Mortgage Bill Consolidation Loan

• A common loan used for bill consolidation is a second mortgage or refinancing an existing mortgage with cash out to pay off existing debt. Consolidating bills through a mortgage loan has the advantage of providing tax deductions on mortgage interest payments and acquiring interest rates that usually are much lower than short-term debts such as credit cards. The downside to using a home as collateral for a bill consolidation loan is that real estate now secures a debt that previously was unsecured (not backed by collateral). For homeowners with financial difficulty or cash flow problems, this could cause additional concerns if they are unable to make the higher mortgage payments. Being unable to make the payments could cause the homeowner to lose his house.
  
  

Current Lending Market

• The economic downturn that began in 2008 makes it difficult to obtain mortgage bill consolidation loans. Economic problems in 2011 have created a situation in which credit is tight from all types of lenders, making credit difficult to obtain. Many people are turning to finance companies for bill consolidation, but finance companies' interest rates typically are higher than short-term debt, such as credit card debt. While a debtor may be able to lower his monthly payments over a longer term, the total amount repaid for the debt will be higher in the long term.
  
  

Bank Loan

• If a debtor has good credit, he may be able to obtain an unsecured bill consolidation loan from a bank. This is a suitable option for bill consolidation, because the debt remains unsecured and interest rates are lower than those charged by a finance company. Unfortunately, many people that need bill consolidation loans do not qualify for them from a bank in a tight credit market.
  
  

Take Care Not to Rebuild Debt

• A debtor that obtains a bill consolidation loan must be diligent to not allow the debt to rebuild. Debt consolidation takes discipline, and many debtors begin spending with credit cards after the balance has been paid by the consolidation loan.