Many people with a large amount of debt turn to a debt consolidation refinance loan so they can use their home’s equity to pay off their debt. Also, since essentially this is tacking on someone’s personal debt to their home loan they often get a lower interest rate and feel that this is a better option than continuing to struggle to pay off high interest debt.
While this might be beneficial for someone who is responsible with their money and can pay off their home loan, commonly, individuals who use this method might not have the most disciplined of financial habits. Anyone that accrues a large amount of debt may want to think twice before getting this debt consolidation refinance loan.
There are people who have built up a lot of debt and now realize that their spending habits needs to change and they’re ready to take charge by budgeting, saving, and living within their means. Anyone with this mentality might be able to benefit from a debt consolidation refinance loan because they may be in a frame of mind to be more frugal with their money and they won’t run the risk of missing a home loan payment.
It needs to be understood that anyone who takes out a debt consolidation refinance loan, typically, is taking unsecured debt which will not cause them to lose their home and attaching it to their mortgage, thereby increasing their home loan debt, which if it becomes too sizable of an amount to handle they could in fact lose their home in this case.
While a debt consolidation refinance loan is something that is going to be a personal decision, anyone considering this option has to weigh the pros and cons and realize that it may cost more over the long run by refinancing their home and attaching their unsecured debt to their mortgage, but worse it could cause their home loan payment to increase to a point that is unmanageable and they may become delinquent or default on their home loan.
It’s risky to put unsecured debt into your mortgage by using your home’s equity to pay off your debt by increasing the size of your mortgage debt, so while using this loan can help those with a substantial amount of debt, it is not something that should be entered into without much consideration.