Where Can I Find Financing for My Debt Consolidation Plan?

A Credit Article Contributed by Mark Mcclelland

Few Viable Alternatives for Financing Your Debt Consolidation Plan

There aren't really a whole lot of alternatives when it comes to financing a debt consolidation plan. All it takes is a little money, somewhere, somehow; but with all the scams and schemes out there that try to separate your from more of your hard earned money, finding reputable, helpful, honest financing sources takes a bit of work.

Basically, finding financing for your debt consolidation plan boils down to just a few alternatives: you can self-finance your plan, you can use a Credit Counseling service to help work with your creditors to develop a consolidated debt repayment program, you can roll your balances due between credit cards, you can borrow from friends or family, you can get a debt consolidation loan, or you can use a home equity loan as the source for financing your debt consolidation plan.

And right off the bat, let's relegate the friends and family option to the 'not really a viable option' bucket, unless, of course, you really don't want any friends and are ready to disenfranchise yourself from your family. In addition, rolling balances due between credit cards, while it can be done successfully, is really difficult, and the credit card companies will catch on to what you're doing and will takes steps (raising interest rates, start charging fees, etc.) to get you to stop.

So, if you can't afford to self-fund your debt consolidation plan - and this probably means that working through a Credit Counseling Service wouldn't be much help either - that only leaves a couple of options: a debt consolidation loan, or financing the plan through a home equity loan.

Financing Your Debt Consolidation Plan with Your Home

There are actually two routes to take here: you can refinance your mortgage at a lower interest rate, thus freeing up cash that you can use to increase the monthly payments you make to your other creditors, or you can take out a home equity loan, often with the same lender that holds your mortgage, that can be used to pay off your credit card balances due in total.

Using wither one of these options might be extremely attractive: in most common situation the interest you pay is tax deductible, and once your credit cards have been paid off, you can use those funds to help accelerate the payoff of the home equity loan, or your house itself. Not such a bad deal.

The once caveat here is that you'll need to keep a close eye out for any strange terms and condition, or fees and other charges the home equity lenders, and mortgage re-financers might tack onto the contract. Be sure that you read and understand the fine print. It won't help your situation a bit is you get sucked into a bad re-fi deal.

Financing Debt Consolidation Plan Using Debt Consolidation Loans

In spite of all the hoopla and marketing furor, if there's any away you can avoid taking out a debt consolidation loan (which in all likelihood is going to use your house or other assets as security) you should do it. Not only can you achieve the same results yourself, and often at a lower interest rate, by taking out a home equity loan, but you avoid getting involved with yet another creditor. Although there are legitimate financing sources for debt consolidation loans, use them only if the alternatives, namely mortgage re-fi, or home equity loans, aren't available.