Too many homeowners are living large with budget-busting spending habits and are facing the same bleak outlook no matter where they live across the nation. For many, it’s becoming a make-or-break situation just trying to pay their household bills everymonth. But those who have taken the first step in consolidating their bills are finding out that there is a light at the end of the tunnel.
Debt consolidation, including mortgage refinancing, is growing in popularity, and an increasing number of homeowners are jumping on the bandwagon in an effort to improve their overall financial standing.
One of the big advantages of debt consolidation is that often, when people see their balance dropping steadily each month, they are encouraged and work harder toward decreasing their debt even further.
Another reason debt consolidation can be so appealing is that having less debt makes it easier to get approved for a home loan. For renters this opens the door to home ownership; and for homeowners looking for help on their existing loan, this could mean refinancing.
However, borrowing against your house in an effort to decrease debt can backfire: you miss a payment or default on the loan and you lose your house. Although many homeowners in debt looking for a quick fix would rather not admit it, the best approach to debt consolidation is the more painful option – a change in behavior and attitude when it comes to handling money.
If you are not careful, many Americans who take out a loan to pay off credit cards or unsecured debt end up in worse shape within the next two years.
And remember, Consumer Credit Counseling Services advises homeowners to keep an eye on their debt ratio, and aim for monthly debt obligations to equal no more than 20 percent of their take-home pay.