What is consolidating a loan
In most cases, consolidating debt also allows you to reduce or eliminate interest charges.As a result, you can get out of debt faster because you focus your money on paying principal, or the actual debt you owe.
The issue here is still that you borrow against your home’s equity, so you take on an increased risk of foreclosure with an MDCL.You pay off your debt, always making payments on time, which improves your credit utilization ratio while building a positive payment history. As long as you can comfortably afford the consolidated debt payments, consolidation should work.Of course, if your financial situation changes and you can’t afford the payments, then you may run into trouble.The MDCL is a cash-out refinance mortgage that pays off your original loan and then gives you the cash difference in equity.So, if your home is worth $120,000 and you owe $80,000 on your original VA home loan, the MDCL gives you a loan for $120,000.If you purchased your home using a VA home loan, you are eligible to get an MDCL.
It’s a loan that borrows against the equity in your home.
If you’re making debt payments every month, but it feels like you’re getting nowhere fast, it may be time to consolidate your debt.
You may have heard the term “consolidation” but unless you’ve used one of these solutions before, you may not understand exactly how it works.
This guide is designed to teach you everything you need to know about debt consolidation.
If you still have questions, feel free to head over to our Ask the Expert section to ask our panel of experts.
This helps minimize damage to your credit score, which often makes this a more desirable solution versus debt settlement. Consolidation rolls similar debts into one monthly payment that is typically less than you paid before.