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Debt Consolidation Mortgage with Bad Credit

Debt consolidation mortgages provide you with funds to pay off existing debts. Since the loan is taken out against existing equity in your home, qualification is easy and you can obtain this type of mortgage with poor credit. Multiple debts are combined into a single mortgage, and with this type of instrument, you are often able to trade high interest rate credit cards, car loans, and other debts, for a lower interest rate equity loan.

The result is a good short-term fix, and lets you have a single monthly payment instead of multiple payments, and reduces the total amount of dollars you must spend each month towards debt.

For some, a debt consolidation loan is an excellent opportunity to get out from a difficult situation, and move towards improved credit. Another plus with a debt consolidation mortgage is that, depending on the total amount of mortgage debt, the interest on the loan may be tax deductible. In contrast, interest on credit cards and other unsecured loans are not tax deductible.

The drawback is that the payback period is often much longer than the debts you are paying off, and you are putting up your house as collateral, so if you don’t pay, you risk losing your home. So while your monthly payments will be less, you will be paying for more months overall. It’s a tradeoff, so consider well what your needs are.

For those who may have a monthly debt that is unmanageable, this may be the best option. However, when considering a debt consolidation mortgage loan, carefully weigh the expenses involved in obtaining the loan against the savings you will get from paying off your debts to make sure that it will be advantageous to your particular situation.