At some point in time, the burden to loans can push into depression. You will be glad to know these days there are several ways in which you can unburden yourself from the stress of having a loan. One of such methods is going for low interest home loan for debt consolidation. Of course, your mind may have come up with various questions regarding this method. In this article, we will try to answer every query of yours so that you can make an informed choice.

What is Debt Consolidation?

Let us begin with defining debt consolidation. Debt consolidation covers credit card bills into a single, lower-interest payment. It reduces your total debt and you can pay all your debts by taking a single loan. When you go for debt consolidation, it covers your multiple debts into a single payment. You can get a low interest home loan for debt consolidation with a good credit score.

How does it work?

It would be best if you keep certain essential things in mind when you are consolidating your debt. You should identify the debt obligation so that you can figure out the total amount. Also, check for the tenure and apply for low interest home loan for debt consolidation.

You will come across two primary ways to consolidate debt. Each one manages your debt payments into one monthly bill, but you need to have a good credit score to get such loan.

• 0% interest with a balance-transfer credit card transfer all your debts into this card and pay the balance entirely during the promotional period.

• A fixed-rate debt consolidation loan uses the money from the loan to pay the debt, but pay the loan in installments over a set term.

You will also come across two additional ways to consolidate debt by taking out a home equity loan, but there are certain risks you cannot avoid—risk to your home or your retirement. Let this not discourage, try to maintain good credit score, profile, and debt-to-income ratio.

Advantages

● All debts covered into one

● Easy to manage the debts

● Lower interest rates

● You can pay the debt faster

● Avoid credit damage

Disadvantages

● You need to pay the same amount

● If you are not able to pay on time, the tenure can be extended

When Debt Consolidation is the Right Choice?

Many people have to this question when to go for low interest home loan for debt consolidation. The first thing you need to do is make sure your total debt excluding mortgage does not exceed 40% of your gross income. It would be best if you had a good credit score to qualify for a 0% credit card or a low-interest debt consolidation loan. So you do not need to use your capital to repay your loans and you can merge all your loans into one account.

Allow us to explain you with an example. Let us assume you have four credit cards with interest rates of 18.99% to 24.99%. You are making your payments on time, so no doubt your credit score will be increased. In this case, you should be qualified for an unsecured debt consolidation loan at 7%. But, the interest rate is depends on the lenders and you need to discuss the same with your bank.

Debt consolidation will take care of your manageable debt by reorganizing multiple bills with different interest rates, payments and due dates. As we have mentioned, it helps you manage multiple debts into a single payment. All you have to do is maintain a good credit score and make sure there are no various debts in the future.