If you own Real Estate, you should consider the merits of a consolidation debt refinance. This will consolidate all your bills into one monthly payment that would be smaller than you're paying now, and you will likely save on interest charges, over-limit fees, as well as late charges .



A consolidation loan refinance will assist in helping you reduce stress and give you the chance to clean up your credit score. But there are issues you need to watch out for so you don't put yourself in a worse state than you already are in.

You have three options when it comes to a a loan consolidation scheme.

First, you might choose to refinance your existing first mortgage. If financing rates are attractive, and you have enough equity after paying off your debt, this might well be your first choice to go.

If the current interest rate is at or less than the interest rate on your current loan, this may be the logical strategy. However, if the interest rate is more than than your current mortgage rate, be very wary. That's because you're not only paying interest on the debt you're you are cleaning up, you are subject to the higher rate on your basic mortgage, and that's almost certainly not a good outcome.

Your second choice to consider is taking out a second mortgage - This option is preferable if you don't want to take 30 years to pay off as you would be by refinancing your first mortgage. With this alternative you take out a loan for a specific amount of money and pay it back over 5 ? 15 years.

The advantage of this option is that you pay off your bills and you can resist the temptation you would have with a home equity loan to spend the extra funds that may be available on other purchases that ultimately increase rather than decrease your debt load. Another advantage is that you can find fixed rate second mortgages which, in my opinion, are preferable to variable rate mortgages.

Your third option is to take out a Home Equity Line of Credit or HELOC. With this option, you get a revolving line of credit that that you can use as necessary to pay bills and expenses.

The beauty of a HELOC is that you only pay interest on the money you borrow. If your line of credit is for $10,000, if you only use $5,000 you only pay interest on the $5,000 which should save you money.

If you choose a home equity loan to consolidate your debt, use it with caution. Usually, the lender will structure the line of credit to maximize their leverage against the equity you have in your home. Your problem is in resisting the temptation to spend the extra money. For example, let's say you have an additional $10,000 available in your equity loan after you've paid all your bills. For many folks that's an invitation to spend the surplus $10,000, so they descend deeper in debt than when they started. It's a vicious cycle.

Using a home refinance strategy to consolidate your debts might be a suitable plan to clean up your bills, but use it wisely, carefully. Don't put yourself in worse condition than where you started. And after you pay them off, cut up your credit cards! You'll sleep much better after you do.