Do you have a number of high interest debts? If so, you might be thinking about consolidating them with a mortgage refinance or a different type of debt consolidation plan.
There may be costs associated with consolidating debt, but in many cases, the benefits far outweigh them. Below, you can discover some of the ways in which consolidating your debts may help you achieve your financial goals as a homeowner.
7 Benefits of Debt Consolidation for Homeowners
- Reduce your interest rate. One of the main reasons to consider consolidation is if your current credit score qualifies you for a lower interest rate than what you are paying now on one or more of your debts. A lower interest rate means lower monthly payments, which can make your financial life more flexible and affordable.
- Pay off your debts more rapidly. Every extra bit of interest you are paying is slowing down your progress in paying off the principal on your loans. So, just by consolidating your debts with a lower interest rate, you speed the process up, sometimes considerably.
- Pay less interest overall. So long as your debts exist, they will continue to accrue interest. That means that the more rapidly you can pay them off, the sooner they will stop accruing interest. This translates to less interest overall over the lifetime of your loans. Depending on your situation, that could add up to a substantial amount of money you can save through debt consolidation.
- You are less likely to miss payments. How many debts are you paying on right now? Can you give the number instantly, without stopping to think about it? If you do have to stop and think, is it easy to miss one or two? Have you ever missed payments in the past because you forgot about a debt? This is a situation you can leave behind if you consolidate all of your debts. In the future, you just have to remember to make that one payment. You could even set it up to come out of your account automatically. When you submit timely payments each month, you avoid late fees and other expenses and hassles.
- Your financial life will be simpler and less stressful. As a homeowner, you already have a lot of financial responsibilities to juggle when it comes to making payments on your mortgage, submitting property taxes, and taking care of maintenance, utilities and repairs. When you are trying to pay off a number of other debts on top of that, it just adds needless stress and complexity to your life. But when they are all consolidated, that stress and complexity are minimized. You can then focus more on the other payments you need to make to take care of your home.
- Your credit score might increase. It is possible your credit score could improve if you consolidate your debts. By lowering your interest rate and making them more affordable, keeping up with them could be easier. As a result, you will be less likely to miss payments. Plus, you are less likely to forget to pay them, as we discussed. That also helps to protect your score. With a higher credit score, you may qualify for more competitive financial products in the future.
- You can pay off your mortgage sooner. When consolidating your debts gives you more financial flexibility, you may find yourself with extra money each month. Instead of putting that toward paying the high interest on other loans, you will be able to put it toward the principal on your mortgage. Over time, you might be surprised by how much those extra payments add up, and how much more quickly you can finish paying off your home loan.
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Have more questions about how consolidating your debts could benefit you? Lending Bankers Mortgage can offer you personalized guidance and