And too many mistakenly expect debt consolidation to be a panacea for all their ills – when it’s more like putting a plaster on a serious wound. While that is true, it’s also true that there are savvy ways to deal with debt.
“It’s a short-term fix, not a remedy for the underlying problem,” says Paul Slot, the president of the Debt Counsellors’ Association of South Africa. For example, your home loan is usually your cheapest form of credit.
Homeowners that want to simplify their finances and begin getting out of debt can refinance their mortgage and consolidation debt.
A debt consolidation refinance is a loan that allows homeowners to consolidate their unsecured debts into their mortgage loan.
You may be surprised by the amount of money you can save.
Benefits include: With interest rates at extreme lows, now is a great time for a refinance mortgage and lock in at a lower rate.
On the other hand, credit cards, store cards and short-term loans incur interest of anything from 21 percent a year to 32 percent over six months.
Generally, you’ll end up paying less each month than you do now, paying all the bills separately.
We encourage you to carefully consider whether consolidating your existing debt is the right choice for you.
Assuming that a homeowner has built up sufficient equity in their home, he or she may be able to refinance, using their home’s equity to pay off other debts.
This will leave the homeowner with one monthly payment, instead of struggling to keep up with several different payments each month.