Home » credit-score » Credit Score and Consolidating Debt: Does It Work?

Credit Score and Consolidating Debt: Does It Work?

%ARTICLETITLE2%

Sharon Listner

It's no secret that having a low credit score below 600, a history of Chapter 7 bankruptcy or Chapter 13 bnkruptcy makes it more difficult to get credit - be it a personal loan, refinance loan, credit cards, etc.

It's also no secret that debt consolidation is one of the best ways to regain control over your finances. If you are juggling bill to bill and unable to pay more than the minimal balance due - it is time to consider a debt consolidation strategy.

If you are a homeowner with equity in your home, you can get a debt consolidation loan to wipe out all your credit card debts, student loans, car loans, medical bills, unsecured personal loans, etc by refinancing your existing mortgage loan to take cash out.

For example, let's assume that you have $25,000 in credit card debts and you pay $800 per month (minimal balance due) to 5 different credit cards creditors - Visa, MasterCard, Home Depot, Sears, Macys.

Let's also assume that your current mortgage loan is $200,000 with a remaining balance of $175,000. If you refinance your existing mortgage loan to get $25,000, your new mortgage loan will now be $200,000. You can use the $25,000 cash to completely erase your credit card debt.

Replacing your $175,000 mortgage with a new $200,000 mortgage will only increase your monthly mortgage payment by $166, assuming a 7% interest rate and a 30 year fixed loan.

$200,000, 7%, 30 year fixed = $1330.60.

$175,000, 7%, 30 year fixed = $1164.28.

You've wiped out all your credit card debts and reduced your stress. Most importantly, your monthly bill payment has gone from $800 to $166.

If your credit score is low (450, 500, 550, etc), you may think it's impossible to get a debt consolidation loan - it is not. Remember that your credit score will go up, when you reduce your debt load and pay your bills on time.

The key to finding a reputable debt consolidation refinance lender is to do your research.

Research recommended bad credit debt consolidation loan lenders, who offer refinance loans to consumers with low credit scores or a history of Chapter 7 or Chapter 13 bankruptcy at the loan resource guide: http://www.kstreetloans.com

Sharon Listner writes about finances and conducts in-depth analysis on various consumer loan products including refinance loans, debt consolidation loans and personal loans.