Five Ways to Consolidate Debts

Enormous debt amounts create a huge burden in many households. Rather than succumb to debts, it helps to outline a plan for eliminating the nuisance. There are many ways to consolidate and wipe away debts. Granted, there is no overnight solution. Yet, with careful planning and a little self-discipline, you can become debt free in a few short years. Consider the following five surefire ways to eliminate unnecessary debts and bills.

1. Cash-Out Mortgage Refinance

In the past few years, many homeowners refinanced their mortgage loans and obtained lower rates. On the other hand, another group of homeowners took advantage of rising home prices and borrowed money against their equity. A mortgage refinancing with a cash-out option is a way to acquire extra cash for debt consolidation. Because money is taken from the home's equity, the mortgage balance and monthly payments may increase. Moreover, a refinancing involves certain fees. Still, the funds received can be used to payoff credit cards, student loans, auto loans, and so forth.

2. Home Equity Loan

Like a mortgage refinancing, a home equity loan allows homeowners to receive a lump sum of cash using their home's equity as the collateral. However, home equity loans are not wrapped into the original loan amount. Instead, homeowners acquire an additional monthly bill. Once a home equity loan is received, the money is used to payoff unnecessary debts. All future payments are submitted to the home equity lender. Because the interest rate on a home equity loan is less than most credit cards, homeowners can expect to save up to 60% on their monthly debt payments.

3. Credit Cards