Consolidating debt into home loan

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Even when you're careful about managing money, emergencies or financial setbacks can leave you facing unwanted debt.

The interest charges and fees many creditors charge can make it even more difficult to get your debt under control.

You may want to consolidate debt in order to: Using your equity to pay down debt can eliminate stress and worry and put you on a solid path to financial freedom on your own terms.

Plus, you'll enjoy the stability of one fixed monthly payment at a fixed interest rate that's probably much lower than what you're currently paying to multiple creditors.

There may be other wrinkles involved - for example, some of your creditors may be willing to write off part of your debt in return for an immediate payoff - but the key thing is that you're simplifying your finances by exchanging many smaller debt obligations for a single bill to be paid every month.

What types of debts can be covered by a debt consolidation?

Not all lenders will allow you to roll your old debts into your new mortgage.

Getting rid of that expensive debt is a nice idea in theory, but finding the finances to do so can be difficult.

Available consolidation loans often carry stringent qualification requirements.

If your lender allows you to include short-term debts into your home loan, however, doing so can make your financial obligations more manageable.

Pros: Another popular strategy is to take out a new, larger mortgage that pays off the old one and leaves you with cash at closing to pay off your other bills.

This option, known as a cash-out refinance, requires that you have sufficient equity in the property.

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