Consolidate Debt Consolidation Loans Consolidation is the process of combining a number of outstanding loans into a single larger, but more manageable, loan. This larger loan is almost always a mortgage loan with a relatively low interest rate. Because the interest rate of a mortgage loan is lower than the interest rates charged for credit card debt you will save quite a bit of money each month. Here is some information to help you understand how mortgage interest rates change. How Interest Rate Changes Affect Mortgage Rates Mortgage rates depend on the interest rate the government charges to lend money to banks--the federal lending rate. Variable mortgage rates are often a fixed percentage above this "prime rate." Long term and short term treasury bond rates also indicate the trend in long term (30 year fixed rate) and short term (e.g., 7 year fixed with balloon payment) mortgage rates. If the 30 year treasury index is higher than the 5 year treasury index, the overall trend in interest rates are upward. If the 30 year treasury index is lower than the 5 year treasury index, the overall trend in interest rates is downward. What if interest rates are headed upward? For a $100,000 loan, for every quarter point increase in a mortgage rate you will pay about $20.83 per month more in interest charges. For a $100,000 mortgage, you will pay about $416.67 per month in interest if the mortgage rate is 5%. If the interest rate increases to 5.25%, you will pay about $437.50 per month in interest charges. That's an increase of $20.83. So, if interest rate are increasing, there is increasing pressure to get a consolidation loan soon. What if interest rates are headed downward? On a $100,000 mortgage loan, every time the mortgage rate drops by a quarter point, you will save about $20.83 per month in interest charges. Let's say you have $30,000 in credit card debt at 18%. This is costing you about $450 per month in interest charges. Consolidating this $30,000 debt into a 5% mortgage would cost you $125 per month in interest. You would save ($450 - $125=) $325 per month in interest charges. It would cost you $325 per month to wait for a better mortgage rate deal. This simply is not worth it. After you get a consolidation loan, if mortgage rates continue to decline, you can always refinance you mortgage at a lower rate and get the benefit of lower interest payments. It would still be smart to consolidate as soon as possible. For more information about consolidation loans please see Online Debt Consolidation -- Reduce High Interest Loans Consolidation Loans and Your Credit Rating A consolidation loan rolls several debts into a new mortgage on your home. You may currently have debts similar to: Existing mortgage Credit card debt Department store debt Unpaid utility bills Tax liens Builders liens ... other debts A consolidation loan can eliminate (or drastically reduce) both the number of your non-mortgage debts and the amount of those debts. Reducing the number and amount of your non-mortgage debts will help raise your credit score. Your credit score is based on the following factors: Bill payment history -- 35% of your FICO score Debt relative to your credit limit -- 30% of your FICO score (Good: non-mortgage loan payments less than 5% of gross income, few installment loans, Bad: many debts, maxed out credit cards) Length of credit history -- 15% of your FICO score (Best, entire credit history of 7 years shows no negative reports) Types of credit -- 10% of your FICO score (Good: mortgage, car loans, Bad: high credit card debt) New credit -- 10% of your FICO score (Bad: many rejected applications, new accounts, or credit inquiries) Consolidation loans help in several ways: Reducing your non-mortgage debt by rolling it into a mortgage loan will reduce both the number and amount of these debts. Decreasing the number of credit cards with continuing debt will reduce the amount of your income going to non-mortgage debt. And, eliminating unpaid utility bills as well as tax and builders liens will remove serious blemishes from your credit report and help your credit score. Both your credit report and your credit score will benefit from consolidation loans. Refinance Your Home Mortgage Take advantage of low mortgage rates. Now you can lower your monthly payments, consolidate high-interest debt, and have cash to make home improvements. When refinancing, you can choose to borrow enough to only pay off the mortgage balance you owe or, if you have enough home equity built up, you may also be able to borrow an additional amount in what is called "cash-out" refinancing. This extra amount can come in handy if you are looking to pay off other debts such as auto loans or credit cards. However, you should evaluate a cash-out refinancing carefully. Generally, when refinancing your home you look for a new loan with more favorable terms. You refinance if you want to pay off a higher interest rate loan with a lower interest rate loan. The new lender pays off the current lender and becomes the lien holder on your home. If you have other debts and want to combine loan payments, you may decide to use a consolidation loan to refinance your mortgage. Advantages of a loan consolidation include: -Lower monthly payments - Paying off consumer debt -Combining monthly payments We custom tailor our loans for each individual – no cookie-cutter loans. We work with you to find a loan that fits your specific needs. We have extensive experience finding the right loan for every customer. Submit your No-Obligation Mortgage Application I Hate Debt The I Hate Debt Radio Show airs live, Mondays from 11am-Noon P.S.T. You can have your debt questions answered by leading experts in the financial planning and debt reduction fields. My goal is to provide you with the tools and motivation needed to get out of and stay out of debt. 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Learn how to end your credit card debt with this free eBook (valued at $27) You will learn: Why moving credit card balances to low interest credit cards can save you money (page 52) How to use consolidation loans wisely (page 50) The three ways to pay down your credit card balances and which is best for you (page 69) How you can make "interest" work for you (page 17) How advertising influences you to spend more money and what you can do about it (page 10) Why the rich get richer and the poor get poorer and how you can move to the rich side (page 17) How the "Can I afford the payments?" culture has changed the way you think about credit and debt (page 22) Why banks are not necessarily your friend (page 23) Why written goals will save you money and how you can start writing your own goals (page 30) The only type of plastic cards you should carry (page 35) How to live like a millionaire for less than you think (page 24) The importance of budgeting and making targeted spending goals with easy to follow examples (page 36) How to create a personal budget (page 61) How to contact your creditors to reduce your interest rates (page 74) What to watch out for with credit counselors (page 77) How you can earn more money than you do now (page 82) All the resources you need (page 104) ... and a whole lot more You Need this Free Credit Card Debt Help Resource Just sign up for our Credit News and Tips newsletter. 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