It would be so much easier if we could get all our bills under control. We look for ways to be free of debts or make payments in a simpler way. For some, debt consolidation could be the answer to this dilemma. But is this a good idea?
In its simplest explanation, debt consolidation combines all debts into a single monthly payment through a debt consolidation loan. Meaning, you give your consolidated payment to a debt consolidation company and then they would do the job of paying each of your debt for you.
Sounds easy? It surely is. Although, it is very important for you to understand the ins and outs of this provision before ultimately deciding if this is worth it.
When exploring debt consolidation options, you’d see that Cash-Out Refinancing is one of them. As long as you’re a qualified veteran homeowner, the VA Cash-Out Refinance Loan could save the day.
Why VA Cash-Out Refinance?
Through this refinancing option, the money tapped from your home’s equity can be used for a lot of things. Paying off your debts is one of them. This could be a good option for you since it’s often the simplest and most affordable route.
How is this possible?
First, you can apply for this refinance program with or without a VA loan. If you’re a qualified veteran homeowner, you can refinance up to 100% of your property’s value. This program is perfect for those looking to pay a mortgage and provide money to pay off other debts.
Among the benefits from a paying off debts through a cash-out refinance are the following:
- It’s possible to obtain a lower interest rate than other debts.
- It may significantly increase your current credit score. When you have a lot of outstanding debts and balances, it merits a negative effect on your credit score. But when this is remedied, it could turn your credit score for the better.
- It could mean a lesser tax liability over time. Note that the first mortgage interest is tax deductible.
Of course, there are some downsides to it that’s worth looking into.
- This puts your property at risk. When going for a cash-out refinance, your property serves as collateral. Making sure you can meet your obligations is key.
- Financial responsibility very is important. For debt consolidation through this option, you must be very careful not to put up more liabilities in the future. This could double your burden afterward or worse, put your homes at risk.
- This could mean a longer loan term once it resets. Make sure this doesn’t become the case.
- Know the terms and make sure it’s doable before making the decision.
Consider all your options and see if going for a cash-out loan is what works perfectly for you in the long run. In the end, the choice is yours.