Debt Consolidation Loan is just a consumer loan that you can use to pay off other debts. Just like mortgage refinancing, you are just trading one kind of debt for another.

One of the most common consolidation loan is home equity loan. Home equity loan is different from refinancing your mortgage because hoe equity loan will not affect your original mortgage. What you are doing is just borrow cash against your home equity.

Let me give you some example. Say your home is worth $150,000 and you still owe $100,000. That gives you $50,000 to borrow against. Nowadays, lenders will give you up to 125 percent of your equity, so you can easily borrow up to $62,500. However I don’t recommend you to borrow more than your home is worth.

Is this worth doing? Actually the answer is up to you. If you are paying interest rates of 15% or more on credit card balance. Then home equity loan maybe can help you to release from the credit card debts stress. Furthermore, interest on the home loan may be tax-deductible but credit cards’ are not. Anyway this is not the real question that you should consider.

The real question we should ask ourselves is, “Will this really conquer my debt?” If you use a home equity loan to pay down all your outstanding debt, then you are giving up what you have done in paying off your mortgage. Anyway mortgage debt is better than other outstanding unsecured credit card debt. However if you still then turn around and start using those credit cards emotionally, then you probably just jump back to the same problem. This is also why many financial expert don’t recommend us to use a home equity loan for day-today expenses or credit card expenses because we may lose our houses.

Please consider a home equity consolidation loan to repay debt only if you’re absolutely commit not to return to your former habits that bring you to the debt. You must know, home equity loan is not a joking loan where you are putting house on the risk. Please remember don’t borrow more than your house is currently worth. Lenders are assuming that your house will increase in value. That’s why they’re willing to lend you more than your house worth. But properties price can drop and you simply never know what will happen.

Mortgage Refinancing loans are getting more and more popular because of its attractive lower interest rates. There are 3 primary reasons people refinancing their mortgage loan :

1. To take advantage of lower interest rate
2. To convert some of the equity in their homes into cash.
3. Convert from an adjustable-rate mortgage(ARM) to a fixed-rate mortgage

Although refinancing your mortgage sometimes is a good idea but in certain condition, it is also not advised. Each situation is different, so you’ll have to calculate for yourself whether it is worthwhile to refinance.

Refinancing your mortgage means trading in one mortgage for another. The refinancing option can be a good idea if:

1. The interest rate on your mortgage is higher than current prevailing rates
2. Your mortgage carries an adjustable interest rate that has been trending up
3. Your new mortgage loan is 80 percent or less than the value of your home. In this way, you don’t have to pay for PMI (Private Mortgage insurance)

You must be careful if you intend to refinance your mortgage to pay off other debt. You could ruin your life if you aren’t careful. You only can refinance your mortgage to repay other debt only if you’ve made the commitment to top borrowing and remain debt-free. If you can’t resist the temptation to into debt again, then you better don’t take the risk.

This is Part 6 for the series post Debt Control - Debt Fighting Tips, you can read my part 1, part 2, part 3, part 4 and part 5 by clicking on the links.

Debt Fighting is a long journey to everybody. You’re not going to be success in overnight, but if you don’t give up you will success. Please prepare your mind that you are going to have some difficulties, but that’s ok, your future will be bright. Keep Thinking Long Term.

Debt fighting tips number 5 : Keep Thinking Long Term

As I said, it isn’t an overnight process to fight debt, and you have to keep an eye on your destination. It probably will take few years to be success and at this time keep thinking long term is very important. Your goal for the future, things you need to get in your future, financial status that you dream will give you power to take actions and continue. So take some times, sit down, and think about what you want to get in future, make decision and take action. No matter what happen and how difficult it is, just keep thinking long term - Your Future.

When we spend our money, we also must think long term. What does it mean? Let me give you a little example.

Christmas is around the corner, you want to get a Big Screen TV for this Christmas. You pay $2000 with credit cards that charge 20% interest. You pay the minimum monthly payment of 2 percent of the balance. So you have to take 40 years to pay off the debt and costing you more than $8000 of interest. So if you can think in long term, the day you buy your big screen TV at $2000, you probably will know it will more than $2000. So does it worth it at that time?

What if you take the $2000, in cash and invest it in a fund that can give you 2% monthly interest. So the story will be different. For the same time, you can get back more than $8000 of interest. Then at that time you can buy your big screen TV with CASH!

The point to think long term is you must think and plan, do some math before you spend your money. Delay your gratification first and you will get even more after this.

This is Part 5 for the series post Debt Control - Debt Fighting Tips, you can read my part 1, part 2, part 3 and part 4 by clicking on the links.

In my post of Formula to be Financial Free: I mentioned that budget is one of the most important elements. In my other post, I also share about how important of budget and information about budget. I concentrate so much on budget because budget is the foundation of your personal finance.

Debt fighting tips number 4 : Prepare a budget

No matter what method you use, you must create a budget if you want to be financial free and debt free. Maybe you hear enough from others that budget is not working and you just live beyond your meaning. However what I think is budget is important and work. ONLY if you decide and ready to take actions.

Actually budget do work if you do them right. You will control and spend your money more wisely, simply because a budget is a plan that will guide you how to spend your money on your personal financial goals. No financial dream, like financial freedom, can come true without a plan like budget. I can guarantee!

Last few days, I make a post called Budget To Financial Freedom - What make your budget fail. It is about reasons why your budget fails. You may have a look on the post and you will find out roughly the basic problems that most people make until their budget fail and make conclusion that budget is not working.

Financial Freedom, Debt Fighting, Tips, Budget

This is Part 4 for the series post Debt Control - Debt Fighting Tips, you can read my part 1, part 2 and part 3 by clicking on the links.

Do you know how you spend money monthly? Do you know how much is your debts? Do you know their interest rate? Or the most important is: Do you have a clear picture of your debts?

Sorry for throwing you so many questions in starting of this post. But we really need to ask ourselves those questions. Before we solve a problem, we need to have a clear picture on the problem and then make a plan to solve it. So before we solve our debt problems, we must get handle on the situation.

Debt fighting tips number 3 : Get Handle on Your Situation

Ok, now, after reading this post, what you should do is sit down with all your paperwork. Gather all your bills, statements, everything relating to your debt. Remember to make sure everything is as current as possible. It is wise if you bring your credit report with you so you can include you any old debts listed there.

Add up all your debt first and get a big picture, how much do you owe? Then you list down all the debts so you can identify what you owe and to whom, what your monthly payments and when It is due.

Once you list down all of them, you will have a clear picture on it. You maybe shock and surprise when seeing the reports that you make. But it just starting

PS: I saw a lot of people who can’t or DON’T WANT to do this. Why? BECAUSE THEY DON’T DARE TO ACCEPT THE REALITY! So they will give a lot of reasons to make them avoid this. Anyway there are no one can help you except you help yourself first. Yes I saw a lot of people will run away from doing this little paper works and continue their life without a lot of stress. I hope you are not 1 of them.

Now you know your situation and clear with it. Only then you can making a plan to knock it out.

Financial Freedom, Debt Fighting, Tips