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If you feel like you are drowning in debt right now, you aren’t alone as so many consumers feel the same way. One way to consider getting out of that debt is to take out a second mortgage on your home. If you have some equity built up in the home and it has maintained value then you could get some cash to work with. There are times when this can be a great benefit.
For example, if you used your credit cards heavily in recent years due to changes in work or medical bills. The economy may have played a role in that for you but now you are back to work or working a job that pays better. You know that once you can pay off those debts you won’t fall back into them. If the amount of interest you can get on a second mortgage loan is less than what you pay on your credit cards it can be a smart move. It could help you to pay off the debt fast and save a ton of cash in interest.
You do need to make certain you have enough money in place to pay for second home loans. If you default on either the primary mortgage or the second one, your home could end up in foreclosure. That isn’t an outcome that would help your family at all. If your credit could be suffering due to what you owe on credit cards or a vehicle, paying them off could boost your credit score.
What is really wise about this is that you loosen up funds that you can use for the household. You won’t have that ongoing debt that never seems to go away with credit cards. At the same time, your credit can improve enough that you may be able to refinance your home at a lower rate of interest than where it is right now. This is a smart move that can save you thousands in interest. It can also help you to pay off your home years sooner than you had anticipated.
Being well in control of your budget is vital for this to work though. Many people end up in a worse situation later on after they take out that second mortgage to consolidate debt. The problem is that they don’t have a good budget in place or financial discipline. You may find taking a budgeting class first is a good idea.
If you decide to get a second mortgage to consolidate debt, you have to be diligent about staying out of debt. You can’t use that money to pay off credit cards and other bills, but then go right back to old spending habits. If you rack up more bills then you are going to be in a terrible predicament. Not only will you need to pay that second mortgage loan, but you will also have those old debts back in place you have to come up with money for each month too.
