It’s easier than you might think for your personal spending to get out of control, and to be faced with the prospect of debt refinance or refinancing debt. For one reason or another, even people who are generally good with money can find they have piled up debts on credit cards, store cards, and loans, without realizing how much it all adds up.
If you are feeling the strain on your monthly pay packet, perhaps it’s time to think about refinancing. Refinancing is basically the process of taking a look at your current financial situation and identifying where you can make improvements and free up some much needed cash.
There are several options you can consider when considering debt refinance depending on your own personal circumstances and what kind of debts you have. The right solution for you may also depend on how large your debt is and whether or not you own your own home.
Here are some possibilities to consider when you are thinking about debt refinancing:
1. Remortgage your house to free up some equity.
If you owe less than your house is currently worth, you can consider remortgaging it and getting a lump sum back to help you pay off your debts. Your mortgage payments may go up, but it largely depends on what interest rate you are currently paying and for how many years your mortgage term is.
Look out for deals that offer you a lump sum cash back when you switch mortgages; the lump sum will vary depending on how much you borrow, but it could be enough to clear your outstanding debts.
2. Get a 0% credit card to pay off your store cards.
Store cards have a notoriously high interest rate, and while the interest rate on credit cards is hardly tiny, it’s preferable to one that’s close to 30%.
When considering debt refinance, look for a 0% deal that runs for at least six months and transfer all your store card balances onto it. Cut up your store cards if you don’t trust yourself not to run them up again. Even if you haven’t cleared your balance, you will still be on a lower rate of interest for the rest of the time it takes you to clear it.
3. Take out a single debt refinancing loan to pay off all your other debts.
Both secured and unsecured loans are possibilities to help you with refinancing. Bear in mind that a secured loan is likely to be secured on your property.
You will generally pay more each month for an unsecured loan than you will for a secured loan; this is because it naturally comes with more risk for the lender. One main debt refinance loan usually works out more cost effectively than having lots of smaller ones. This is because you have one monthly payment and a lower interest rate. The refinancing loan is also likely to be carried over a longer term. It is also much easier to handle a single loan than it is to try and manage several; the chance of missing a monthly payment is reduced significantly.
If you are considering refinancing, make sure you consider all your options carefully and get several quotes for possible loans or cards before making your choice. If done correctly, debt refinance can give your money a whole new lease of life.
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