is taking out a mortgage to pay off your existing creditors.
Two things need to happen for this to be successful
you must insure that your new APR (Annual Percentage Rate)
with the loan is less than the total of your outstanding
debt, and secondly, it is advised that you close off most of the accounts
that you just paid off with the loan.
Note: I mention that you should close off most of
the credit cards but not all of them.
It is important for you to have at least 2-3 accounts that you
can rebuild your credit with. Obviously, if the creditors
have already closed the accounts, then we need to get rid of
them. But if they will still allow you to use them, then
it is critical that we use them properly to build up new, good
And of course, make sure that the cost of the debt consolidation
mortgage is less than what you are currently paying out in
monthly payments on your current debt. The whole idea is
to reduce your monthly debt payment load.
lets look at the negative.
What you�re doing is converting unsecured debt into secured debt.
If you don�t change your spending habits you
could be in a worse position than before.
If you default on your monthly payments, you may
lose your home.
The second alternative is a consolidation program, or
debt consolidation program is much different.
In general, with this kind of program, all existing
creditors remain the same, except that either through your
efforts or a debt consolidation company, interest rates
are renegotiated, reduced or eliminated so that your
monthly payments are far less.
In some cases,
the consumer company will negotiate with the creditor to
reduce the debt substantially, and make a lump sum
Be careful if you do this. Paying off
a creditor by only paying 1/2 is somewhat akin to
bankruptcy, and some lenders look very negatively at that.
They may not wish to lend you money for at least a couple
whichever program you choose, it is important that you
change your spending habits, and establish new good
credit. Within a year or two, if you haven't already
paid off your debt, you should be able to refinance your
debt to get lower interest rates.