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Debt Consolidation Versus Debt Settlement

Refinance Debts to Lower Monthly Payments

Debt settlement, also known as debt arbitration and debt negotiation, is a legal process that facilitates the negotiation of debt settlement between the debtor and the creditor. Debt settlement is the fastest growing trend in debt resolution. It is a proven and effective bankruptcy alternative. Debt settlement is best suited for someone who has a lot of unsecured debts, which include credit cards, medical bills and collection accounts of all types.

It is difficult for people to get out of debt. Many homeowners make the mistake of only making the minimum or interest only payments, which make it very difficult to actually rid yourself of debt. With homeowners making only minimum amount of their monthly repayments, debt can be a vicious circle and near impossible to get out of!

So, what's the solution that saves me the most money?
If you are overwhelmed with debt, you should consider mortgage refinancing. Fixed rate refinancing is a great way of eliminating adjustable interest rates and refinancing revolving debt. If you have enough equity in your home, you could possibly get a cash out refinance for debt consolidation. You'd get rid of compounding credit card debt and enjoy lower monthly payments. Plus, the interest you pay on a refinance loan could be tax-deductible. Consider credit card debt settlement if you are not able to qualify for a mortgage refinance loan.

Interest rates on credit cards and personal loans are not tax-deductible. And, with credit card carriers increasing interest rates to alarming amounts, you would definitely be paying less interest. Plus, with it being a fixed rate and simple interest, you'd only be paying one interest rate for your balance. This will make your payments much easier to budget, and it could raise your credit scores by quite a bit.

Are refinance loans hard to qualify for?
Refinance loans with conventional lenders are not only hard, but nearly impossible. Unless you have stellar credit and a lot of equity in your house (3% or more), you probably won't be approved for a conventional loan. But, you could get approved for a FHA loan. FHA loans have very reasonable credit underwriting guidelines. FHA itself actually doesn't have any credit score requirements because they don't extend loans, but merely guarantee them. The lenders have minimum credit score requirements, but they are a lot less than those of conventional loans. You could get a FHA loan with a credit score of as low as 500, but most lenders want a score of at least 580.

FHA is more concerned with your payment history than credit score. If your mortgage is current, and you have a history of at least 12 on-time monthly mortgage payments, you could possibly get a low, fixed rate FHA refinance loan. And, unlike conventional lenders, you could refinance up to 90% loan to value (LTV), which means you could have as little as 10% equity in your home for a cash out debt consolidation loan.

Do you have an adjustable rate mortgage (ARM)?
Not only can refinancing be used to refinance credit card debt, it can also be used to reduce the risk associated with an existing loan and lower your monthly mortgage payments. Interest rates on adjustable-rate loans and mortgages shift up and down based on the movements of the various indices used to calculate them. Rising interest rates have caused mortgage payments to rise by hundreds of dollars. By refinancing an adjustable-rate mortgage into a fixed-rate one, you no longer have the risk of increasing interest rates. Your rates and monthly mortgage payments remain the same, which makes budgeting your mortgage payment each month easier and more predictable. Plus, your mortgage will be more affordable.

You don't have to be a current FHA client to refinance into a low, fixed rate FHA loan. And, in a time like this, where refinancing is nearly impossible, FHA makes a lot of sense. And, if you are currently a FHA client and don't need any cash out, you could do a FHA streamline refinance. These loans have very little paperwork, generally do not require an appraisal, income verification or employment verification. Plus, your credit is not usually pulled. It's a great way of refinancing an ARM to a fixed rate loan or otherwise improving the terms of your loan quickly, easily and affordably.

Fill out the free loan quote on this page to find out what your options are.