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Loan Refinancing: Debt-freedom or Debt-slavery?

Many loan agents promote home loan refinancing as the path to debt freedom. Refinancing can be either a way to reduce your debt, a way to reduce the amount of your monthly payments or a cheap source of finance. However, depending on your home loan terms and the new loan conditions, refinancing can contribute to reducing or augmenting your debt.

You need to be extremely careful when considering refinancing since it is a very complex financial operation and there are many variables involved that if not considered carefully, they can affect the results turning the financial transaction into an extremely onerous decision that may increase your debt against your will.

Daily Finance Eased

Refinancing your home loan can alleviate your daily finances. By refinancing your home mortgage with a longer repayment program and / or a lower interest rate, you can lower your monthly payments and thus, the amount of money you destine towards debt payments will be considerably reduced.

However, this does not always come at no-cost. If you get a lower rate and a longer repayment program, you may be saving money but you will have to be indebted for a longer period of time. If you get a higher rate and a longer repayment program, you may get lower or higher monthly payments depending on the intensity of the increments and you may also get some ease for your finances but you will also be attached to the loan for a longer period of time. Only an equal loan term and a lower interest rate can save you thousands and not oblige you to a loan for longer periods.

Long Term Commitment To Mortgage Payments

The opposite of the above is also true. If you want to hasten the date where you will finally be debt free, you will have to compromise your income to debt ratio. Shortening repayment programs will raise your monthly payments as a higher rate would do. This can be compensated by a reduction on the interest rate but this cannot always be achieved.

By refinancing for shorter repayment programs you will be affecting your income since you will have to destine higher amounts towards debt payments. So, when it comes to refinancing, you will need to ponder all and reach equilibrium between all these variables so you do not extend your debt-slavery too long and you do not affect your income to debt ratio either.

The Right Path Towards Debt-Freedom

What you need to do is reduce your overall debt and since home loans are the cheapest sources of finance, it is wise to extend the repayment programs (even if the rate goes up) because by lowering the installments you will be able to use the surplus to repay other debt. Of course, this requires discipline on your behalf since a chaotic credit behavior will worsen your situation.

If you can get approved for a cash-out refinance home loan, you will be able to use the extra money to cancel outstanding and more expensive debt which will contribute to achieving debt freedom sooner. Remember, exchanging your expensive debt for cheaper financial sources is the smartest and most intelligent thing to do.

Melissa Kellett is an expert loan consultant who has worked for twenty years in the financial industry and helps people to repair their credit and get approved for home loans, unsecured personal loans, student loans, consolidation loans, car loans and many other types of loans and financial products. If you want to learn more about <a href="” rel=”nofollow”>Quick Loans For Bad Credit and <a href="” rel=”nofollow”>Unsecured Personal Loans you can visit her site
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Debt Consolidation + Refinancing = Debt Relief

Getting debt relief is sometimes too complicated. Even after consolidating your debt through a debt consolidation agency you may end up with monthly payments too difficult to afford that won’t leave space for unexpected expenses. However, by combining Debt Consolidation with Mortgage Refinancing you can achieve debt relief to an unbelievable extent.

The usual means for reducing debt exposure is contacting a consolidation agency or negotiating debt yourself. Debt consolidation implies contacting lenders and agreeing with them new repayment programs with lower monthly payments. This result can be achieved either by reducing the amount of money charged on interests or by extending the repayment schedules.

Debt Consolidation

The procedure is simple enough: Either you or the agent assigned to your case by the consolidation agency contacts each of your creditors and tries to convince them of the advantages they will get if they agree to lower your monthly payments. Sometimes in order to obtain their money sooner the lenders agree to a cut on the overall debt including capital and interests. In many cases debt consolidation agencies have obtained up to a 65% reduction of the debtor’s outstanding loans and credit card balances.

Once the negotiation process is completed; your debt expenses will be greatly reduced. However, sometimes the procedure is not enough and you may not be able to afford the monthly payments. At this stage, some debt consolidation agencies offer a debt consolidation loan with a longer repayment program. You just pay this single monthly installment to them and they take care of your loan payments and bills.

The problem is that in certain situations there is too much debt that is non-negotiable. Typically, federal student loans and some private student loan programs, home loans, home equity loans and any other form of secured loan is too hard to negotiate because the lender is comfortable knowing that he can legally claim your property in case you fail to repay the loan.


One would think that refinancing would only solve the problem with your home loan, but truth is that by taking advantage of cash out refinance loans you can request a higher loan amount than the amount of your current mortgage’s remaining debt and use that extra money to cancel other non-negotiable debt.

This procedure will not reduce your debt but will reduce your income/spending ratio because by refinancing you’ll be able to spread your debt into a longer repayment program reducing the amount of your monthly payments. Since by applying for a cash-out refinance loan you’ll get actual cash, you can use it for prepaying outstanding debt, but be careful to repay those loans that don’t have prepayment penalties first; that way you’ll save even more money.

The only difficulty that this method presents is that you need to have enough equity on your home in order to obtain a cash-out refinance loan. If a home equity loan is part of the debt you need to repay, chances are that you won’t be able to use this system. However, there are some lenders offering up to 135% financing at slightly higher rates. If there is no other choice, you can resort to them.

Devora Witts is a certified loan consultant with several years of experience in the credit area who instructs people regarding credit recovery and approval for personal loans, home loans, consolidation loans, car loans, student loans, unsecured loans and many other types of loans. If you want to understand <a href="” rel=”nofollow”>Personal Loans for Bad Credit and <a href="” rel=”nofollow”>Unsecured Loans thoroughly you can visit her site
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Tips for Deciding When to Consolidate Student Debt

After graduation, it comes the time when you have to start paying off your student debt. But even if you are lucky enough to find a job right away, your salary might not let you pay for all your expenses plus the loans installments. This is when student consolidation loans come in handy.

When consolidating student debt, the loans principal will not be modified. Nevertheless, you will be able to save thousands of dollars on interests and reduce your monthly payments by extending the loans length. Moreover, consolidating at a fixed interest rate will let you keep the same monthly installment amount through the whole life of the consolidation loan.

That being said, consolidating student debt is not always worth the trouble. Only if you can obtain a substantial reduction on your debt or if you can make your monthly payments more affordable you can say that consolidating student loans is appealing enough. In order to determine this you may want to follow the following tips: Consolidating During The Grace Period

Be especially careful not to consolidate during the initial grace period unless the consolidation loan includes another grace period or you can do without it, because otherwise you will have to start paying your debt right away. Grace periods usually last between 4 months and a year. During this period, the borrower is not required to start paying off the loan. The main reason for this benefit is that the graduated student might need such a time to find a job and get used to a new lifestyle. Interest Rates

If you can get a lower interest rate than the average of all your outstanding loans, that would be great. However, you will probably get an interest rate just a bit higher than the average interest rate of all your student loans. The reason why you would want to consider consolidating even with a higher interest rate is that the length of your loan will be extended and the loan installments reduced. Besides, the interest rate will be locked so if market conditions worsen you would still be paying the same amount, as opposed to federal student loans which rates fluctuate with the market. Contact Government Agency For Cancellation

Prior to consolidating your federal student loans or other government loan, you might want to contact the government agency that issued the loan. It is possible to fully cancel the loan without reimbursing the money if certain requirements are met. Since you have nothing to loose, before searching for a lender to consolidate your student debt, make sure you can not get the government to condone the whole or part of the debt. After consolidating, you will not be able to apply for this kind of government forgiveness. Set Aside Special Loan Programs

There are certain loans that you might want to maintain with its original terms. There are loans where the government pays for the interest and you only pay for the principal, others where the loan can be renewed upon cancellation or even before. If you consolidate this kind of loans with the rest of them you will loose this special attributes. So make sure you will not have use for them before rushing in. There is always time for consolidating, so you might as well make a conscious decision on this matter.

Devora Witts is a certified loan consultant with several years of experience in the credit area who instructs people regarding credit recovery and approval for personal loans, home loans, consolidation loans, car loans, student loans, unsecured loans and many other types of loans. If you want to understand <a href="” rel=”nofollow”>Debt Consolidation and <a href="” rel=”nofollow”>Government Grants thoroughly you can visit her site
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