Unsecured loans are some of the most available ways to consolidate your debts because, as the name suggests, they do not really need you to put anything on the line. Thus credit cards and similar debt consolidation arrangements have become very common in recent years.
However, one big problem with unsecured loans for debt consolidation was that they usually had high interest rates attached to them. With credit cards, for example, that interest could reach as high as 30%. If that sort of figure is too much for your income and budget, you might want to try one of the other very available methods of debt consolidation, the mortgage.
Your Debts under One Roof
A mortgage is, in essence, a loan with your home or real estate used as collateral or security. Therefore, it offers all the usual benefits of debt consolidation plans, such as simplified payments and an extension on what would otherwise have been overdue and interest heavy debts.
The added advantage of getting a mortgage to consolidate your debts is that the interest rates associated with mortgages are usually lower. Sure, it is being getting a bit more expensive in recent years as all the borrowing and other market forces have pushed the interest rates upward.
Neverheless, getting a mortgage to put all your debts in one place is still a cheaper option than unsecured debt consolidation methods such as using credit cards. You can take comfort in the fact that you would not be forced to pay the sky high 30% APR that some credit cards tend to charge.
Along the obvious advantage provided by lower interest rates, using a mortgage for your debt consolidation offers you another plus. In most cases, your payments on your mortgage (or, at least, the interest on your mortgage) can actually be deductible from the property taxes that you have to pay.
Add up all the mortgage payments you will have to make and you can see that you will be saving yourself quite a tidy sum in taxes in the long run. You get to hit two financial problems with the same amount of money.
The Cons of a Mortgage
Because it is a loan that is secured using your house, the most obvious and the most urgent drawback of getting a mortgage is that your house and real estate is on the line. Before taking out a mortgage loan, you have to make sure that you will be able to make mortgage payments regularly and on time to keep your house yours. There are also closing fees that you will most likely have to deal with at the end of the loan term.
Mortgages are a great debt consolidation option for those who have secured regular income for the span of the loan term, as well as considerable home equity. It offers significantly lower interest rates than other non secured loans and consolidation methods, so you will be paying less in fees through the term of the loan. At the same time, you get a chance to make some of your payments tax deductibles, saving you even more money. And when it comes to debt consolidation, saving money is what counts.