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An additional strategy used to help reduce debt is to apply for a home equity loan, also known as a second mortgage.
If you have equity in your property, you can use it as collateral to secure another fixed-rate loan and pay off other debts.
If your property is valued at 0,000, for example, and you owe 0,000 on your mortgage, you may be able to refinance the mortgage at the higher amount and take out the difference to pay off other debts.
Once you complete the refinancing process, you’ll owe only your primary mortgage lender instead of owing a number of third-party lenders and credit card companies. You are pulling equity from a property to pay off many bills and cutting the number of creditors – and bills – that you have.
In addition to simplifying monthly payments, this technique has another major benefit: savings.
Right now, you could be paying 15 percent interest on a credit card, as the national average is 14.83.
Those trends have made more people consider mortgage refinancing as a way to reduce their consumer debt burden.
In the most typical scenario, a consumer obtains a new mortgage at an interest rate lower than his or her previous one.
Another popular strategy is to take out a new, larger mortgage that pays off the old one and leaves you with cash at closing to pay off your other bills.
This option, known as a cash-out refinance, requires that you have sufficient equity in the property.
Your equity is the difference between the market value of the property and how much you owe on it.
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The borrower can decide when to use this open-ended credit.