Are you at the point where you’re too stressed out to check your mail or answer your phone, for fear it’s a collections agent, another bill, or any sort of unpleasant reminder that you are struggling under the weight of debt? You’re not alone. High-interest credit card debts, medical bills, student loans, home equity loans, and many other kinds of debt can stack up quickly, making it difficult to imagine there’s a solution to repair your credit history, pay off your debts in a responsible way and maintain your dignity.

For many, debt consolidation offers a solution. Debt consolidation is the process of working with a financial representative to apply for a cash-out refinance loan designed to cover the debt of high-interest debt so you can pay just one payment and work toward financial stability. Is debt consolidation right for you? Let’s look at the details of the process.

Who Qualifies?

Many borrowers who are having difficulty repaying their debts may assume they won’t qualify for debt consolidation because they have less than perfect credit. However, you may be surprised to learn that some lenders only require a credit score of 500 (although most look for scores around 620 to 640.) This allows a large variety of customers to find a solution to their financial concerns in this manner. This long-term debt strategy can take three to five years to complete, but it will allow you to get out of debt while rebuilding credit with lower interest rates and lower monthly payments.

To determine if you qualify, gather all your bills and your income statements to discuss your current financial situation with a financial professional.

What Debt Can It Cover?

There are two major types of debts: unsecured debt and secured debt. Secured debt is the type of debt where the borrower puts up collateral, like a house or an automobile, as insurance against the debt. Lenders of secured debt place liens on the property and have the right to take it back and sell it if you fall behind. Unsecured debt, like credit card debt, medical bills, student loans and cash advance loans, are not attached to assets. Both unsecured and secured debt qualifies for a debt consolidation process with a cash-out refinance, allowing you to only pay one monthly payment for everything you owe.

Are There Disadvantages?

Overall, if you work with a reputable company, there are substantial benefits to debt consolidation. You can borrow money at a low interest rate to pay off your loans or credit cards, which have higher interest rates. You can also often pay off the debt faster as a result. It’s also good to have fewer payments and, of course, put an end to those stressful calls and walks to the mailbox.

However, there are disadvantages as well. You need to be aware of the exact terms of your new cash-out refinance loan. If you not, you risk paying even more in interest over the life of the loan, possibly sinking you even further into debt. If you choose the wrong company, the process could create even bigger problems.

What Companies Are Reputable?

When you’re considering debt consolidation, do your research on the best companies to work with. Do they have a solid history of good customer service? Are you able to call and talk to a representative, and are they interested in working with you for an overall debt management plan? If a company starts to pressure you to quickly sign up without taking the time to read the terms, take a breath. There are many companies in the market to consider. Make a smart decision to take back control of your finances for the rest of your life.

Ready to learn more about the debt consolidation process? Log on to Refi.com’s debt consolidation page now to connect with a representative who wants you to succeed.

Sources:

https://www.nolo.com/legal-encyclopedia/debt-consolidation-pros-cons.html

https://www.thebalance.com/pros-and-cons-of-debt-consolidation-4159611