Consolidating home and auto loans
Third, interest paid on mortgage debt, even from a debt consolidation, is tax-deductible up to certain limits – so that can save you money as well.
A Mortgage Debt Consolidation Loan can be one of two types: a home equity loan/line of credit, or a cash-out refinance.
Your credit may be hurt if you run up credit card balances again, close most or all of your remaining cards, or miss a payment on your debt consolidation loan.
Learn more about how debt consolidation affects your credit score.
» MORE: Follow these 3 steps to pay off debt Two additional ways to consolidate debt are taking out a home equity loan or 401(k) loan.
However, these two options involve risk — to your home or your retirement.
Would you benefit from consolidating your debts through a home equity loan or a cash-out refinance of your mortgage? It takes all of your current monthly debt payments and compares them to what you'd pay if you rolled them into a mortgage consolidation loan.
It doesn’t address excessive spending habits that create debt in the first place.
Here’s a scenario when consolidation makes sense: Say you have four credit cards with interest rates ranging from 18.99% to 24.99%.
You always make your payments on time, so your credit is good.
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First, mortgage rates tend to be lower than the interest rates than other types of debt, particularly credit cards and other unsecured loans.