Get Real About Your Debt Consolidation Loan Alternatives

[Jul 24, 2009.]

 

Consumers Seeking Debt Relief Often Wait Too Long Before Seeking Help
Unfortunately, consumers often resort to debt consolidation loans as one of their last-resort options, after missing a few payments and suffering a credit score hit. So while debt consolidation programs typically advertise lower interest rates and simpler loan alternatives, these problems can often create difficult obstacles for borrowers looking to get out of debt .


As a result, many are forced to higher cost hard money loans and personal loans. Compared to traditional debt consolidation alternatives, these types of loans rarely offer the interest rate savings found with a home equity loan or cash out mortgage refinance. Additionally, it's this desperation attempt that also creates vulnerable borrowers for common debt consolidation scams, and other debt relief schemes.

Although many options do exist, borrowers are often surprised to find out the best consolidation moves can be made on their own, without the need for expensive consultation fees or service charges. These solutions can range from refinancing a car loan, calling creditors to negotiate better terms, or working with a mortgage lender to obtain a new mortgage. But as previously mentioned, exploring these options is tremendously easier in the beginning, instead of waiting until the very end where borrowers must also deal with loan delinquencies and damaged credit scores.

Homeowners With Equity Have the Most Options To Consolidate Debt
Fortunately, homeowners with sufficient equity left in their home have the best options when it comes time to consolidate debts. Whether it's credit card debt problems or other consumer debt, loans secured by a homeowner's property typically allow for the most thorough consolidations at the cheapest price available. And with current mortgage rates currently at historic lows, borrowers with debt troubles have a much better chance of finding a loan that lowers their overall monthly payments.

Remember though, the advertised interest rates found on television ads and news reports are typically reserved for those with the best credit and loan qualifications. In most cases, borrowers with severe debt issues will rarely fall into this category. However, homeowners should still aggressively explore this option as there are many mortgage lenders willing to make loans--granted there is equity available in the home. When consolidating with a mortgage secured by a home, borrowers should only borrow what's necessary to avoid further problems down the line such as equity issues and missed mortgage payments.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.