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Debt consolidation is a process by which we negotiate with all of your creditors to obtain the lowest monthly obligation needed to satisfy all of your current accounts. So you pay one "lump" sum monthly which is in turn portioned out to your creditors. This monthly payment will in almost all cases be lower (perhaps by as much as 50%) than the sum of your individual account obligations.

Many times the solution can be found literally, at your doorstep. A Home Equity Debt Consolidation refinance of your home may be the answer. If you have equity in your home, it may be possible to use that equity to pay off your credit cards, lower your monthly payments and save hundreds of dollars every month!

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Here is an example: You have a home worth $150,000. You have credit card debt of:

Creditor Balance Monthly Payment
Visa $2750.00 $82.50
Discover $3000.00 $90.00
Sears $2500.00 $75.00
Mastercard $3750.00 $112.50
Total Credit Card Debt $12,000 $360.00
Mortgage $100,000 $768.91
Totals $112,000 $1128.91

Now, if you consolidate the $12,000 in credit card debt and $100,000 in mortgage balance into one new mortgage loan of $115,000 at 8.5% interest would generate a new monthly payment of $884.25. That's a monthly savings of $244.66! Every month! That's a savings of $2935.92 the first year and $14679.60 over five years.

You'll notice that the loan amount of $115,000 is higher than the combination of $12,000 in credit card debt and the $100,000 mortgage balance. This is because you will have to establish a new escrow account, as well as, certain fees associated with the new loan. You will receive a refund for most of these from your current lender for escrow monies already held.

Remember, there is a reason why your credit card balances don't seem to go down. For every minimum payment you make only a few dollars go toward the balance. Almost all of the payment pays interest. Interest which is not tax deductible. Depending on your tax situation, all of the interest on your new loan may be tax deductible, further increasing your savings. (Please consult your tax professional to determine if this deduction applies to you.)

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