolidation Consolidate Debt using Home Equity

Did you know one of the easiest ways to reduce the payments you make each month is by consolidating your debt?  One of the best ways to consolidate or restructure debt is by using your home equity.  We all know that debt is a very scary thing and causes more stress in our lives than most other things.  More couples fight over money than any other topic.  Part of what we must do, in order to be free from the debt that plagues is, is to find a solution.  Speaking to many Frugal Moms about reducing debt, I have found that different solutions work for different families.  Some families may choose to put together a well planned budget and cut back on expenses. Other families choose to consolidate their debt and combine that with making changes in their spending habits. It is often possible to consolidate your debt and cut credit card payments by up to 60% or more. It is often worth looking into as you can usually get free, no obligation quotes.

Generally speaking there are several potential benefits to a home equity debt consolidation loan

  1. Lower interest rates than current debt; especially credit card debt
  2. A single lower payment, with more of the payment going toward the principal
  3. The interest may be tax deductible
  4. An improved credit report due to fewer active and open balance credit cards

See if this is a right option for you - use FrugalMom's FREE Debt Consolidation Calculator

Using Home Equity Loans to Restructure Debt

Debt Consolidation, in a nutshell, is taking all of your bills and putting them into one large bill.  Debt Consolidation can take many different forms, however, using home equity will usually provide the best overall results. For instance, you can consolidate debt through a Home Equity Loan (either a home equity line of credit or a 2nd mortgage) or by refinancing your first mortgage, using the equity in your home to  refinance your debt.

There are other options you can consider as well.  If you do not have equity in your home, you may consolidate on a credit card or contact one of the debt consolidation companies that can help you negotiate lower finance charges and payment plans with your lenders. 

 

More on Debt Consolidation using home equity

You may be managing your debt instead of your debt managing you, but wish to reduce your monthly debt through consolidation. You may feel overwhelmed by debt, there may seem like there is no relief in sight when this is not necessarily the truth. There are ways to consolidate many of your bills and roll them up into one neat package by using debt consolidation using one of the following methods: 

  1. Home Equity Line of Credit
  2. 2nd Mortgage secured by home equity
  3. Refinance 1st mortgage

Using home equity to consolidate debts

One of the popular methods of debt consolidation today is the Home Equity Loan- usually executed as a line of credit that you can use as you need it or a 2nd mortgage that gives you a lump sum payout.. Current debt is paid-off using the equity from a homeowner’s home. A loan is created outside of the first mortgage in order to satisfy the debts. With an equity line of credit, you only pay interest on, and repay, the amount of money you take from the line of credit.  An advantage is that as you repay the line of credit, the credit is available to you for other purposes.  You may want to consider a free financial evaluation that will help you determine how much you might lower your monthly expenses.

Refinancing home mortgage

Another option to  pay-off debt is by rolling it into a new mortgage. In this manner the existing debt is retired and rolled into the mortgage. Overall, this will generally have the lowest interest rate, however, several factors have to be taken into consideration to determine if this is the right solution.  Use our FREE Debt Consolidation Calculator to determine how this might lower your monthly bills:

  1. Difference in interest rate on existing 1st mortgage and new mortgage
  2. Length of time that you have had your current 1st mortgage
  3. Loan to value ratio when the consolidated debt is added to the 1st mortgage


 

Frugal Dad has used LendingTree in the past and was very pleased with the the ability to get multiple competitive quotes with a single application.

LendingTree Mortgage

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Debt Consolidation Calculator - Refinance Without Home Equity Loan

Debt Consolidation Calculator Using Home Equity Loan